Many thousands of people would love to own a Malibu home.
Hundreds inquire about the possibility every month. The sideline is
packed full of wishful buyers. Malibu is the dream of multitudes who
crave beauty, recreation and a small-town feeling for their lives, as
well as the ultimate reward for accomplishment. Yet, in 2008, only
about two homes per week sold here.
Despite the deep romantic
chemistry between the public and our town, the transitive property of
equality (if A = B, and B = C, then A = C) is ignored by many Malibu
is a real estate market that statewide and in the Los Angeles region
has seen values drop more than 40 percent. "B" is the historically
proven notion that realty trends in the region similarly occur in
Malibu. "C" follows that Malibu is experiencing a 40 percent drop in
real estate values, or more. Our town, however, has been in a long
period of denial. The assumption of insulation from the market has been
dominant. Many listings still come on the market at higher prices than
were recently paid for the same house, as if a profit is still expected
in this economy. Other listings sit for months with no offers.
The result: almost no marketplace at all; very few sales; a Malibu real estate industry with barely a pulse.
is true that the lending and home value collapse had a delayed effect
on Malibu, as well as on other high-end areas of Los Angeles. Now,
however, every price range, including the revered upper-end, is
suffering from a harsh lack of willing and able buyers. The discrepancy
between the number of active buyers and sellers is large. Many in the
industry and the town seem unwilling to face it.
Malibu risks a much greater value decline than necessary unless price
stabilization occurs sooner than later. Just as the individual who
starts with an aggressively high asking price is often the most
motivated seller later on, settling for a much lower than anticipated
price, our market as a whole risks a greater decline in the long run
because reality is disregarded in the short run.
Only 100 homes
sold last year? This is more challenging than any market of the 1990s
when we had a prolonged housing slump. Last year was probably the worst
year for sales in Malibu history, with only about 2.5 percent of
existing homes transacting. Yet many listings are currently priced as
though year 2004 appreciation is still in effect when, really, a 2004
sales price now might be fortunate.
The marketplace requires
that either a buyer have a good amount of cash, is taking a profit out
of their recent home sale, or can get a large loan. All three sources
are limited. Investment portfolios are diminishing, home equities have
narrowed or been eliminated, and lending market requirements are
anything but relaxed.
While banks are operating with the right
hand making it thorny for anyone to get a loan, the left hand takes
back more properties lost by sellers because buyers cannot get a loan.
Only when prices are so low that lenders feel little risk left from the
market will they go back to taking chances with borrowers.
means that competitive pricing is vital. Before a real estate recovery
can occur, let alone rising prices, some equilibrium needs to be
established. Sales and value data need to be in place. Buyers and
sellers (and Realtors) need to be working from some knowledge base. Our
community lacks that simple guide at this time.
never be expected to put their needs behind those of the community, but
this is a time the stars are aligned. All of Malibu will benefit from
smart sellers. The best advice now, I believe, is the same as during
the past 18 months: "Mr. and Mrs. Homeowner, with values heading
downward, you are better off selling sooner than later. And if you
don't need to sell, you are not getting any offers and you decide not
to lower your price, it is probably not the right time to be competing
in the already saturated market. Unless you're willing to price your
home with the growing number of short sale and foreclosure sale prices
(the prices most buyers are watching), just sit back a few years and
enjoy your lovely Malibu home."
Prices are easily forecast for
the next six to 12 months, if supply and demand trends are clear. In
Malibu, when the annualized sales projection is equal to the current
inventory of homes for sale, prices likely remain flat. In good times,
yearly sales totals were in the 300s and the inventory was only about
150 homes for sale; prices were going skyward. But now, with a pace of
100 projected homes selling annually and 200 to 250 on the market,
prices are guaranteed to keep going down. With the current discrepancy,
it may be a steep drop.
Sellers have a choice of burying their
heads in the 2006 sands, taking a 2002-2004 number now or looking at a
lower, year-2000 price down the road. I hope Malibu's retreat on the
calendar is as brief as possible. Clarity of the market environment may
Conversely, Malibu in good cycles has grown in value
exponentially better than the rest of the state. To illustrate, in 1972
the median value of a home in Malibu was twice that of the state. By
1990, it was three times greater. By 1997, it had gone up to four times
the state median; recent years, five to six times. While prospects for
the long term are fabulous for Malibu investors, at the moment the
median asking price in Malibu is 14 times the state median sale price.
I feel it is out of sync with reality.
Malibu real estate will
always be the best that can be found, but this is a time to be cutting
losses, not attempting gains. Malibu is not immune from the rest of the
world; pricing needs to adapt to conditions. Those who realize this
soonest will be rewarded, as will all of Malibu.