Beach Values Have A Long Way To Go

The years 2009-2011 were the worst ever for Malibu real estate. Values plummeted like never before,

sales were few and short-sale/ foreclosure business accounted for about half the sales that existed.

With good news posting everywhere these days about the industry, the process of forgetting about 2009-2011 is underway. Coveted is the day that values have fully rebounded back again after their fall from peak to trough. As far as the beach is concerned, however, we have a ways to go.

Current values on Malibu’s sandy beaches still haven’t turned the corner enough to match the “depression years” values of 2009- 2011, let alone the height of the market during earlier years. The average beach sale during that most sizzling four years of robust prices (’05-’08) was over $9 million. Even with some anomaly sales of mammoth estates during 2009-2011, the average dropped to below $8.5 million. Now, it is just above $8 million.

Most of the beach areas noted in the adjacent chart indicate how prices skyrocketed during the glorious 2005-2008 years and then slipped during 2009-2011. Thanks to prime real estate being partly collectible and akin to artwork, beach prices dropping as little as they did was something of a moral victory for the town’s most precious local commodity. Compared to the state of California and Los Angeles County, which each lost more than 50 percent of their beach values, the Malibu coastline did well.

Over $4 billion has traded hands for Malibu beach front homes since the new century began. The 2000-2004 period when prices were steadily rising in a very healthy market; the 2005-2008 period when prices were exploding faster than anyone could keep up with, creating the infamous “bubble” (which lasted in Malibu one year longer than other places, as prices kept inching up during 2008); the “depression” of 2009-2011; and the past 18 months of much healthier sales and the beginning of price recovery.

The investment potential for Malibu beach houses was demonstrated from 2000-2008. Prices more than doubled overall. During the first five years, for example, 29 homes sold in the Malibu Colony for about $7 million average. The next four years saw the average at nearly $15 million. Broad Beach homes during the same period went from $6 million to $14 million. Homes on La Costa Beach went from about $3.5 million to $8.5 million.

Each location on the beach, with the exception of the bluff estate areas, is selling at distinctly lower prices now.

The pace of sales is also telling for the different phases of the market. Malibu’s best years for sales units were 2000-2004 throughout all parts of the market. The beach especially benefited when about 60 homes per year traded hands. Prices soared from 2005-2008 even as fewer deals took place and fewer buyers could afford them, as volume reached a staggering $400 million per year on the beach. For the 2009- 2011 period, 33 sales per year was not enough to hold up values. The current pace of home sales, running at about 46 deals annually, is more similar to the robust earlier years.

Bluff locations have been the exception in spectacular fashion. Bluff locations typically provide far more land than a beach house, as well as privacy from the beach. The 2012-2013 values show a huge jump in bluff values lately (for 8 known sales) even with the exclusion of a rumored $75 million transaction on Encinal Bluffs, which has never been confirmed with concrete documentation. Paradise Cove has had recent deals of more than $36 million and $41 million. Point Dume had a $21 million bluff transaction last year.

The information herein has been collected from numerous sources over the years and includes regular reviews of publicly recorded information on every beach home (1-4 units) in Malibu. There are about 1,000 such structures.

In all, about 650 sales on the beach and bluffs are tallied here for the 13 years. The total sales volume of all locations since the turn of the century is about $4.3 billion.

Malibu Road has been the busiest beach area since the market began to recover, but an average sale price of less than $7 million pales in comparison to the 2005-2011 year averages.

Less prominent, but more affordable beach areas such as the stretches from Las Tunas to Las Flores and from Corral to Escondido beach are still about 20 percent off their high. The latter set of beaches, for example, averaged about $6 million per sale from 2005-2011; with plentiful sales production, it is now about $4.8 million.

Broad Beach values have struggled of late, certainly a reflection of the sand depletion issue there, while a desperate private sand restoration project for the beach gets delayed in bureaucracy. Scant sales in recent years are averaging far less than the nearly $14 million averages of 2005- 2008.

Carbon Beach, meanwhile, has been steadily topping $13 million for many years now. Sales of $25 million or more have occurred four times now on “Billionaires Beach” to help boost the averages.

La Costa, nearby, has experienced a huge pick up in sales, though with a phenomenon similar to Malibu Road: lower-priced homes on those beaches seem to be getting the most attention as the average price per sale is noticeably down.

Rick Wallace has been a Realtor in Malibu for 25 years.