Half-Year Report - Malibu Sales Steady; Prices Stable

By the sounds of news reports everywhere, the real estate market is going crazy.

Frequent reports in the regional media tell of huge price gains in month-over-month median averages. Multiple offers on every property, leading to huge price increases; or so it seems.

A June 13 article in the Los Angeles Times, for example, boasted of a statewide increase in values of 26 percent from May 2012 to May of this year, while Los Angeles County was up 25 percent. Such is not the case in Malibu, however. At least, not yet.

The median price of a home in the 90265 ZIP code has actually inched downward during 2013, going from a final 2012 figure of $2,250,000 to $2,100,000 so far this year. Additionally, while the number of sales units remains healthy, they are just short of the pace tallied last year.

Compared to many previous years, the market is quite alive and healthy. But it is not gangbusters. All the key indicators are that the activity this year is barely equal to last year, with a few nuances.

Last year, 262 residences of 1-4 units sold in the Malibu area, including many sales not reported in the Multiple Listing Service but evident in public records. Through June 30 of this year there have been 116 sales, less than half the number of sales reported at the same date last year. The pace tends to pick up during the second half of the year, and there are surely some secret sales yet undetected for the 2013 ledger. But the flow has not increased.

Why the drop in median price?

The drop in the median price deserves more analysis, since everyone in town knows prices are not really going down. It is simply that lower-priced homes are selling better than higher-priced homes. Last year, 43 percent of home sales were below $2 million. So far this year, such transactions are 49 percent of the action.

That is not a big variance. In fact, so far this year, all the price tiers are experiencing similar results to 2012. The glaring exception is the $5-$10 million product. Last year, 43 sales were produced in Malibu in that threshold. In 2013, only eight such sales have occurred. Whether on the beach or the “land side,” that expensive tier is sluggish. (Worth noting, however, is the $10 million market. Ten sales in the first six months of this year compares favorably to 13 for all of last year).

The total volume last year was $930,889,000 for 262 sales, for an average of about $3.55 million per deal. This year it is $476,750,000 for 116 sales, or about $4.11 million per deal. It would seem that 2013 is better. But there is a twist. The two largest sales in Malibu history, at $41 million and $75 million (large estates on Paradise Cove Bluff and Encinal Bluffs, respectively) both occurred in the past six months. Without those two deals accounting for 25 percent of Malibu’s volume so far, the average for the other 114 deals would be only $3.16 million, down from last year.

So, statistically, sales, median, volume and average sale price are worse this year than last year.

Then again, sometimes water is not boiling one second, but starts boiling the next. That analogy may apply to Malibu real estate values, upcoming. Malibu results tend to run 6-12 months behind regional news, so the market fury reported all around the L.A. area may hit here at any time. Furthermore, other indicators suggest that values are inching upward, in reality.

All condo complexes, while generally in the under $1 million arena, are clearly seeing higher prices. And all four homes in Malibu that have sold twice since the beginning of 2012 sold for more money the second time. (A few others, in escrow at this writing, will likely join the club).

Outlook

Market activity is brisk. There are some multiple offers. It is just not gangbusters. The success stories are isolated and not widespread.

After many rough years, nevertheless, this is a marketplace that sellers, Realtors and anyone associated with the industry will gladly embrace. To match 2012 is a good thing. Sales above 200 units traditionally means a good year. If total homes volume hits $1 billion this year, it would be a first—and a large feather in the cap of current times.

So what about the rest of the year? Three key factors hint at better prices to come:

First, super-low interest rates (by traditional measures) still make all housing more affordable. Any increase in rates will only swell the ranks of anxious buyers in the short run, and deplete them in the long run. Buyers know that a $2 million home with 25 percent down payment, financed at 4 percent interest, costs $5000/month in interest costs. If the interest rates go to 6 percent, the monthly nut will be $7500. Interest rates remain influential on current market activity.

Second, the all-important other half of the equation needs to be addressed—inventory. Very gradually, the supply of homes available dwindles in Malibu. While competing Westside residents complain of scant choice of homes for sale, Malibu still has some inventory, and opportunities for buyers. It is disappearing, however. For example, in mid- July of 2013 there are currently 214 homes for sale in the 90265 ZIP code. That compares to 231 in 2012, 314 in 2011, and 281 in 2010 at the same time of the year. For buyers, this may be that magic moment just before the boil. For properties listed under $2 million, furthermore, there were 57 available last year and just 37 now.

Lastly, a staggering 55 homes are in escrow in the 90265 selling zone at this writing—more than one than out of five houses on the market. As deals close, the momentum of more activity and ever-higher prices will become more evident.

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