Malibu Real Estate Report: A full recovery from 2009 is in sight

Previous to 2008, the state of California had never seen an annual drop in median price more than four percent.

Then, in one disastrous year, the median price in the state fell from $558,000 to $348,000.  A total collapse of 37 percent.  

It fell an additional 21 percent the next year, in 2009. That unprecedented free-fall in real estate prices devoured Malibu as well, albeit lagging one year later and not as severely.

The Malibu median value itself plummeted from $3,325,000 to $2,075,000, from 2008-2011. At its worst, values nearly 40 percent, though not as badly as the state or county experienced.   That includes single family homes 1-4 units in the 90265 ZIP code. Condominiums and mobile homes experienced a parallel movement.

Since then, a long recovery has been underway. Long, indeed. At no time in the past eight years have values been as high as the banner year 2008. It is extremely rare for eight years to go by showing no increase in appreciation. Compare other eight-year periods. 

Homes in Malibu increased 252 percent from 1970-1978; 134 percent from 1980-1988; 19 percent from 1990-1998; 166 percent from 2000-2008.

Now, the glowing light is shining on that promontory of $3,325,000 median price for Malibu. For the first four-and-a-half months of 2016, we have essentially matched that elevated level.

Statistically, 2015 brought only a three percent vault in the median price for 90265, and so far this year it has been 22 percent.  Whatever the allocation, Malibu values are increasing steadily, and since 2013 have been irrefutably averaging about one percent per month appreciation. That is about 12 percent per year, as an average.

Sales units, a different gauge, have been decidedly steady for Malibu the past four years. Every year has landed between 245-270 total sales of homes. This year, though at a slower pace so far, will likely hit the same range.

All market cycles seem to have similar characteristics and phases. Currently, very slight indicators are beginning to show warning signs for this cycle. Foremost is a distinct rise in inventory. Many local homeowners, who suffered through severe equity loss five years ago, have recovered those paper gains and are increasingly seeking to cash out. The number of homes available for sale in the month of May had steadily dropped the past few years. Contrarily, it has leaped from 183 last year to 217 currently. The trend began in January when year-over-year inventory levels noticeably reversed upward.

Furthermore, 254 sales of last year will be unlikely. Sales units for this year may be healthy and close to the total of 2015, but probably lower.

The first sign of a waning marketplace is higher inventory, fewer sales. That is exactly what is occurring, subtly.

The party rages on, however, with no cops yet called to the scene, and well before curfew hour.

Eighty-one sales through this writing have dispersed this way: Forty below $3,350,000 and 40 above that price. Thus the median price, defined by this example, is well above last year’s final tally of $2,742,000.

Virtually every single person that initiates an interest in Malibu real estate finds themselves quickly saying, “Wow, this place is ridiculously expensive.” If 30,000 people per year make an inquiry about homes and condos here, only about one percent actually buy.

But prices, “ridiculously expensive” or not, merely reflect the competitive demand. Other niches of the world still boast higher price/square foot averages than Malibu. Malibu real estate very gradually, (though not so gradually on the beach), becomes more of a “collectible”, a work of living art, a tangible holding, a reliable investment, as time goes by.

Some explanation about the workings of the statistics may be in order.  Last year, the pace of sales under $2.5 million was pretty heavy. That market has essentially been cleaned out.  Part of the reason for a mere 3 percent increase in median average during 2015 was the weight of the lower tiers selling so robustly, throwing more lower prices into the mix.

This year, curiously there have been no sales of more than $20 million through mid-May, but the prices ranges of $2-6 million have had steady sales, carrying more weight on the median average than the lower numbers. Thus, 22 percent increase in values is the pace so far. Curiously, the average price per sale, a different measure than the median, is almost exactly the same as last year – about $4.6 million. With any sort of activity in the $20 million-plus category, that will go up.

Beach properties are a slightly higher share of the sales this year, as well. That is in contrast to the past few years. Beach sales are projected to be near 60 closed escrows this year, whereas no year 2013-2015 saw more than 50 such transactions. 

The takeaway is that the horrendous years of the early part of the decade, with most homeowners underwater on their equity, many sales of the foreclosure or short sale nature, and desperation throughout the industry, are well behind us.