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     Nearly 500 homeowners in Malibu have attempted to sell their home so far this year. The frustration and, in some cases, catastrophic results of their efforts, would have been unpredictable just three years ago. While the underlying product of Malibu real estate remains the most exclusive and coveted of any in Southern California, it has not been immune to a financing system collapse and market deflation everywhere. Through August, only about 50 of the homeowners will have successfully closed escrow on their homes, a paltry 10 percent of those who have tried.

     What is it like in this marketplace for those who put their personal pride and greatest investment on public display? How does selling a home in 2009 compare to past periods?

          While not all 470 homes have been listed this entire calendar year-and as many as 25 more are in escrow at this time-the number represents a cumulative effort that, furthermore, marks frustrations from previous years. The tallies are among single-family homes only, excluding mobile homes and condos in the 90265 ZIP code, among approximately 4,200 homes that actually exist. The challenges current sellers face are best demonstrated by analyzing what actually sold this year.

 

     The 50 approximate sales projects to a year total about 75, which would be fewer than last year (110) and about half of the worst recession years of the 1990s, when about 150 annual sales was the low for Malibu. Successful 2009 home sellers endured so far by making the greatest compromises versus their competition. Those compromises took shape in three forms.

 

     First, price reductions were prevalent in almost every case. Only about 10 of the 50 home sellers this year managed to sell their home using their initial asking price which, in retrospect, was market savvy to begin with. About half the sales took place via three or more price reductions. Many home sellers determine their initial asking price with their heart rather than as a function of competitive juices and motivation. This market has usually extinguished initial wishes and forced homeowners to eventually feel the necessity of competing with price reductions.

 

     Second, the time on market has surprised most home sellers. The median amount of time needed to sell a house, from first effort to close of escrow, has been 16 months among recent sales. That includes periods off the market and escrow time as well. That means half the homes sold were first on the market at least 16 months before; half sold within that time to establish the median. Taking into consideration only the most recent listing agent and the most recent continuous listing effort, the time has been 280 days as an average. By comparison, at the height of the market, the periods were 6 months and 140 days, respectively. Thus, market time has doubled. Again, that is among the listings that actually sold. Many homeowners have run out of time and lost their home to foreclosure or been forced to seek a short sale.

 

     Third, and perhaps most dramatic, is the discrepancy between the original asking price and the final sale price. (Similarly, the gap between last price and sold price has grown dramatically). Buyers these days are tough cookies-they negotiate only with the most anxious seller. Sellers who have shown the greatest flexibility in their price have found buyers. How much flexibility? The average discount from first asking price to final sale price is about 30 percent. Some homes have seen 50 percent drops, such as a home originally listed at nearly $10 million that sold this year for $4,500,000. The average cut in price in actual negotiations, from last asking price, is about 15 percent. Some homes finally hit a magic price and sell close to that price, even with multiple offers. Others, looking for “any offer,” will settle for more than 20 percent off the last advertised price. These numbers are again double in apples-apples comparisons from the hot market of 2003-2005.

 

     Suffice it to say, the Malibu market, with about 260 current listings (excluding the 210 that gave up, went into escrow or have sold) and a pace of only 75 annual sales, is clearly a “buyers market.” What does that mean?

 

     In any price range, when genuinely ready, willing and able buyers step up, they essentially let the serious sellers in that price range bid for their business. He who lowers his price most, wins. That house sold, when the

next scarce buyer steps up, the next most motivated seller will secure a deal. Each time, the comparable price drifts downward as sellers effectively jockey among themselves to score the next sale, based on their motivation, as well as their accurate gauge of the competition.

 

     The opposite occurs in a seller's market, as was the case for several years and sure to return. More easily described, multitudes of buyers bid upon a limited number of homes available. The highest bidder wins at each sale, usually bumping up the market.

 

     The sense of price free fall has taken a noticeable turn lately. Encouraging for prices down the road, the intensity of buyer resistance has cooled; 25 homes in escrow represent a recent bump up in activity, particularly as more sellers move aggressively to minimize the pain. Additionally, there is a possible reversing of the inventory trends that were moving upward unabated. The past two months, seasonally adjusted, have spelled a pause in the growth of listed homes. While prices will continue to reflect the realities of the times, at least the long period of negative trending, of ever fewer buyers and ever more sellers, has begun to level out.

 

     Rick Wallace has been a Malibu Realtor with Coldwell Banker for 22 years.

 

     The supply/demand dynamics of Malibu real estate have reversed completely from five years ago when scant few homes were on the market, and home sales were sizzling. Mid-way through 2009, a sales tally unimaginably low is offset by an inventory of homes available that is the highest of the decade.

     Malibu is on a pace for much fewer than 100 home sales this year, compared to 2004 when more than 300 homes sold. Contrarily, about 140 homes were on the market five years ago and the number was decreasing rapidly. Now, the inventory approaches 270 homes for sale.

     Listings represent supply. Actual sales represent demand.

     Home values seem to resemble those of 2004, but moving quickly back in time. While the state and Los Angeles region have gradually seen more than 50 percent drops in value, Malibu is off about 33 percent this year from last. The median value of a home sale this year, $2,250,000, is well below the past two years, which topped $3 million, but about the same as the median of 2004.

     Only 10 homes have sold in excess of $4 million so far in 2009; in 2007 it was six per month. In that prestigious category (homes for sale more than $4 million), more than 100 such listings are in the computer, highlighting the severe challenge of home sellers this year. With only one in 10 selling during a five-month span, the current inventory is about 50 months of high-priced Malibu listings waiting to sell.

     The direction of values is unmistakable. A symptom of a lending market that collapsed and has yet to fully recover, the breakdown in the marketplace is systemic. Nevertheless, the result is a playing field where only the very most compromising sellers are luring willing buyers, and the influx of short sale listings and foreclosures increasingly influences the Malibu scene as it already has virtually everywhere else.

     Both homes and condos are finding the same fate. Fourteen condos, in fact, had sold through May, a pace far different from 2004 when about 10 sold every month. On the plus side, the number of escrows opened recently has increased and activity is reported brisker throughout the industry.

     The summer inventory of homes listed, seasonally the busiest of the year, only reached 200 last year-the first time since 2001. It is now at a point (more than 260 homes listed) not seen since 1999. Even beach homes are finding extra competition, with about 50 currently listed.

     Malibu's pricey marketplace has lagged well behind adjusting to the financial meltdown. Only about a year ago did the tug on prices downward begin here, 18 months behind entry-level communities. Those communities have hit bottom, apparently, as California is experiencing brisk sales in low-priced regions and stabilized prices, albeit at 50 percent to 60 percent off the peak. Homes that sold in the past three months averaged 371 days of market time during their latest listing, some with previous brokers and attempts going back even farther.

     The adjacent chart is produced from ongoing analysis of the local Multiple Listing Service information and a review of the public records of every home and condo in Malibu, as some sales are made privately. All homes and condos in the 90265 ZIP code were reviewed.

     The median in Malibu was rising steadily since 2004 even while the number of sales was decreasing. Malibu has been anchored by the high-priced market, which kept overall volume robust and tilted the averages upward, the last frontier for a market virus that slowly spread up the ladder.

     Until this year.

   Lower-priced homes (and condos) are getting the most attention as only the most affordable properties are sought by cash-strapped and loan-battered prospects. The inevitable recovery will begin with the lowest tiers, though a buying frenzy in that marketplace lacks apparent imminence.

     Sales in Malibu as a percentage of homes existing is surely the lowest ever. Even as every price range in every region of the state has dropped more than 50 percent during the downturn, Malibu, in judging the behavior of asking prices, has pleaded exemption. The vast majority of new listings this year of homes that sold since 2004 are asking more than what the owner paid.

     The measly sales totals are both a cause and effect of a community in denial of its fate. Buyers have long seen Malibu as overpriced and out of step with these new times. The sales totals of the past 18 months bear that out. On the other side of the coin, with such little comparable sales information available to work with, sellers have grappled with their pricing decisions and, as a whole, misjudged the market.

 

Rick Wallace has been a local Realtor for 22 years.

 

 

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     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 homeowners.

     "A" 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.

     It 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.

     I believe 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.

     That 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.

     Individuals can 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 help.

     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.

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