Luxury Malibu foreclosure chasing the market down – How to reduce a home price by $1 million in one year. Home equity loans and shadow inventory of million dollar SoCal markets.

There are many million dollar foreclosures across Southern California that have a story to tell about the housing market.  Many of these are part of the shadow inventory and lenders have been reluctant to act on any of these places especially in prime locations.  The fact that we are seeing movement in some of these markets tells us banks are getting serious about moving inventory.  There are a few key trends that seem to be emerging in the million dollar home market.  Quality homes that you would associate with million dollar luxury homes are selling at an okay pace although with discounts.  Homes that simply sit in prime zip codes but need to be completely remodeled are lingering and banks are starting to leak some of these out to market.  This is occurring in areas like Beverly Hills and also the prime community of Malibu.  Let us examine a lender owned home in Malibu.

Malibu foreclosure

malibu home

28860 Selfridge Dr Malibu, CA 90265    

5 bedroom, 4 bathroom, 4,000 square feet, Single Family

This home is located in Central Malibu and has been on the MLS for 249 days.  This is a 5 bedrooms and 4 bathrooms home.  It has a good lot size of 1.1 acres.  If someone were to buy this home especially at the current price there would need to be some updating to the property:

malibu home 2

The history of this home really highlights the history of the housing bubble in Southern California:

malibu price history

First the ad:

“Severely Rduced And Priced To Sell Quickly.” Welcome To Pt. Dume! Make This Your Next Home. With Approx 4,000 Sf This Sizable Home Offers Many Possibilities. Terrific Lot On Over 1 Acre of Prime Property With Ocean Views. Connected To The Main Home Is A Wonderful Architecturally Designed Guest Suite That Would Be Great As A Home Office As Well. This Property Comes With A Beach Key. Lowest Priced Pt. Dume Home On The Market of This Size With A Beach Key. Lender Owned.”

The home sold for $575,000 back in 1995.  From the property records it looks like the same owners were in the place up until it became lender owned.  In 2010 someone was trying to sell this place for a stunning $2,995,000.  Does the above home look like a $3 million property?  This was listed at this price even as the entire housing market was quickly unraveling.

In 2011 a reduction was made taking the price down to $2,395,000.  That didn’t seem to work or find any suitors so it was dropped again to $2,295,000 and then $2,195,000.  Finally, in 2012 the price was dropped to $1,995,000 but brought back up to $2,395,000.  I love it when you have $400,000 price changes in one day!  If you need any proof that prices are being pulled out of thin air, just look at places like this in prime locations like Malibu.

The home is now listed at $1,899,000 which is $1,096,000 less than the 2011 price.  What changed in one year to suddenly knock this place down by over $1 million?  By the way, with the above trend why would anyone rush into buying?  Are you seeing a rush with price increases?

History of the place 

By looking at the records here it doesn’t seem like the home was sold again after 1995 and equity was extracted from the place with additional loans:

malibu data

The most recent notice of default was filed on July 2011.  But looking further back, the home was already in trouble in June of 2009!  At this point the first NOD was filed for $32,929.  This isn’t unusual for these prime shadow inventory properties to linger for ages.  So nearly three years later the home is now on the market and pricing action is moving one way and it certainly isn’t going up.

Malibu is an interesting market.  Only a handful of foreclosures are listed on the MLS, less than five to be exact but the total shadow inventory of the area is up to 112 properties.  We’re talking about properties with loan balances of $1, $2, and even $4 million.  One place I looked at had a notice of default filed and owed over $300,000 just to become current!

You have to realize that these markets have a very small pool of potential buyers.  It looks like properties that were financed with toxic loans are now coming due.  If you make $300,000 a year but have a $3 million loan it might be hard to pull that off for a long time.  It looks like the bill is coming due in many of these top locations nearly half a decade after the market popped.  Does anyone realistically think places like the above are going to soar in price anytime soon?

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49 Responses to “Luxury Malibu foreclosure chasing the market down – How to reduce a home price by $1 million in one year. Home equity loans and shadow inventory of million dollar SoCal markets.”

  • “The fact that we are seeing movement in some of these markets tells us banks are getting serious about moving inventory.”

    I’ll believe they’re serious when we actually see a solid and growing percentage of delinquent homes actually put on the market. A handful at a time is what they have been doing for a while. Actually, it makes sense that they would put one like this Malibu place out there as a tester to see how the market is behaving. No bites? Hold back the inventory. It’s what I’d do if I were them.

  • $1.9 million dollars for that dump? What a ripoff. If we got rid of leverage in our markets, the $500k for that home in 1995 probably was a good price. That’s still a lot of money, people need to get that $500k average bubble price mentality out of their heads. I remember growing up, that having a $100k house was respectable and a milestone. These days, with current depressed wages, average homes shouldn’t be much over $150k. Like I said previously, $400k for a home with two professional incomes is sort of the defining moment in America when you can say “we made it”. WINNING!

    One thing though, to keep being fair and balanced, I’ll say it again…people see the words “starter home”. Ok, fair enough, but it’s not in a “starter market”. Just because we have a bubble, doesn’t take away the fairness that some cities will always cost more than others. That’s just life.

  • The longer these high end homes sit vacant the more likely they will develop significant structural problems that will further reduce there market value. Allowing owners that are not interested in maintaining these properties to live in them is not a viable solution as needed repairs are put off.

    • speedingpullet

      Though, if my experience of short sales in the area is any indicator – it doesn’t really matter what state the property is in, as almost all shorts are sold “as is”.

      Coupled with CAE’s observation about the trickle of inventory – which I can corroborate anecdotally – means that anything that comes on the MLS is going to get swarmed with potential buyers.
      Due to so few properties for sale, bidding wars ensue…

      Which seems amazing to me in 2012. The Housing Bubble reached its point of infection in – what? – late 2006? We’re 6 years into this and still seeing artificial ‘shortages’ and offers over the asking price, even while most of the rest of the country has reached bottom price-wise.

      Call me bitter, but I wouldn’t be surprised if SoCal prices don’t hit bottom for another 10 years, the way things are going …

  • apolitical scientist

    I go hiking in the Pt. Dume area quite a bit and just want to point out that this is far from a “Malibu Glamour property”. No view, a solid 3/4 mile walk to the beach (despite the disingenuous emphasis on the “beach key”), aside from the out of date furnishings. Nobody hunting for Malibu property in the $2M range would even look at a place like this.

  • I would give that house a 1.5 out of 10 for curb appeal, and that is being generous. It looks like it started life as a one story rancher and then Uncle Bob (who moonlights as a contractor) came over and added the two story crap to the right side of the picture.

    I sure am glad all these bums are allowed to squat in their Malibu houses. They are probably drinking a cold one at the beach laughing at schmuks like us who played by the rules. I tell the next generation all the time that being responisible and playing by the rules is NOT rewarded in today’s society…and it won’t be until massive changes are made.

  • “If someone were to buy this home especially at the current price there would need to be some updating to the property:” … and we have a picture of quite nice kitchen.

    Should it be much larger with this price or does that refer the property as whole, I have no idea. Could someone please enlighten me?

    Besides, I like blue so I’d leave the kitchen as it is, new granite tabletops won’t make it any better. ;)

    • speedingpullet

      Actually, I thought the same thing! I like white and blue, and that looks like a nice kitchen to cook in.

    • The cabinets and appliances are all low-end, as found in $140k starter homes, and tile countertops are not so practical with all those porous grout lines.

      The scams continue, as if no one has wised up.

    • The kitchen reminds me of many one bedroom apartments :). It’s ok, just 1.9 million, hahahaha.

  • You’ve really got to wonder what they did with all the money they took out of their equity. They sure didn’t spend it on the house. If it went up their noses, that’s really tragic.

    • Judging from the junkyard ON the property, I’d say you’ve correctly “read” the tragic situation. Detectives have told me a tell-tale sign of meth/speed addicts is a yard full of ambitious, quarter-finished projects… note the car up on blocks, boats in various states of refurb, and more and more SHEDS to house all the unfinished symphonies.

  • It looks like the place has a monstrosity of an addition added at some point on the right side. Regardless I just can’t imagine paying 1.9 million for this place. The money must be in the lot, but paying 1.9 million for a tear down? The house may not be in that bad of shape, but I can’t imagine being thrilled to drive up to that having spent 1.9 million on it.

    • Indeed, the so-called architectural addition is offensive enough, but what does it say about the strength of ZONING and CODE ENFORCEMENT in such an “exclusive” area?

      Google Maps sattelite shows a JUNKYARD adjacent to this “gem” of a house! Fook Mi, I shelled out $1.9M, and instead of seeing the ocean, I’m seeing a clunker up on blocks!

      • Found a map with property lines, junkyard is ON the lot being sold. Still, some previous owner went from single story to 3 1/2 stories, blocking the views of who knows how many other props. Really, what’s the LIMIT in this enclave? Can I put up an 8-story tower, in a style that looks like Willy Wonka? Who wouldn’t want to live next to that? [roll]

      • Not a junkyard. Those are vintage “Treasures” & project cars the upside-down owner will someday get around to restoring!

    • Any estimate of the value of the lot?

  • We Don't Make Those Drinks No More

    “Connected To The Main Home Is A Wonderful Architecturally Designed Guest Suite That Would Be Great As A Home Office As Well.”

    It Hurts My Eyes To Look At The Photo Of This Sizeable Home; The Right Side Jutting Upwards Reminds Me Of Devil’s Postpile In Yosemite, Or Toon Town, Or A RE Listing Where Every Word Is Capitalized…Now I Get It The Right Side Of The House Is Capitalized!

  • Dave HB-Renter

    The sad reality is that this home will probably sell very soon, most likely not far below the most recent asking price. A full acre on Point Dume with beach key will not go for below 1.5 Million – guaranteed. And no, I’m not a realtor but someone who’s been looking to buy there and I’ve been surprised again and again how little movement there is in terms on Point Dume.

    Point Dume is one of the nicest places in the world – especially if you have the beach key, I’d love to be able to afford to live there. I’d put in an offer for 1.8 in a heartbeat if I had that kind of money… It’ll cost a lot of money to turn this place into something nice (I’m thinking teardown) but this is still going to be cheaper than paying 4 Million+ for anything nice.

    • Interesting. Was one acre on Point Dume “one of the nicest places in the world” when it sold for $575k back in 1995? Or did that just happen in the 15 years?

      • Dave HB-Renter

        Joe, it sure was – but much fewer people knew about it. It’s something like 200 homes, probably as many as half of them are owned by ultra rich folks who have no reason to ever sell.

        I wish as much as anybody else that prices on Point Dume returned to levels from 10 years ago, but so far they haven’t budged much at all, and I wouldn’t be surprised if they never did.

        Would I buy there if I had enough money? Yes
        Would I feel like a jackass compared to my neighbors who bought pre 2000? Probably
        Would I be okay with the value of my property dropping? Yes, remember – I’d buy if I could “afford” it, so I’m not talking 5% down, 30yr mortgage, more like 50% down and 15 years, anything else is suicide IMHO

  • Forever_Sidelined

    A few commenters have mentioned houses sitting vacant in prime areas or neighbors they swear haven’t been paying their mortgages for years. How exactly can you find out for sure? How can you find out if an property is delinquent paying their mortgage or if they have taken out lines of credit against the house? What website gives you that kind of information?…I see that DR HB has an image of the “Transaction History” to that house…what website is that from?…

  • What posters may fail to realize is that incorporated into this price is the relatively recent premium that attaches across the board to all real estate in hyper-exclusive enclaves, where one can be surrounded by the ultra rich or their heirs. See Santa monica, north of Montana. Sure, the riff raff can pass through Malibu on Highway One – maybe stop and have a coffee or a coutnry mart sandwhich or go surfing – but you can’t BE there unless you overpay. Your kids cant go to school at the top rated, massively funded, non-LAUSD Malibu school unless you live there. You can’t live this kind of placid, beach front lifestyle anywhere near the Westside of LA unless you cough up the dough.

    It was like that 15 years ago, but less so. The inexorable snowball force of socio-economic balkanization is in full swing in the United States. In other words, if the rich are getting richer, and we know that they are, then what will they pay to live in the areas that they want to live in? Answer: More! The household has got to have at least 300K per year in annual income plus 400ishK to put into a downpayment to even consider buying in Malibu now. That bar will do nothing but get higher.

    Not sure I am convinced of my own thesis here, but I offer it anyway. The house in question was obviously a strawman though – way overpriced. Indefensibly so. It will likely go for at least 1.5. At least.

    • Lord Blankfein

      Golf clap for Jay. Nice thesis, I agree with almost all of it. As of recent times, we have evolved into a society where image counts for a whole bunch, this is especially true for some of the elite enclaves we have here in LA/OC. People will go to extraordinary lengths just say they “own” in a certain zipcode. Obviously these enclaves have certain things going for them (location, safety, climate, good schools, etc). A city like this will always have its share of rich people. These rich people want to live amongst each other. Then you have the people who aren’t quite rich, but will sacrifice much to live in these exclusive areas. And then there is no shortage of the pretenders in this city who will commit financial suicide just to impress people and fit in.

      I remember back 30 years ago when German luxury cars (Mercedes, BMW, etc) were truly for the upper crust of society. Fast forward 30 years, you do not need to be special to drive one of these things around. This all goes back to image, this culture is alive and well in this city. I don’t see that changing anytime soon. Malibu or any other ultra prime location in this city will never be available to the average middle class person again. I think that is getting clearer by the day.

      • We Don't Make Those Drinks No More

        “I remember back 30 years ago when German luxury cars (Mercedes, BMW, etc) were truly for the upper crust of society. Fast forward 30 years, you do not need to be special to drive one of these things around. This all goes back to image, this culture is alive and well in this city.”

        True. The other day in a retail store, I overheard a twenty something cashier lamenting to a coworker that he needed to replace a tire on his vehicle; he was bummed because the tire cost $700.

    • I agree with your general thesis. I have watched Pt. Dume transform from a nice upper middle class neighborhood into a Hollywood freak show. Black turtlenecks abound.

      I would disagree though in your characterization of Malibu public schools as being top notch. They are very mediocre and are not in the same league as other wealthy SoCal areas: La Canada, PV, San Marino, MB, etc…

    • Keep out the riff-raff! Ha! If people really go around with that kind of toffee-nosed mindset that John Cleese so perfectly lampooned in the Gourmet Night episode of Fawlty Towers, then why even stop for a sandwich.

      I was out there last summer. There’s nothing organic or normal about the Malibu area any more. It doesn’t excite. It’s a spent force, infested with tourists and the propped-up, veneered vestiges of Hollywood’s dying days.

      Even Jeffer’s Carmel is not so far removed from the Carmel of today. Malibu is just a name with instant cachet for people who have no soul or individual tastes and have to latch onto the lowest hanging fruit. Let these millionaire geeks flip these shagged out boogers back-n-forth to one another. Nothing to aspire to there.

      • Hamsun – wound a bit tight? Seriously, I do not think anyone who has traveled can say that Malibu is some spectacular spot in its own right. “All” it is is a relatively secluded (for LA County) place to live that is right on the ocean and close to West Los Angeles. If one did not need to be close to West LA, there would be nothing that differentiated this area much from Pismo Beach. But rich people need to be close to West LA. It boils down to where someone in the 1% that needs to be near West LA would want to live. Malibu/PV/Santa Monica/BH/Manhattan Beach are going to be high on any of those short lists.

      • Jay says: “Hamsun – wound a bit tight? Seriously, I do not think anyone who has traveled can say that Malibu is some spectacular spot in its own right. “All” it is is a relatively secluded (for LA County) place to live that is right on the ocean and close to West Los Angeles.”

        Just having a sudden fit of clarity/brutal honesty. It happens.

      • OutOfCalifornia

        Speaking of Manhattan Beach, just sold my ( inherited ) house there and am saving money and renting in a very quiet and agreeable part of Saugus.

        I grew up in Manhattan Beach and it is only after having left that I see how abnormal the place really is. I can see why people who are chasing a fantasy would live there. The people are incredibly good-looking, to the point it is a shock to see what they look like almost anywhere else. Jaw-droppingly pretty girls go there to meet jaw-droppingly wealthy men, so it has that type of materialistic and heartless natural selection about it, almost as if the city has bred a race of supermen and superwomen. It is very wealthy, yet there is a kind of “good taste” that you don’t see in other wealthy areas, people try to appear very nonchalant about money. Of course much of it is fake, but there are many people who do seem relatively unpretentious, compared to those in Beverly Hills or Brentwood.

        In short, it’s a rich, chilled, laid-back community, the true California dream, albeit a dream that is always out of reach. I imagine the beautiful women you see walking the Strand being manufactured in some nearby factory and then dismantled the same night, because you never see the same one twice. It makes you feel you’ve arrived but then when you’re there, you can’t hold on to it, you still can’t get close, because this fantasy only exists in your mind, the actual city serving simply to project this false image to you that can never be attained…

        All I can say is, if you are attracted to that sort of dream, which I no longer am, then you will pay the big bucks to live there. What I have come to realize is that in declining America, each city, each area has its own kind of dreamers, with their own vision of reality. Here in Saugus / Valencia the upwardly-mobile types look almost like laughable clichés from the 80′s, driving red sports cars and so on, while Manhattan Beach is more about effortless, discreet flaunting of wealth, with a forced unpretentiousness, Beverly Hills is for Persians and Jews, Palos Verdes is a pretty dead zone for Asians who want to gaze at manicured lawns, and Malibu is more for the wealthy who are hippies at heart. If I were still a California dreamer, Palos Verdes would suit me the most, to be secluded and gaze out over the ocean — PV is by far the most beautiful city I have been to in this state — but Manhattan Beach has its own appeal for a certain type.

        I don’t see MB correcting to pre-bubble prices, for the simple reason that this area was becoming more fashionable during the bubble. It wasn’t only the bubble driving the prices up, in other words. And as was pointed out above, these little enclaves are only getting more exclusive.

        I don’t see anyone talking about Santa Clarita here, but it’s probably the best place that I know of to live in L.A. if you’re not filthy rich or don’t want to take a giant loan. It’s not especially glamorous but there are very good areas, safe and quiet and friendly. Everyone is talking about the Inland Empire, I would say the Santa Clarita Valley is vastly preferable. I wonder if there isn’t kind of an invisible exodus away from L.A. towards this place, I can’t be the only one who thought of it! What is striking is that the city is thriving, you don’t see many “For Lease” signs like you do everywhere else. You’d almost think it was in its heyday, despite the fact that this city, like the rest of the nation, is totally doomed.

  • Dave HB-Renter

    Cha-ching – the house is now (Apr-16) listed as pending. We’ll see what the final sale price will be but I’d be willing to bet that it’s no less than 1.8 Million.

    • Dave HB-Renter

      In fact, I think even 1.9 Million makes this property a steal. It’s not facing PCH like the 2.2 Million property across the street, and it’s a flat acre unlike the lot of the 2.6 Million property on Dume drive with a tiny shithole as a house. Any other comps? They’re all very nice move-in ready homes at 4 to 5 Million, most of them not any closer to the ocean.

  • For a 4,000 SF house (five bedrooms, …), kitchen seems to be kind of small.

    Houses which sit vacant (they do not receive proper ventilation) for a while will have “MOLD” issues and it cost a lot of money to fix this problem.

  • All I can say is OVER PRICED!

    I was watching House Hunters last week & there was a childless couple buying a house in the suburbs of Minneapolis. The husband was one of those who believed that bigger is better, but the wife was more senceable. They did plan on staying there for the longterm. They ended up paying $490,000 for a 5000 plus sq ft home that was a short sale & was vacant for four years. The kitchen had no apliences & other rooms had exposed wireing. One thing the agent casually noted was that the home would have sold for $1,300,000 in 2007.

    Yah think this agent is still drinking the cool-aid?

  • I grew up in the east SFV, and Malibu was a dreamy area to me as a child. The more I’ve seen of beach areas of other states and other countries, very little about Malibu impresses me. Maybe “The Colony” area (the late Johnny Carson’s home area) might, but I think Malibu is a dump with great marketing behind it.

    That architecture is butt ugly. It looks like a Frank Lloyd Wright tear down.As a former McMansion owner (more butt ugly architecture),I’ll take a one-story wrap around porch Craftsman style home over most pos these days.Malibu or not, that house is fugly.

    • That place looks nothing like a FLW tear-down. It looks like a pretentious hodge-podge of add-ons with funny angles and lines to make you think *designer.*

  • Malibu has been hit the hardest out of all luxury areas on the Westside. Discounts of close to 50% off 2007 peak prices are now starting to pop up. Here is an example:

    6029 Latigo Canyon Road
    3+2, 978 sqft
    YB 1947, 3.07 acre Lot
    SOLD on 3/17/06 for $1,940,000
    SOLD on 4/6/12 for $1,000,000 (-48.5%)

    http://www.redfin.com/CA/Malibu/6029-Latigo-Canyon-Rd-90265/home/6855401

    To keep updated, you can see rolling monthly and weekly sales for Malibu and all areas on the Westside at :

    http://www.westsideremeltdown.blogspot.com

    Just like everywhere now, it seems we have a tale of two markets. Crappy undesirable properties that the banks have begun to release as short sales and REOs, and very few desirable properties from those who can actually sell and are not upside down.

    • Dave HB-Renter

      Summer, it is true that Malibu got hit hard, especially east of PCH. But neither Pt.Dume nor the Colony have had any problems consistently fetching bubble prices.

      @Jay – great observation!

  • Latigo canyon is horrible. Driving up and down that road makes you car sick.

    • Latigo is an AWESOME road…on a sportbike. Amazing I never got killed screaming my GSXR750 up and down it, at triple the speedlimit every Sunday. I’m sure all the folks that live there LOVE being woke-up by a Suzuki 4 cycl @ 12,000 RPM!!

      • Amazing, and maybe even something of a pity.

      • HaHa! That road and Encinal as well as Decker is fileld with bikes and those fancy schmancy cars on weekends zooming at God Awful speeds. CHP does sting operations there pretty awful. But for the guy who has to come down and then go to work or even Malibu is just a pain. Thousand Oaks/Agoura is much easier. Pt. Dume is ok-maybe the Chinese are buying there?

  • This house in the luxury locations in Phoenix would sell for the value of the lot without the house. With the exception of homes with historic value, virtually any high-end home with 8-foot lids would end up in the land fill.

  • Agree that Malibu is a whacky place for the ultra rich and some ultra strange people. Also keep in mind about every 5 years is a massive fire OR mudslides and the occasional closing of Topanga Canyon or Kanan or PCH due to head on collisions, road work, mudlslides, etc. PCH is one of the top 5 most dangerous highways in LAC. (Sunset and Mulholland also rank high on that list).

  • I was in Lakeport, CA in January. Maybe 10 listed on Zillow. Just looked again today, at least 40+ listings… mosr bank owned. Realize that area may not be indicative of a popular housing area but goes to show this Spring home sales is starting with banks unloading inventory

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