Charts and Analysis, But How Long Is The Line?

There are some tell-tale signs that the economic slowdown affecting the national real estate market may slowly begin rolling into Pasadena. If this is the case, look for Townhomes and Condominiums to be the first victims. Our market which has been more resilient than other area’s throughout the country began exhibiting signs in July that may indicate some softening.

To give you an idea of the size of the market; In the past 12 months (August 09 – July 10) sales of condominiums and townhomes have totaled 550 units, compared to 829 single family homes within the City of Pasadena. For every two Townhomes / Condos sold, three single family homes are sold. Also about 21% of the units for sale (active & back up) are distressed properties, meaning they are either a short sale or bank owned.

Market Snapshot – Left graph

Two closely watched indicators declined from June, the number of sales and the number of units that entered “pending” status. There were about the same number of new listings for the month, but since there were fewer sales, actual inventory rose due to less units being absorbed.

Sold and Percent – Middle Graph

The critical component in this exhibit is the price sellers are receiving for their property. This shows the actual selling price compared to the listing price expressed as a percentage. In July, we see the value dropped to 94%, its lowest level since January which is typically the slowest month of the year. If a product was listed for a dollar, it sold for .94 cents. This indicates sellers must be willing to be more aggressive with their pricing and realize they will be selling for less money. Another sign of a slowing market.

Inventory Levels – Right Graph

Inventory jumped to over a 6 month supply which was a result of the poor sales in July. Inventory had been steadily declining as sales had been increasing, but when sales begin to slow during what is usually a high volume month, inventory consequently rises.

How long is the wait?

The other factor that has to be considered is the unusually low cost of money. With interest rates around 4.5%, one would normally assume a higher level of activity in the housing market. As I have always stated, one month does not a year make, so we will continue to see if the market does begin to slow down or is just catching its breath.

One last thought, I think if you see a slowdown in the housing market, you will begin to see it affect other areas. It would not be limited to just housing. Take notice the next few times you go to Starbucks or Costco and how long you stand in line. Store traffic is a great indicator of the strength or weakness in the overall economy.