The federal government has even thrown in an incentive – an $8000 tax credit if you purchase a home this year. An $8000 credit has much more meaning if you are buying in Oklahoma. For this credit to be applied properly it would be indexed based upon the sales price in the area. A note to our State representatives – next time negotiate harder.

As stated in the January report, the Pasadena real estate market was close to yelling U N C L E. Sales results for February finally indicated some stability in the market. The steep declines we have seen the last few months subsided and pricing began to level off with the exception of townhomes and condominiums. I think Buyers are weighing their alternatives and deciding that single family homes offer a much better alternative to the current selections available in other areas of the housing market.

My charts include median pricing as far back as 2004. However with the median price of Pasadena home at $435,000, I would have to go through the archives and see when the last time prices were this low. There has been a moratorium on foreclosures recently, however there is some speculation that we could begin to see an increase in activity now that the Obama housing plan has been unveiled. This puts to rest who will benefit, which I think the market has been waiting for.

Enclosed below is the complete recap with median prices and units sold. In the coming week, we will look at the forecast for the next few months.

Housing programs available through the City include rental and home ownership. For the purposes of this article we will look at programs available to those wishing to become homeowners. For those people who do meet the requirements, a few caveats also come along. These may or may not change depending upon the program you are applying for:

1. Eligibility – restrictions are imposed on who can and cannot qualify.
2. Owner Occupied – if you are going to be a recipient of the program, you must also live in the unit. Forget the “would be” landlords aspiring to let the property and collect a rental check.
3. Income Limits – due to the generosity and intent of the program, income limits have been placed on the applicants wishing to apply for the aid. These income limits are determined for low to medium income households as determined by a formula using the median income for LA County as determined by the U.S. Department of Housing and Development. Income limits vary by the number of people in a household.
4. Restrictions on Selling – the City may receive a “first right of refusal” to purchase the property or may share in the increased equity, once you decide its time to move on.
5. Increasing Income – rising income may impair your ability for ongoing participation in the program

As with anything, a critical implied component is timing. Timing is important since federal, state and local money is the source of funds. These programs will usually have a predetermined annual budget. In other words, you need to know when the money becomes available and take the necessary steps towards application. Once the money is gone, you will more than likely be waiting until next year.

Down Payment Assistance

Known as the Homeownership Opportunity Program, this option is available as long as the purchase price does not exceed $425,000 and offers down payment assistance in the form of a second trust deed up to $200,000 with a 45 year term. To sweeten the deal, interest and principal for the first 5 years are waived. Plus, the interest on the second trust deed may be as low as 1.5%. A purchaser has to make a minimum of a 3% down payment which can also be a gift and must be a first-time homebuyer. The critical factor is your ability to meet the qualification terms of the first loan. Also participants have to attend a special homebuyer education class.

Pasadena Inclusionary Housing

As you drive through town slowing down at the construction zones, you probably did not realize that some of those units being constructed are reserved for Low to Moderate Income Households as Affordable Housing. Before the City of Pasadena agrees to green light new development, the Developer has agreed to set aside 15% of the available units for this special program. Priority is given to eligible households that live and work in the City of Pasadena. I should also preface this paragraph by saying that other options are available to Developers if they choose not to set aside the required ratio of mandated units. They may offer a payment In-Lieu fee, may build other affordable housing off site, or may convey other land to the City. Each development project is different and may hinge on whether the developer was granted a density bonus as to the choice of action they pursue. Unlike the HOP (above), being a first time buyer is not a prerequisite for the program.

To find out what other programs are available as well as which projects may be participating, I would suggest checking with the City of Pasadena or working with a local Pasadena Real Estate Agent who can help you navigate the process.

The same can be said of the Pasadena real estate market. The market overall continues to pick up steam. We continue to see unit volume increases, indicating that buyers are returning to the market which is good news. On the flip side those buyers are opting for many of the foreclosures and bank owned properties in Pasadena.

Unfortunately we can not confuse an increase in unit sales as being beneficial. Currently an inverse relationship exists with the number of houses that are being sold and the median price. Right now as more homes are sold, the median price continues to decline as short sales and foreclosures are eliciting multiple offers.

Market Action

In a slower market homes that are priced in the mid price ranges ($700.0 – $999.0) are usually prone to slower selling times. The reason is many buyers and investors look for opportunities to buy below market value in the the lower price ranges. In the higher end homes above $1MM, home buyers are not as susceptible to the increased demands of loan qualification, therefore homes are more likely to turnover.

The big question to which there is much speculation is “Is Pasadena real estate close to a bottom?”

If the projected sales numbers for November are any indication, the answer is “not yet”. Of the homes currently in escrow the median price appears to be lower than what was recorded for the month of October.

Pasadena Homes Market Report

The enclosed slides break out the numbers for the overall residential market. Included are single family along with condominiums and town homes. The report is best viewed by using the full size icon in the lower right hand corner.

In real estate the old adage was to buy the least expensive home on the best street. Most home buyers have a particular budget in mind when they shop for a home and what they can qualify for in terms of a loan and house payment. At least these days they do, the banks are seeing to that.

Neighborhood Value Considerations

Why does South Pasadena real estate seem to hold its value better than Pasadena?

1. Number of households -with So Pas having approximately 1/5 the number of housing units there is less diversity and much more homogeneity. Pasadena had better opportunities for entry level home buyers due to its history of lower median prices, while South Pasadena has been more of a move up market.
2. Distressed Properties – more housing units in Pasadena and lower entry prices have resulted in more properties in the foreclosure process, depressing home prices in the area.
3. More Equity, Less Leverage -when home buyers move up, they typically put more of their own money into the transaction meaning less volatility in market ups and downs.
4. Public Schools – schools in So Pas enjoy a very good reputation. Does a correlation exist between high home prices and good public schools? A recent comment by one of our readers made an excellent point about public schools. It would be interesting to see the effect on Pasadena home prices if the public schools had the same reputation as South Pasadena.
5. Other factors – neighborhood amenities, (retail, worship, topography, traffic, local services) and crime statistics can also have a role in the overall purchase decision, however these things may be more subjective to a large degree with the exception of crime in an area. If a home buyer is concerned about neighborhood crime, it is always a good idea to talk with the local police department.

When markets are bullish, we see prices rise across the board with no real concern of quality or value. The tech bubble comes to mind, followed by the real estate bubble. However when prices begin to fall, neighborhoods or cities that successfully address the above criteria will be less susceptible to market gyrations.

The answer is ….probably not

It would be great news and also provide a much needed boost to the housing sector if we could pinpoint the expected July turnaround to the proactive position taken by consumers and to a lesser extent, government intervention. But the underlying reason of the better news can only be attributed to one thing, and that is…. time.

It was July 2007, when we noticed a substantial drop in home sales activity. Although projected home sales for the month of July 2008 will be predictably in line with what we have seen so far this year, when compared against last year it will appear that the housing market has began to steady itself and that the worst news is now behind us. The outlook for the remainder of 2008 also appears to be favorable based upon the recorded home sales in the back half of ’07. While the next few months may begin to appear more positive, its not much to get excited about. But then again it will be portrayed as a sign that the market is on track and that in itself will allay consumer skepticism. The perception will be perceived as a return to normalcy and as we all know, perception is reality, when in fact you know it as a false positive.

Success Story or Continuing Saga?

The biggest obstacle to getting your home sold is living in the past and trying to rationalize the value of your property and “what once was”. If you are selling your home you have to move away from the height of the market in August 2005. This cannot continue to be your reference point.

The sellers of this house realized that. This property is located in NE Pasadena and was listed for $700,000. It was in escrow in less than 30 days. The reason is that the sellers had an opportunity to relocate and were very reasonable with their expectations. They had a solid buyer and did not want to lose an opportunity. There is a saying in real estate that “Sometimes your first offer is your best offer” and that may or may not be true, but any offer is certainly worth a counter offer.

In Escrow in Less Than A Week

The sellers of this house understood the importance of pricing their home properly. How many houses in this market have an accepted offer after being on the market for only six days? Very few. How does a home sell so quickly, very simply it offers excellent value for the dollar. Value is best defined as “the price paid compared to the features or amenities that are offered”.

Does your home reflect a competitive price for the value that is offered? Before you answer that ask yourself “How many days has it been on the market?” The answer lies within. There is a house for sale in my neighborhood. In fact it has been for sale for over a year and with three different brokerage companies. Without seeing the house you know there is one overriding issue…..it offers no value at the listed price.

These Seller’s accepted The Secret

The owners of this property had a desire to move out of the area. They understood the key to selling their South Pasadena condo lied within the secret. As a result, they had an accepted offer in less than two weeks. Unlike many other property owners, they understood the fallacies in overpricing and thinking “we can always come down”.

So you see there are many success stories despite a slowing market. If your home has been listed for over 90 days it’s time for a reality check. When I list a house I let my potential client know that the biggest disservice I can provide is to overprice your property. Inevitably, sellers always begin to count their money. I cannot give someone an inflated value just to obtain their business. We take our fiduciary duty very seriously. People do not expect a property to stay on the market for months. Give me the Readers Digest condensed version. I’m not much on continuing sagas.