From the data presented, two of the charts offer reasons for optimism. The first is the Monthly Supply of Inventory. Housing units available for sale are basically at their lowest levels in two years indicating one of two things, 1) there is beginning to be some balance in the market or 2) many sellers have taken their homes off of the market because prices don’t provide them the opportunity to sell.

The other chart that portends a bottoming or the beginning of a turnaround is the Homes in Escrow. Again the number of homes that have an accepted purchase contract is near a two year high.

Lastly, one of the more puzzling charts is the How Many Days to Sell. This trend is coming down slowly within the last year but spiked considerably in April. If the housing downturn is in remission, the number of days it takes to sell a house will have to decline. Also with fewer homes on the market, I would think the number of days required to sell them would be less.

The only factor that might be contributing to this is the way this number is calculated. It can be easily manipulated, depending on the manner in which the listing agent changes the status. After an offer is accepted, if the status changes to “pending” the days on market stops counting. If it is changed to “back up,” the meter continues to run.

One last note of irony. In May 2007, the median listing price of a single family home in Pasadena was $769,500. In April 2009, the median price of all homes listed for sale that month were $769,000.

source Clarus REsource

Think about the impact of the $8000 tax credit. How long does it take to earn $8000 in salary? For someone who was waiting for prices to become more affordable they in essence have hit the housing lottery. Interest rates are below 5% and taking into consideration the incentives available, the housing dollar is going a long way compared to historical standards.

Nearly all of the key housing indicators are turning positive and I guess I should preface that by “depending upon your situation”. But what happened was, inventory is coming down, selling times are decreasing, homes that are in escrow are pointing to higher sale prices. The check and balance in the report also indicated that condominium and townhome prices are stabilizing and appear to be coming out of hibernation. The median price of a single family home ticked considerably higher after months of declines rising about $100,000 from our last February sales report.

It’s great to see what happens when pro-growth policies are implemented and the turnaround that can occur. Sacramento, are you listening?

All of the key analysis comparisons are contained in the report below. Click the icon in the lower right hand corner to view it in full screen mode.

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.

I am beginning to read some articles about other real estate markets across the country, showing some signs of life. In fact a Seattle Broker created quite a stir last week when she announced the end of declining values in her market. She observed that properties priced 20% under their 2007 summer peak were all selling. However, if you look at the peak here in Pasadena, it occurred in December ’07 at $710,750. A 20% decline would have been $568,600, which would have occurred around August last year. Our prices have fallen every month since then to a current median price in January 2009 of $429,000, or 40% off of our December ’07 high.

Pasadena Home Prices

Explaining the events in January can be summed up in a couple of points:

1. The number of single family home sales were 30 units compared with 28 units for condo/townhomes. Of the 57 housing units that were sold, 75% of them were sold below $600,000
2. Previously single family units had outpaced condo/townhomes by about a 2:1 ratio. This month however the ratio of single family to condo/townhome was almost 1:1. The median price of a condo was $415,000 which pulled down the overall median price.

Pasadena Outlook

The median prices of homes in escrow is indicating a trend still towards lower prices. The month of February is probably less exciting than January; however with a median price of $429,000 we are very close to reaching the bottom ourselves.

Is the local Pasadena housing market better or worse than other real estate markets across the country? The factors that must be considered are the number of homes that sell compared to the number of homes that enter the foreclosure process. An increased number of home sales will indicate that consumers are returning to the market and the underlying fundamentals mentioned above are beginning to provide a foundation in which overall consumer confidence is increasing.

The Pasadena home sales for the month of December were just recently reviewed including the median prices and number of units that were sold. I took the single family home sales and plotted them on a map. If you scroll you mouse over the “green pin” and click you can also access the recorded sales price below.

To give you an idea of the disparity that exists in the Pasadena housing market, the second map includes the number of homes where a “Notice of Default” has been filed.

As you can see the problem becomes pretty defined when displayed in a visual context. In addition this may help you understand why the median price of a Pasadena home has declined about $200,000 in the last 12 months.

If a new house is on your holiday wish list, don’t forget to factor into your equation the cost of money. With interest rates coming down in the last few weeks you may be able to qualify for a more expensive home or find out the one you are considering may have become cheaper. On a $500,000 loan amortized over 30 years, the difference in interest rate payments for the first five years is about $12,500 or $208 per month.

In the next few days, I will report on the November sales of Pasadena homes. While that report focuses more specifically on what has sold, the enclosed chart describes the current market with homes currently listed for sale. The data specifically examines the “single family” market, so condos and townhomes have been excluded. The chart is broken down by zip code and includes the overall numbers tied together to give you an idea of how Pasadena is performing as a city. The data looks at four key indicators of the market including

1. The Median List Price – the number which indicates one half of the homes are listed for less and the other half is listed for more.
2. The Average Price per Square Foot – takes the listing price and divides it by the square feet on the property. A smaller house will typically sell at a higher cost per square foot than a larger house.
3. The Average Days on Market – the meter is running indicating the time a house has been on the market
4. Total Inventory – the number of homes listed for sale at this time.

If you would like to receive free Pasadena Market Reports, just enter your information for a complimentary subscription.

The numbers are current as of 12/8/08 and are a courtesy of Altos Research LLC, Copyright 2008.

Symptomatic of falling home prices are a couple of things:

1. Supply far exceeding demand resulting in fewer homes being sold, requiring sellers to become more aggressive with pricing
2. The re-emergence of the under $400,000 market

Both charts below show the same data only graphed differently. The first chart indicates monthly median prices expressed on a continuing line. The bottom chart shows values by calendar year. Looking at the first graph, prices rose steeply from 2004 through 2006, from about $480,000 to $710,000, or roughly an annual increase of 14%.

Charting monthly median prices tends to contain quite a bit of volatility. Who would have thought that the highest median price would have been recorded in December ’06? Remember too, that these points represent when a property was sold. Since the escrow process can be 30 to 60 days, one must look at the numbers and attempt to figure out why one month was so much better or worse. What event happened in March that could have impacted the May sales results?

Personally, I am not to worried with the monthly variances in value from month to month. I am more concerned with a rolling 12 month analysis. The change from July ’08 compared to July ’07 is more important than the difference from June ’08 to July ’08.

Are Pasadena Home Prices Leveling Out?

The last three months of this year show that median home prices have been very consistent with little or no variance. Could this be a sign that the market is beginning to turn around? Since more homes are being sold under $400,000, the market activity above $700,000 for a single family home and $477,000 for condo and townhome needs to stabilize. These are the latest median Pasadena home prices. With price decreases still looming on property listed for sale and the days on market in excess of 100, it does not appear that prices will even out anytime soon. Plus, we will need to see at least 125 units sold per month. Currently we have been experiencing less than 100 monthly units since September ’07.

My opinion is that for the next several months ….advantage home buyers. Market cycles are not likely to turn around in one year’s time. There just have been far too many body punches that will continue to keep the market down for the count. My guess is that we are in round 8 of this 15 round bout.

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.

If you are looking to buy a property, there is no more important factor than your interest rate.
It can make or break your deal. A slight change can end up costing you hundreds if not thousands of dollars over the life of your loan. The most closely watched barometer of the housing market, followed intently by home buyers and all but ignored by home sellers.

Why?

Because homes are priced based on comparative sales in the neighborhood with very little thought to economic conditions, with one exception as we will discuss in a following paragraph. On the other hand homes are purchased based upon affordability and qualification. Two factors that have maligned the mortgage industry of late, since borrowers are now being asked to document the file and prove their income.

The following graphs reflect the current status of the Pasadena California real estate market for single family homes as of last Friday, June 20.

Interest Rate Increase, Home Sales Decrease

Even though loan qualification is a much more stringent process these days, interest rates remain historically low. However when interest rates begin to rise what impact does this produce on home sales?

As you can see from the graph provided by Bankrate, over the last two and a half months interest have been steadily on the increase. Home buyers begin to recognize this and see the monthly mortgage payment consume more of the monthly budget. Instead of rushing out to lock in a loan, they choose to take a “wait and see” approach, in hopes of this just being a slight adjustment and thinking rates will soon fall to previous levels.

The Trickle Up Effect

When interest rates begin to move up, we see other leading indicators in the housing market begin to move in unison. Typically, inventory or unsold homes will increase as new homes become listed “for sale” and houses that have been “for sale” continue to increase their “days on market” or selling time due to the reduced activity of home buyers.

Now is when home sellers begin to pay attention to the economic indicators which is typified by how many days the house has been on the market for sale. The net result is the longer number of days it takes to sell a house produces a decline in property values.

One way to avoid being at the mercy of the housing market is to accept the fact that pricing your Pasadena home properly is critical to getting out of this market as quickly as possible. The longer you’re in it, the less likely your chances of winning.

According to Altos Research, there are 487 single family properties for sale in Pasadena, indicating a 9.5 months supply, very indicative of a buyers market.

Condo’s & Townhomes

Sales of condos and townhomes also decreased 14% compared to last year, but unit sales continued to decline by almost 50%. Compared to last month units increased from 25 to 31 and sales prices were down about 2% from $470,000 to $460,000. Last year we saw an increase in activity in new units which helped propel the median prices in this category. Now with the slower market, condos and townhomes are returning to median prices seen in 2006.

We are seeing some of the same characteristics as the single family market, mainly condos and townhomes are selling at a bigger discount to their listing prices. Altos Research reports that 289 condos & townhomes are available for sale. With 31 reported sales in April, a 9.3 months supply of inventory exists. If you would like the latest research information on the Pasadena real estate market, email me, indicating single family or condo.

A list of all the homes / townhomes that were sold in Pasadena, Altadena and South Pasadena for the month of April is available at up2daterealestate.

Note: We have modified our “days on market” with two numbers, (1) is days on market for the current listing period, (2) represents cummulative days on market indicating how long a property has been for sale. For instance, a property may have been for sale for 60 days and did not sell and was relisted with a new agent one week later. Numerically it would read 1/61.