The number of homes in escrow was increasing and stories were developing of multiple offers and quick sales. And we are not just referring to distressed properties. There is really no other term to describe the month of June than just an old fashioned “blow out”.

Almost every indicator showed a positive increase. the number of home sales increased 45%, the median price of a single family home was up almost $50,000 over last month. Even the townhome / condominium market which has been a major drag on reporting, sprang to life with approximately a 50% increase in the median price and unit sales over May.

Now that Newsweek has finally declared the recession over, I guess we have cause for celebration. Housing inventory, a closely watched barometer regarding the health and trends in the market is now down to about a 5.5 months supply.

It seems very puzzling to me that our local housing market can be so strong. Considering the local and national economic situation, what is it that is creating the demand for housing? Consumer confidence is not exactly at its highest levels but there is something that is driving people to buy houses.

What do you think it is?

Unit sales along with the median price make positive gains in May, continuing an upward trend in 2009.

Predictability, which was absent in the Pasadena real estate market during the last two years appears to be making a return. Predictable that is, when the seasonal home buying months once again become the months of May thru August. The median price of a Pasadena home exceeded $500,000 for the first time since November 2008.

The housing market which has exhibited some positive trends of late still offers a few inconsistencies. For example, the market for single family homes is outselling the condo/townhome market by a ratio of 2:1. In terms of months of supply, single family is about 6.75 months, and the condo market is closer to 10 months. Also sellers of condos and townhomes are having to be more aggressive in marketing their properties, evidenced by the final sales price achieving only 90% of the original asking price.

The catalyst for this market remains homes under $500,000. One of the most telling statistics is how the market has changed. As an example in May of 2008, only 13 homes sold at a price below $500,000. In May of this year that number increased to 28.

In the market for homes over $1,000,000 there were 18 homes selling in May 2008 and the number dropped this year to 11. Whereas “declining” used to be the adjective of choice to provide a one word label that summed up the Pasadena real estate market, I think the new word now becomes “shifting“.

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.

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.

In stock market jargon it is referred to as testing the bottom or testing the lows. If prices hover around the previous lows without establishing a new benchmark it can be recognized as a positive sign. It may be perceived that price stabilization will occur and that the free fall is over, at least for a while. Maybe it’s just a psychological barrier more than a realistic barometer of market indicators, but sometimes all that may be needed is some innocuous event indicating a market change.

Home prices in Pasadena hit a four year low in October 2004 and then took on a meteoric rise for the next 49 months before returning for a landing in November 2008. With Pasadena home prices in a downward spiral the last couple of months, there seems to be returning momentum in the housing market. Momentum however is a relative term when compared to the recent events of the last few months.

Increased activity has been precipitated by declining interest rates, motivated sellers and plenty of property to choose from. If you were aiming to buy a house a couple of years ago and were priced out of the market, today’s events must be looking pretty good to you.

Look for December home prices to modestly rise or at the very minimum, at least stabilize. Home prices have been known to rise in December if the previous months activity has been slow as evidenced by December 2006 in which prices jumped considerably over the preceding months.

A Discriminating Real Estate Market

The new real estate market is going to pick and choose who benefits. You would think with very favorable interest rates that a re-fi boom would be in the works. Not necessarily so. Consider the plight of the self employed. Today’s refinance rules are based upon one thing….. does your income fall in line with the debt to equity ratios of your new loan? It doesn’t matter that you have never been late on a payment or that your current payment is higher than your new lower refinanced payment would be. Forget credit scores, anyone ever heard of FICO! Now you have to pay to play.

And if you were thinking about a construction loan to build your dream house. Well it seems that you can forget that too. A conversation with a direct lender last week informed me that construction loans were harder to find than consumers paying full retail this holiday season!

I don’t know about you, but I am sure glad the $700 billion federal bailout has retuned a sense of normalcy to our credit markets.

Traditional sales of Pasadena homes in the past have resembled more of a bell curve, low on both the right and left ends, (January & December) but higher in the middle (May – August), indicating a seasonality to home sales. But then again we haven’t seen traditional for about two years.

The data for November is disappointing. There did seem to be some momentum building in the market as unit sales were increasing, albeit the brakes were applied. Not a slow rolling stop, but more of a skid.

What Effected the Cause?

When analyzing results, I look for triggers. What happened in October that resulted in poor sales results in November? Could it be the federal bailout, reduced gas prices, decorating for Halloween? Or could we just be in the infancy stages of normalcy, a return to seasonality, the home buying lull after the return to back to school? It’s hard to make a single determination as so many external factors have to be considered.

Pasadena Median Home Prices

The median price sank to $500,000 for November. The last time the median price was at this level was 4 years ago. Homes priced under $500,000 are generating most of the activity, while homes in the $600,000 to $1,000,000 range have slipped into hibernation.

All of the market statistics are included in the 11 page presentation. If you would like to receive complimentary Pasadena market reports updated weekly, enter your contact information.

However steady or predictable unit sales can be, they have no bearing on sold prices. All you have to do is look at July 2008.

Pasadena Single Family Homes

In the overall market of Pasadena California real estate, single family homes are outperforming condos and townhomes. July unit sales were 65 units compared to 52 units last year, an increase of 25%. On the downside, the median price of $685,000 was 17% lower than last year’s median price of $826,750.

Contributing to the median price decline is the return of the low end market. Absent for the last couple of years, it is making a comeback. As an example in July 2007, a total of 4 single family homes were sold under $500,000. This past month the number increased to 20 units, or now 30% of the market below $500K. Of these 20 units, 14 properties appear to in some form of foreclosure that are either bank owned or short sale.

Current inventory levels indicate about an 8.5 month supply of unsold homes compared to 6 months supply last July.

Pasadena Condos and Townhomes

Unlike the single family market that showed an increase over last year in unit sales, the condo and townhome market declined. Last year 54 units sold, compared to only 38 units this year. The weakness is coming from properties available for sale exceeding the $500,000 price point. Analyzing the lower end of the market $500,000 and less, a total of 21 properties sold last year and 20 sold this past month. Low end sales remain fairly steady, but there is weakness above the $500K benchmark with only 18 unit sales this year compared to 33 last year.

Inventory levels show approximately 8.4 months supply compared to about 5 months last year.

Pasadena Real Estate Forecast

The median price of a single family in August ’07 was $792,000. Currently of the 550+ units available for sale, 51% are below the current median price of $685,000. As banks become more aggressive in liquidating their inventory, the low end of the market will continue to influence prices. Until we see more buyers enter the market, home sellers will find themselves more negotiable.