The earlier post this week looked at the annual performance of South Pasadena real estate prices and to what degree did the market change in 2008 compared to 2007. The results were somewhat surprising considering the current market and economic conditions. The data indicated the median price of a single family home actually increased in 2008.

After looking at prices then we have to look at the other variable which was the number of houses that were sold. The number of closed transactions decreased in 2008. Herein lies the conundrum. How does the price of homes increase when there is less demand in the market and selling times are increasing? If you sell less of something, shouldn’t Econ 101 mandate the price should fall?

I surmised that it was due to a market shift. A market in which homes that were selling tended to be geared towards the higher end of the market. You can still sell less of something but if its at a higher price, it will appear the market is progressing upward and that area prices remain on the increase. If there was any vulnerability at all in this market I was determined to find out where it was.

Top 50 Home Sales in South Pasadena

I pulled a list of all home sales in South Pasadena and sorted it beginning with the lowest price in ascending order. I tried to equalize the results by comparing 50 transactions in ’07 vs 50 transactions in 2008. With only 80 single family sales in 2008, I was looking to exclude the higher end transactions. The sales results were not very revealing. A median price of $766,000 in ’07 against $770,500 in ’08, still a slight increase.

Top 25 Sales

Comparing half the number this time produced no change either. The price in 2007 was $659,000 compared to 2008 of $667,000.

Top 10 Sales

Lastly, I looked at the 10 lowest priced transactions. The numbers for 2008 indicated a marked change. The median price in ’07 of $595,000 was much higher than the sales price in ’08 of $539,000. A decline of 10%. I know you statistician’s out there might have a real problem with a sample of only 10 units and it may not be appropriate to call it conclusive. Breaking a market down to one -eighth of its size may exceed GAAP standards; however we are only looking for comparisons, not the standard deviation and mean of the South Pasadena housing market.

List Price vs. Sell Price

One other item that was interesting concerned the price of a “sold” home compared to the price when it was first listed. In 2008, Seller’s were more negotiable. Home prices were only fetching 97.5% of the original asking price. In 2007, Buyers were willing to pay more as evidenced by homes selling for 99.6% of their asking prices.

Buyers were making lower offers and Sellers were more willing to put their property into escrow than were willing to worry about the uncertainties of the market. Sellers were pricing to 2007 levels but were selling to 2008 economic news.