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.

That being said, the South Pasadena real estate market turned in an excellent performance in 2008 compared to Pasadena, Altadena, and Los Angeles. I could go on and on. The median price of a South Pasadena property including single family, townhomes and condo’s declined a measly 5% from $815,000 in 2007 to $773,500 this year. Basically a rounding error.

Single family homes were the blue ribbon award winner. The median price actually increased (that’s a word we have not seen much this year) from $920,000 last year to $935,000 this year. An increase of 1.6%. Cue the music!

Despite the increase in the median price of a single family home, South Pasadena does exhibit many of the characteristics of other real estate markets, both locally and nationally. Condominiums and townhomes for example have shown greater declines in median prices and also increased selling times in all areas. Unit sales this year were just a little better than half of what they were last year and prices declined about 10% overall.

As noticed in other markets, the sales activity on homes over $1 million has been pretty consistent. On of the reasons South Pas has performed so well this year is that the market for high priced properties is disproportionate to entry level or first time buyer price points. Of the 80 homes sold in ’08, 34 of them were sold over $1 million, while only 4 were sold for less than $500K.

The median price of a South Pasadena condo / townhome is almost the same price as a Pasadena single family home. In all real estate market ups and downs, therein lies a lesson. The education learned here is how to avoid a real estate market decline. Evidently the key is to look for a small homogenous community with less than 5000 households and a highly regarded school district.

In the Pasadena area, the San Marino school system is one of the best if not the best in the state of California. The South Pasadena school system enjoys an excellent reputation as well. Unfortunately the Pasadena public schools have not been on the list of the most highly sought after school districts. Given the choice would you rather go see the Lakers or attend a Clippers game? Most homebuyers have not used the public schools as a compelling reason to reside in Pasadena, unless they are attending one of the many private and pricey schools in the city.

The purpose of this article is not to discuss the pros and cons of the available school districts in the area, but to see if a correlation exists between property values in a given area and the school system in which it resides. Do the better public schools help to maintain higher property values in their city?

First let’s look at the cost of a private education. The cost of K-8th grade at a private educational institution can set you back from $12,000 to $15,000 annually. For those 9 years, be prepared to pay in the neighborhood of $135,000. Oh and by the way, that is for one (1) child.

Now let’s take a look at the housing markets in the subject areas and what has happened in the last year as real estate markets began to retreat both locally and nationally.

The City of San Marino has sold 86 homes this year to date compared to 108 last year. These were sales results through September. The median price increased from $1,400,000 to $1,552,500. If you have the number one school system in the state of California, your real estate market must be immune to external forces?

South Pasadena real estate reports sales of 82 homes this year compared to 141 last year through September, but despite the unit decline, the median price has only dropped 2.6% from $819,000 to $797,500 this year.

With the median price of a single family detached home in California down 40.9% from September ’07 to September ’08, these are remarkable results in a state that has been hit hard by the foreclosure and sub-prime crisis.

When reviewing Pasadena real estate, the numbers begin to change. Last year through September, Pasadena recorded approximately 1176 home sales and a median price of $665,000. In 2008 unit sales decreased to 736 and the median price dropped to $600,000. Down about 11%. (Note: the Pasadena sales numbers were not verified for accuracy. They were taken as reported by the i-Tech MLS. The numbers reported for 2007 may have some duplication due to the i-Tech and MRMLS being combined)

The $64,000 Question

Maybe the more appropriate heading should be the $135,000 question. Are the Pasadena public schools negatively affecting Pasadena Real Estate Prices?

The Pasadena housing market is about ten times the size of South Pasadena or San Marino. Maybe it’s just possible when you have a school district that size, top performance will always be elusive. Just look at the beast known as LA unified. If larger school districts were broken up into more manageable units, would performance increase? If performance increased, would housing values stabilize and be less subject to volatility?

I do not know the exact answer to the question. Based upon the evidence, it certainly doesn’t appear that Pasadena public schools provide property values here in Pasadena any advantage. If no benefit exists, then only hindrance remains.

We all want what is best for our kids. I once heard the best gift a parent can give to a child is a good education. Would you be willing to sacrifice your living standards by moving to a smaller, more expensive house to enable your children to attend an excellent public school? I realize sometimes that is just not possible.

An improved public educational system is in everyone’s best interest.

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.

But what is uncommon in South Pasadena is the consistency of the median price and how there seems to be very little deviation. South Pasadena is the antithesis of the current real state market. If only we could apply that to the latest market report for Pasadena homes.

The highlights of the market recap included:

1. All Residential – a median price decline of (2.6%) (single family, townhomes & condominiums)
2. Single family prices were + 1%, and
3. Townhomes & Condo’s median prices were off (6%), which is considered minor due to the softness this category is experiencing

Enclosed is the full report:

South Pasadena CA Real Estate Market Reports

CA South Pasadena Market Report for May – July

South Pasadena Homes 1st Quarter Market Report

South Pasadena Real Estate Free Market Reports

South Pasadena real estate sales results do indicate that homes are selling closer to their asking prices and are selling in less time, a couple of key indicators to the overall strength of the market.

South Pasadena Homes for Sale

chart from Altos Research LLC, Copyright 2007

In terms of houses for sale, South Pasadena currently has 64 homes that are either for sale or in the escrow process, close to 8 months of supply. Eight homes sold in the month of March ’08.

South Pasadena Foreclosures

chart from Foreclosureradar.com, copyright 2008

Currently 20 properties are in the foreclosure process, indicating that no matter how desirable the area or school system may be, loan defaults are widespread given these economic times. If you would like a list of South Pasadena properties in foreclosure, email me.

Small Number of Foreclosure’s

There are currently 16 properties that are in some stage of foreclosure in South Pasadena. The small number of properties has not produced any downward effect on prices in the overall market as of yet. This number has been steadily increasing in the last few months, so it remains to be seen if this will produce any softening in home values. We should have a better idea around April or May, as these properties begin to be absorbed into the market.

Median Home Prices in the $800′s

The median price of South Pasadena real estate has hovered in the range of $800 to $850.0, throughout the year. What makes that relevant? We have seen a real softening in the market from homes priced in the range of $500.0 to $650,000. It has been difficult to find a home for sale in this price range other than townhomes or condominiums. Therefore since South Pasadena has a higher home price, it has not been subject to the steeper price declines and market volatility as other San Gabriel Valley communities.

South Pasadena Home Values

Home values remained strong throughout 2007 and did not appear to loose any of the momentum that was gained in the previous years. The market certainly exhibited many of the characteristics that were observed in other regional cities such as longer selling times and fewer homes sold. But in the final analysis, the values showed less than a 1% decline. Based upon the results for the year ending 2007, a market with little or no growth can be perceived as a major success.

2008 Outlook

I think 2008 will bring an increase in the number of home sales compaed to 2007. The market needs lower interest rates to get people buying again and that appears to be where the housing market is headed. Prices should stay at current levels with the median price remainig in the low $800′s.

Even the South Pasadena Housing Market cannot escape the cloud that hangs over residential real estate. Sales for the month of October included 12 residential units compared to 11 last year. Since the small number of reported sales can skew the median price, we looked at what has happened over the last 5 months and prices seem to be flat. However under the current market conditions, sale prices that remain level with last year seem to be a positive sign.

To see a list of the homes that were sold in South Pasadena last month click the highlighted link.