Months Supply of Inventory

Take inventory or the number of homes for sale as an example. In Pasadena, inventory increased by 27% from June to July. For the same period, inventory only increased by 3% in South Pasadena. However we need to quantify this number and add some perspective. The past 12 months in Pasadena produced sales of 829 Single Family Homes. In South Pasadena this number represented only about 15% of the market size or 122 unit sales of Single Family homes.

South Pasadena Home Prices per Square Foot

There are several ways to gauge housing market activity. Individually each measure may produce results that are misleading until you have an opportunity to do further investigation. This often leads to an explanation such as “things aren’t exactly as they seem”. In other words, just reading the headlines without the full article may present a distorted and an inaccurate view of current results. Sales price per square foot can often be misleading. The mix of houses which are sold can have a big impact on this measurement. By most accounts, sales per square foot decreased from June to July. In South Pasadena, the numbers were $471 in June, but decreased to $424 in July. Pasadena had the same experience with $391 in June, and $388 in July. Keep in mind however there were 11 recorded home sales in South Pasadena in June and 12 in July. Pasadena recorded 82 home sales in June and 76 in July. Due to the small number of home sales in South Pasadena, monthly variations can be proportionately much, much wider.

The Number of Homes for Sale

One of the best indicators of a slowing housing market is the increasing amount of unsold inventory. Remember, one month does not a trend make. However, when trends develop based upon 2-3 concurrent months and also upon a “this year” versus “last year” basis, its more than just an unexplained monthly blip. This is one area where Pasadena and South Pasadena apparently find some coexistence. Inventory increased 16% for both cities on a month to month basis. The 42 single family homes which were for sale in South Pasadena were the highest monthly level based upon the last 15 months.

What’s Next

The issue that has many analyst concerned about a slowing market is based upon a couple of indicators that normally indicate a very bullish market. Mainly, interest rates are very attractive and people’s housing dollar is going much further. Low interest rates translate into more affordability bringing more people into the housing market, typically. This time of year market conditions dictate we should be witnessing increased activity. Economic conditions however are overriding conventional wisdom.

South Pasadena Single Family Homes For Sale

Take a look at all homes in South Pasadena for sale.
Take Me To The Map

Prices Per Square Foot Increasing

A good check and balance is to also see what is happening with prices on a square foot basis. There is more good news here as the Price per Square Foot increased to $426 up from the March number of $379 and well above the April ‘09 figure of $384 per square foot. The mix of property being sold also affects the Price per Square Foot. Last year we were seeing a higher number of homes sold in the lower price ranges as many of the foreclosures and bank owned property entered the market below the $500,000 price point. In April 2009 there were 25 recorded home sales at a price of $500,000 or below compared to last month when there were only 17 sales.

Also this year, sales of higher priced homes are beginning to reappear. Qualifying restrictions for a jumbo mortgage has also become easier than it was last year evidenced by the number of homes sold over $900,000. In April ‘09 only 11 homes sold in this category compared to 21 last month, an increase of 90%.

Impact of Home Buying Incentives

As we approach the end of tax incentives which are supposedly designed to get people off of the fence and into a house, what will happen once they expire? I don’t believe we will see much of an impact due to the price of Pasadena real estate. Incentives make a difference when you purchase a home for $100,000 as you can in many parts of the country. With our median price of over $700,000 and a return to higher priced homes, incentives are a marginal part of a home buyers decision. The main key to continuing prosperity will be the price of money. In the last few days, interest rates on 30 year fixed rate conforming loans have tested 50 year lows. Interest rates which influence affordability and how much home someone can buy will be the key to continued improvement.

Single Family - Average Price / Sq Ft

Single Family - For Sale, Sold & Pended

Pasadena Single Family Home Median Prices

The sales cycle has been harder to predict than in Single Family homes

nature are also marked by sharp contrasts. According to the Pasadena home search, there are about 230 condominium properties for sale in the city. What is not being reported is all of the recent new construction properties that are for sale, but are not listed in the MLS.

There is a very good reason for this. The developers do not want you to see how many of these units are currently unsold. If you knew you might be more aggressive on your offering price. Many of these new units now for sale were being purchased and planned several years ago when the market was red hot and appeared there was no end in sight. The other misfortune assumed that Pasadena had a voracious appetite for high end units. With most of this development happening in the downtown and in the high retail areas, land was selling at a premium. The assumption was people would pay more to live in areas with so many walkable amenities.

Current Market Conditions

These two graphs present different stories. The reason being the top chart is based on actual closed sales and the bottom is based on what is currently “for sale”. The median price of units sold in the last couple of

Increasing Inventory Means Lower Prices

months have ranged form $425.0 to $450.0. Whereas the bottom chart indicated that the median price has fallen about $45,000 since January 1, 2010 and currently resides around $500.0. On the flip side inventory has also increased around 10% from the first of the year also.
So what does this mean?
What this really indicates is some softness in the upper end condo market. It could also be evidence of trade up buyers opting for single family homes as opposed to a different lifestyle associated with communal living.

Price Direction

Unlike the current activity in the Single Family market, we don’t see multiple bids on condos and townhomes, nor do we see evidence of closing prices above current asking prices. Home sellers in this category are going to have to remain negotiable for the foreseeable future and developers may resort to interest rate buy downs in lieu of reduced prices.

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Join REMAX

We also considered the advantages REMAX represents in our area and believe the opportunities are numerous. Upon joining REMAX agents have access to the following:

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Buying or Selling a Home?

REMAX provides their agents the technology tools necessary to sell your home in today’s market. While most companies leave marketing to the individual budget of the agent, REMAX continues its National TV campaigns and billboard advertising driving consumers to REMAX.com. When would be home buyers see a REMAX sign in the front yard, they know they will be dealing with a professional.

Call Us For A Personal Meeting

We are excited about the opportunities we have and would appreciate the opportunity to speak with you. If you are considering buying or selling a house or thinking about your real estate career, work with the best name in the industry. We can be reached at 626-432-4615.

Total Annual Home Sales in Pasadena

What Homes Were Selling?

The market also shifted in terms of price points and the values at which homes were sold with lower price homes comprising a bigger market share of the overall volume. Homes under $600,000 were 64% of overall home sales in Pasadena. In 2006 that number was 42%. It’s not that the under $600,000 market was the just the price of choice, but it is also an indication of the Pasadena housing dollar going further as well as mortgages were much easier to obtain. Many home buyers found that mortgage money available in the $750,000 and above price range was harder to find, especially in the first half of 2009, but conditions began to ease as the year progressed.

Stability Returns

One of the positive signs of 2009 was the consistency of the monthly sales volume. Going back to 2005 and 2006 there was much more of a seasonality factor.

Pasadena Monthly Unit Sales - Residential Real estate

Interest Rates, Home Prices and Time

The adage in real estate has always been location, location and location. However, I think its time we should give careful consideration to introducing a new housing trifecta.

1. Interest Rates – home prices here in Pasadena are much higher than national averages. As a consequence interest rates have a bigger impact on affordability since we typically borrow more money to pay for our homes. Interest rates this past year have been very low by historical standards, therefore people could qualify for more house.
2. Home Prices – I think its safe to say home prices have fallen around 20% from their historical highs compounded with the increasing rate of foreclosures. Home prices were more favorable and affordable in 2009.
3. Time – it takes time to heal a broker heart and for housing markets to recover from the initial shock and bad news that precipatates declines. We spent 2008 adjusting to the shock. When 2009 rolled around home buyers were ready to get back into the market to take advantage of lower rates and prices.

There is much speculation as to the economic recovery and the manner in which it will progress. Lets hope the housing market takes on the “V” shape with 2008 being the bottom and 2010 building on the momentum we have just experienced.

All eyes are on Pasadena and the Rose Bowl Parade

The Texas Longhorns will play in the BCS Game in Pasadena

California Dreaming

Many cities can put on their Sunday best for vacationers and visitors, but how many of them can do it in the dead of winter? With overnight temperatures dipping into the low 40’s lately, daytime temps have been in the mid to high 60’s. The crystal blue skies and mountain views are sure to leave an indelible impression as many visitors begin to how nice it would be to live here.

As for myself, I know it would be very hard to return to someplace that actually has winter. Now that you have visited you may begin to understand why the Los Angeles area does not have a professional football team. It was once explained to me, the weather is just to nice to sit inside and watch TV.

Pasadena foreclosure filings are approaching 700 units

Ask most real estate agents their opinion on short sales and you’re likely to receive a negative response. The reason …… a short sale usually consumes a lot of time and resources and there is no guarantee that the bank will approve the sale. The other reason that you are not likely to hear….the agent does not have the training or information involved on how to successfully complete a short sale.

Short sales can be encumbered by two loans on the property, usually a first and second and many times these are with two different lenders. If the loans are with the same company, there is an excellent chance that department within the same bank do not talk to each other. The negotiation and follow up skills of the real estate professional are critical.

Short Sale Submission Packet

Lenders are being inundated with reams of paper and short sale proposals, however there is certain documentation they require and they usually require it correct the first time or you may find your proposal back at the bottom of an ever growing pile.

Before an offer is received, lenders typically want to see 2 years of tax returns, two recent months of bank statements, recent pay stubs, a personal financial worksheet, a hardship letter explaining why you cannot make your house payment and the listing agreement. If your self employed they will want a profit & loss statement.

Once an offer is received, they require a HUD – 1, showing all of the costs as well as the final proceeds, the buyers pre-approval letter and proof of funds. I usually go a bit further and provide an explanation showing how many properties in the area are in foreclosure including a market analysis and also the complete listing detail of the property so that they can see how long it has been on the market and the price it was offered, as well as price reductions that were taken.

New Timelines Announced

As mentioned above, the time involved in a short sale can be extreme. However, it looks like all of that is about to change. new short sale guidelines announced by the Treasury Department are going to dramatically reduce the amount of time involved in the bank approval process. Previously decision times could come anywhere from 60 days to 6 months, however under the new guidelines banks will be required to inform the parties involved in 10 days. This is major legislation. I believe it will have much more impact than any of the previously designed assistance geared towards helping homeowners in distress and the less than favorable results that have been achieved.

Pasadena Home Prices

This of course is an over simplification but it does suggest just how quickly market forces can affect change. Many people thought that if the market did change it would be gradual and exhibit more of a round curve as prices quit rising, began to level off and then eventually decrease.

The Future of Home Prices

Can the same be said when home prices begin to rebound? With the upward spike seen over the last several months the question has to be asked “Are we headed for another bull market in the housing market or are we just seeing short term optimism”? The rise in housing prices during the first part of the decade was associated with low interest rates and a very friendly monetary policy where everyone who wanted a loan and could sign a loan application received a mortgage. It’s not that easy anymore. Now only one of those criteria exists in the form of low interest rates.

Our home prices here in LA County and along the right and left coast may always be more volatile than other parts of the country simply because we have a fixed supply of housing. Our increases will be sharper and our declines will be deeper. Real estate price increases or decreases of +/- 3% are found in middle America.

The recent run up in real estate activity locally and nationally may prove one thing. Low interest rates have the ability to overcome economic conditions that are not exactly ideal. Maybe this has to do more with people’s approach to housing and the fact that you have to live somewhere, you can either pay rent or pay a mortgage and the possibility that when people do buy real estate they are looking long term.

Is it really taking houses that much longer to sell?

DOM or more commonly known as Days on Market is one measurement used in the housing market that is often misunderstood. The reason being is it is so easily and often manipulated. Many times the data supposedly represented actually provides false or misleading information. Its intention was to provide a quick indication of how long a particular property has been for sale. Too long and home buyers begin to wonder what is wrong with the house, why it’s becoming stale. The most obvious answer lies with the price, as in overpriced and too expensive. The seller is pricing according to their pocketbook and not to the market. One approach is successful, the other one is not.

Explaining the Numbers

Current vs. Cumulative – For the month of June, the Pasadena MLS indicates of all the properties that were sold the “days on market” were 97/187. The first number is the current measurement. The second number, the cumulative number. The number 97 represents all of the properties being sold in June that are listed under the current listing agreement. The second number “187″ indicates the same property may have been cancelled or could have expired, but represents the total number of days regardless of the listing agreement. So say broker “X’ listed 123 main street and it was not sold and expired 60 days later. Then broker “Y” relisted the property two weeks later, but was more successful. The contract went pending in 30 days. Therefore the days on market would be 30/90.

Back Up vs. Pending – one of the main reasons we are seeing such an increase in the days on market activity is not solely because properties are taking longer to sell. It also has to do with the way the status of a property is changed. In this market, when most agents receive an offer they change the status to “back up”. Now for all intents and purposes, most people do not make offers on properties listed in a “back up” position. Even though the property is under contract, the days on market meter is still running. Consider a short sale entering escrow, it is changed to back up and takes the bank 60 days to accept the contract plus the buyer may have another 17 days to inspect. That’s 77 days the property has been basically off of the market, but due to the manner in which the measurement is calculated, it still continues to add days to the total.

Agent Manipulation – If a lisiting agent has had the property listed 90 days and it did not sell, instead of immediately relisting it, they might wait 3-4 weeks hoping the cumulative days would reset, so when it was relisted it would now show as 1/1 instead of 1/91. There have been some attempts to correct this in the MLS along with some new policies implemented that prohibit agents from cancelling the listing, just to renter a few days later as new to reset the current DOM clock.

Many times, most agents have access to the property history that shows when it was listed along with a record of pricing changes and the number of days between changes. One thing common in today’s market is price reductions. Most initial price reductions are in the range of 2.5% to 4%. Before you make an offer on a property that has been listed for a few weeks checking the pricing history is always a good idea and one of the many things to research.