When you hear the word “sensitive” the Pasadena real estate market is probably not the first thing that springs to mind. That being said, we are probably in the midst of the most sensitive housing market in years. Volatility will continue to reign, until time has a chance to cure the current ills.

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.

Tags: interest rates, Pasadena home sales, pasadena housing market