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Pasadena & South Pasadena Real Estate, A Tale of Two Cities
The recent September market reports analyzing the sales of Pasadena homes along with the sales of homes in the South Pasadena real estate market described two very different scenarios. How could two cities so close together have such very different results? To recheck my results I went back and reviewed the data only this time I used the same search parameters. The results were both predictable and surprising.
Previously the analysis was completed two different ways. For Pasadena, I looked at the current month and compared it to the same month last year. This is the manner in which the data appears in all of the monthly housing reports you see in the media including newspaper and television. South Pasadena was reported differently. Due to the small number of homes in this market, comparing months in a year versus year analysis can have a wide variance. Therefore the results were compared looking at 9 months from January – September (2007 vs 2008).
What we see is when the market was increasing, the gap in home values was fairly consistent and predictable. The appreciation rates in both markets appeared to be linear. However, when the market began its decline the story was much different. The decline in South Pasadena has been much more of a flat line with very little growth or decline from 2006 to 2008. Pasadena on the other hand has shown to be much more volatile than its neighbor to the south. Especially just within the last year.
According to the 2000 census, Pasadena has roughly 54,132 housing units and almost a 46% ownership rate. South Pasadena on the other hand has about 11,000 units with 45% ownership as of 2002. The Pasadena housing market is approximately 5 times the size of South Pasadena, however rental rates and home ownership are basically the same. So why does Pasadena with its many more options and opportunities for home ownership become more susceptible to market declines?
The source for the date is the i-Tech MLS. The data was not verified for its accuracy or duplicity.
Tags: california pasadena, california south pasadena, Pasadena real estate, South Pasadena California real estate
October 28th, 2008 at 1:00 pm
“So why does Pasadena with its many more options and opportunities for home ownership become more susceptible to market declines?”
It’s the school district. The people who care a lot about a school district have very different income profiles and priorities than other buyers. For one, they are almost always are married couples, often with two earners, so that alone makes them willing to spend a lot more money for a single house than say, a single person who is only housing herself. Additionally, couples with kids, or plans in the near future to have kids, will factor in the cost of primary school education into the cost of their home. This will make them perceive the added value of the house as worth $100K or so as an “investment” in their child’s education. This is the reason why schools which have high test scores, such as Arcadia, San Marino, Claremont and South Pasadena usually have higher housing prices than their neighbors. I won’t rehash it all, but this subject is written up in an excellent chapter of the book The Two-Income Trap by Harvard economist Elizabeth Warren. It accurately attributes most of the increase of housing in the 70’s to the creation of the dual-income household and the chasing of good schools as the holy grail of parenthood. Parents, it turns out, are *most* fearful of their children’s safety and development and are thus most easily convinced to part with their money on such things, including housing.
It turns out though, that this is largely a misguided pursuit, with schools test score averages not likely to influence how well your child actually does later in life, and it is also shown that the additional money spent on a home in a nicer school district can often by invested in private school education to better effect. But it definitely sells houses!