A few years ago, the Pasadena real estate market offered something for everyone. It did not matter if you classified yourself as an investor, a speculator or just a homeowner, the opportunity was there to buy real estate with Monopoly money. The late night TV infomercials refer to it as OPM or “other people’s money”. Create wealth, build your portfolio and retire rich, just don’t use any of your own cash.

Generally speaking, if money is readilly available the chance of abuse will likely increase. As we have seen, the easy credit policies of the past failed to suffuciently factor in the increased cost of risk. As a result……well you know the story because we are living the “as a result”.

To see how easy it was to manipulate the real estate market look no further than right here in Pasadena. Let’s take a company, a mortgage broker. Their primary function is to find loans for home buyers. In addition to originating loans they also have a couple of real estate agents. Not uncommon. Many companies vertically integrated themselves, offering buyers one stop for all of their real estate needs. Nothing strange about that, but what does seem out of the ordinary is what has transpired several months after the transaction has closed.

Here is a scenario that seemed to repeat itself a couple of times:

Purchase offers were typically made on Pasadena homes offering a price in excess of the listing price with the seller providing a credit back to the buyer in the amount of a couple of percent. Again considering the market at the time this was not that uncommon. On a $700,000 home, a credit of $14,000 would usually insure the buyer would not have any out of pocket costs. Therby buying real estate with no money down. Depending on the profitability of the loan the lender had some autonomy to influence their commission in the process.

Once the house closed, the originator of the loan was paid generous commissions to originate the loan, in addition to the employed real estate sales people who were also paid a commission. Title to the new property was typically taken in the name of one individual.

After the property was purchased, the new owner never moved in, instead opting to lease the home. The advantage of 100% financing allows someone to own a home that may not have the required downpayment. It will not cover the principal, interest, taxes and insurance at current market rents. Principal and interst would exceed $4100 / month. The market rent woud be about $3000 / month.

Almost one year to the purchase date, the house is relisted as a short sale. The listing company is the same company that represented the buyer in the original purchase. A homeowner facing default can usually choose the real estate agent they prefer to sell the house. Once the house becomes bank owned, most banks have their own list of preferential brokers.

It’s very hard to say if there was any shananigans going on here. Maybe it is just a strange set of circumstances. The real estate market had some amazing appreciation in the previous years and the thought could have been that the market would continue to increase. After all, nobody seemed to predict the house of cards that the lending and housing industry was based upon.

If someone’s intention was to create deception but fly under the radar this would be a much more easier way to pull it off consistently as opposed to other forms of mortgage fraud, previously reviewed here. However if you can get in with nothing down, then the opportunity for appreciation may outweigh the risk for decline, especially if you have nothing to lose. After all, its other people’s money.

Tags: Mortgage fraud, pasadena california real estate, pasadena real estate fraud

There has been much speculation on where the Pasadena California real estate market and home prices are headed. And also, to what extent have values declined? The median price has dropped, but to what degree have Pasadena property owners experienced a loss?

Symptomatic of falling home prices are a couple of things:

1. Supply far exceeding demand resulting in fewer homes being sold, requiring sellers to become more aggressive with pricing
2. The re-emergence of the under $400,000 market

Both charts below show the same data only graphed differently. The first chart indicates monthly median prices expressed on a continuing line. The bottom chart shows values by calendar year. Looking at the first graph, prices rose steeply from 2004 through 2006, from about $480,000 to $710,000, or roughly an annual increase of 14%.

Charting monthly median prices tends to contain quite a bit of volatility. Who would have thought that the highest median price would have been recorded in December ‘06? Remember too, that these points represent when a property was sold. Since the escrow process can be 30 to 60 days, one must look at the numbers and attempt to figure out why one month was so much better or worse. What event happened in March that could have impacted the May sales results?

Personally, I am not to worried with the monthly variances in value from month to month. I am more concerned with a rolling 12 month analysis. The change from July ‘08 compared to July ‘07 is more important than the difference from June ‘08 to July ‘08.

Are Pasadena Home Prices Leveling Out?

The last three months of this year show that median home prices have been very consistent with little or no variance. Could this be a sign that the market is beginning to turn around? Since more homes are being sold under $400,000, the market activity above $700,000 for a single family home and $477,000 for condo and townhome needs to stabilize. These are the latest median Pasadena home prices. With price decreases still looming on property listed for sale and the days on market in excess of 100, it does not appear that prices will even out anytime soon. Plus, we will need to see at least 125 units sold per month. Currently we have been experiencing less than 100 monthly units since September ‘07.

My opinion is that for the next several months ….advantage home buyers. Market cycles are not likely to turn around in one year’s time. There just have been far too many body punches that will continue to keep the market down for the count. My guess is that we are in round 8 of this 15 round bout.

Tags: pasadena california real estate, pasadena housing market, real estate in Pasadena

The Pasadena housing market continues to limp along on one leg. While this strategy seems to work well for Tiger Woods, it does not bode well if you are a property owner with a house to sell. Sales results for the month of June continue to confirm what we have seen year to date with (1) fewer home sales and (2) decline in the median sales price.

The June median price was $700,000, compared to $790,000 last year, a decline of 11.3%. Compared to Pasadena’s median price last month of $760,000, prices declined 7.9%. June is normally a strong month for housing as evidenced by last years median price of $790,000 for May and June. The fact that we experienced further declines this past month indicate that the housing market is continuing to soften.

The mix of units sold is changing. In June ‘07, there were 4 homes that sold below $500,000 ranging in price from $449.0 to $495. This year 10 homes sold below $500,000 with prices from $339.9 to $469.9. The low end of the market has re-emerged with sales of homes in the range of $500.0 to $999.0 slowing. Currently 504 units/properties are either active, pending or in back-up position resulting in approximately a 10 month inventory supply.

Pasadena Condo’s & Townhomes

Condo’s and Townhomes continue to lag and drag. They lag the units sold in comparison to the single family market and they continue to drag down the overall performance of the housing market with their larger declines in value. .Sales results for June indicate a median price of $477,500 which was down almost 17% from last June’s median price of $575,000 and we sold almost 50% fewer units. Compared to last month’s median price of $488,000, the median price declined 2.1%. We also have approximately a 10 month supply here as well with 319 units on the market today.

Median Price vs Average Price

I am often asked why we do not include an “average” price on our market updates. To me, an average price is not a good indicator of what is happening in the market. Here is an example. Currently the most expensive listing in Pasadena is a house for $52 million. If this house were to sell, can you imagine how the numbers would be inflated and thrown all out of proportion due to this one sale based upon an average? Median prices direct us towards the middle. Average prices tend to sku the results, either positively or negatively.

Ckick on the link to see all of the homes sold in Pasadena, South Pasadena, and Altadena for the month of June.

The data used for this report was compiled from the i-Tech MLS on 7/10. The data will only include properties listed in the i-Tech MLS.

Tags: pasadena ca homes for sale, pasadena california market update, pasadena california real estate, pasadena june market report, Pasadena real estate

May was an exciting month with the Phoenix Mars Lander arriving on the Red Planet. Its goal is to look for signs of life. Was there water on Mars? If the Mars Lander somehow became misguided and landed in the San Gabriel Valley, would it find signs of life in the Pasadena Real Estate market?

There does appear to be some activity as the positive signs indicate increasing unit sales in single family homes. Monthly increases this year are much smaller than in years past, but they are slowly on the rise and the gap between unit sales last year is decreasing. There is still some pricing weakness in the market as sellers have to offer bigger discounts to sell their home.

We are seeing the market for homes under $500,000 redevelop, thanks to foreclosed and bank owned properties. This month, 12 homes sold under $500,000 compared to only 3 in May ‘07. On the other end of the market, $1 million dollar homes declined with 17 sales this month compared to 27 last year.

Pasadena Townhomes and Condominiums

I recently recapped the Pasadena Townhome and Condominium building boom. Looking at the sales results in this area you have to ask “What were they thinking”? New multi-use projects are nearing completion and are targeted at upper end homebuyer’s.
Median sale prices are near 2006 levels and current inventory is close to a 10 month supply. Current sellers and developers are becoming more aggressive in an attempt to solicit offers from the declining pool of buyers.

Market to Level in July

Based upon the current trends, July should be the point we begin to see equilibrium as the decline became very pronounced last year. The market probably will not pick up; it’s just that the news reports will not seem so ominous.

Tags: pasadena california real estate, pasadena housing market report, Pasadena real estate

Pricing your Pasadena home correctly is the critical first step to a successful transaction. Last week I provided solid evidence in a post regarding the Pasadena Real Estate Secret, that if you price your home properly you will (1) sell it in much less time and (2) maximize the value, by selling it for more money, plus reducing your ongoing out of pocket expenses.

Pricing a property correctly can cause much consternation between salespeople and homeowners. Most homeowners who are considering the sale of a home have made themselves aware of their competition by visiting open houses and collecting “for sale” flyers. However they may not have the latest information on what has actually sold, since this data is not as readily available. Since homes listed for sale tend to represent the high end of the market, comparisons may be made based upon incorrect information.

Determining the Proper Price

So many times I have heard that the property down the street sold for “x” amount, therefore my house should be worth “y”. Many times the owner is comparing only price for price and has failed to factor in the differences in square footage, lot size, beds/baths and amenities the comparable home featured.

To simplify the comparison, I developed the following spreadsheet and chart to visually display the differences and better explain why one home may be comparable in bed/bath’s and square footage, but may sell for a much different price. The following homes have sold within the past 70 days in Northeast Pasadena:

I have represented each house that has sold with a numbered icon to display the value. When a home moves up the price scale, it will also move to the right indicating more features and amenities. This is effective because you are looking at houses in the same neighborhood so there is less variance based upon location and also when you are comparing it to properties within 10% of a square footage variance.

Value = Price + Perceived Benefit

Today’s home buyer is very discerning. They know they do not have much competition so they can afford to be patient and hope to get the best value for their dollar. After looking at 8-10 houses during the course of an afternoon, you begin to get a good idea of how homes are priced. Selling your home is similar to a job interview, price it correctly and you have made a great first impression and may very well get the best home buyer candidate. If your price is deemed uncompetitive, you may find it sitting on the market. Since you read up2daterealestate, you know the longer it sits, the more you loose.

If you’re considering the sale of your property and would like a market analysis, give me a call or send me an email. I will be glad to provide you with a detailed analysis of your market area!

Tags: pasadena california real estate, Pasadena homes for sale, pricing your home to sell

The content of this article may be the key to your future prosperity. For it holds the key to what so many have searched before. The text is not based upon hearsay, not based on opinion, but rather predicated on actual data. In these days when everyone has an opinion on the anemic housing market its good to know that someone has performed the research, culled the data and drawn careful conclusions. The key to selling your Pasadena home in this current market will soon be revealed.

I should also point out that our research department which is staffed by six figure MBA’s had the afternoon off. Actually they have every afternoon off, since we do not have a research department. Regardless, the thesis for a successful property transaction was discovered in about an hour. Not by mere accident like rubber and the telephone, but by attempting to prove a theory. A guess, that there was a correlation somewhere between why some experience success while others deal with frustration and failure.

Selling houses is not rocket science, no matter what some agents would try and get you to believe. There is no magic bullet, no formula that has been passed down through the ages. No one particular agent or company has “the power”, for if they did it would have been published long ago, allowing the keeper of the flame to cash out and make millions of dollars on speaking engagements and book publishing. Real estate agents know this, however there is an implied oath, that it never be divulged or publicly exposed for fear of succumbing to the status quo. Its Superman’s kryptonite. The myth must continue to be propagated.

It Should Have Been Obvious

Sometimes we attempt to make things more complex than they should be. However the secret to a successful property transaction is so simple, it should have been announced a long time ago. In fact, we obfuscate the real issue with terms such as “staging”, “curb appeal” and rosy laced language we forget we are selling real property, instead of trench coats for J. Peterman.

The Secret Announced

Your success or failure in your property sale will be determined from day one. Once your house hits the market and has been announced that it is “For Sale”, your strategy has been plotted and your motive announced.

For the key to maximizing your value, the difference between success and failure all comes down to one thing……..the listing price

The data analyzed was residential sales for the month of May in Pasadena, California.

The numbers indicate that if your house is priced correctly from the beginning, two things are likely to happen:

1. The house will sell for more money
2. The house will sell in less time

The chart shows when properties are listed too high, they tend to chase the market and take price reductions, selling for less and less of their asking prices. The result is longer selling times, therefore reducing the value.

In a declining market, time is money, and the longer your home sits unsold, well I think you get the idea.

Tags: home selling tips, pasadena california real estate, Pasadena real estate, Selling Your Home

Looking at all of the new construction projects in town you would never guess that Pasadena real estate is experiencing a slow down. If you have made the decision to purchase a condominium or townhome then take your seat front and center. The catbird seat. You have many options these days. No matter what you are looking for in terms of amenities or pricing, chances are it is available, and less expensive than it was six months ago. Prices have come down from their listing highs. Based upon the recent rate of sale we may see further reductions.

Catalina Villas is a 15 unit complex located at 480 N. Catalina Avenue. 8 properties are currently for sale. A 2 bed and 3 bath unit featuring 1009 square feet is currently listed for $459,000, down from $544,500 last June. Association fees are $250/month. Units with 2 beds and 2 baths are listed for $399,500.

Fair Oaks Summit - a 24 unit complex with 10 units currently for sale. A 3 bed / 3 bath unit was listed last September for $589,000 and is offering 1709 square feet. It has been reduced to $450,000. Located between Washington and Woodbury on N Fair Oaks, this craftsman style unit has an association fee of $238/month. If you desire new construction, these units offer a great value.

Cinema Lofts feature a total of 37 units, however only 3 units have been reported sold with another 2 units pending. These lofts are 1 bed and 1 bath ranging in price from $385,000 to $395,000. Properties have been listed for 3 months, with association fees in the range of $159.00/month. These units appear to be very elegantly appointed with some great features and amenities.

Belleme Terrace - ranging in price from $595,000 for a 2 bedroom, 3 bath with 1163 sq ft to a unit of 2307 sq ft priced at $1,099,000. This 16 unit complex has 12 units available for sale. These units were listed for sale in November last year and have had price reductions in the range of 6%. A beautifully designed complex unlike any other in Pasadena.

More Coming

There are several other projects currently in the construction phase including Lake@Walnut, a mixed use project containing 106 residential units that are being constructed on top of retail space which sits on the ground floor. To the west we have Delacey Place. Another mixed use project with first floor retail and 30 residential units.

Tags: pasadena california real estate, pasadena condos & townhomes, Pasadena real estate

Earlier this week we reported on the Pasadena real estate market and the sales numbers for March.

Two things are quite obvious; unit sales are off by about 50% across the board. This seems to be true in LA County as well as California. And secondly, inventory levels of homes listed for sale are at the highest point we have probably seen in the last 10 years.

Since the Pasadena area covers such a wide geography and demographic area and because all real estate is local, I decided to break down the analysis by zip code and further dissect what is happening with home values in our city.

Zip Code 91101 - This area is dominated by condos and townhomes. Last year saw quite a bit of activity on newer projects on E. Green St., S. Hudson and Union Street. A market shift has occurred with more mid priced units selling as opposed to higher end units. There are close to 29 homes in foreclosure with about a 10 month supply of inventory.

Zip Code 91103 - Homes within this zip code could be referred to as “A Tale of Two Cities”. This area includes million dollar homes in Linda Vista and also homes east of the Rose Bowl to Marengo. The million dollar market remains fairly strong, however if you exclude homes that sold over $1 million, the median price has fallen from $540,000 last year to $450,000 this year. There are close to 130 homes in this eastern part of the zip code in some stage of foreclosure and approximately a 1 1/2 year supply of homes for sale.

Zip Code 91104 - Including, Orange Heights, Bungalow Heaven, Historic Highlands, Garfield Heights and Brigden Ranch. There is a good cross section of homes in this area and the median price is down about 12%. Also this area is increasing in the number of foreclosures with about 100 properties currently listed. Close to a 10 month supply of homes on the market for sale.

Zip Code 91105 - This area includes San Rafael and features homes in the above average to high price range. It has also been the best performing neighborhood in Pasadena as far as maintaining value and will also be home to the new Pasadena Eco House. Home values have remained strong partly due to the low number (24) of properties in foreclosure. Current inventory indicates about a 12 month supply. This high number of homes for sale could very well produce some softening of values in the future.

Zip Code 91106 - This area features single family homes in Madison Heights in the million dollar plus range, but is also comprised of many condos and townhomes which make up about 75% of the units sold. Most of the price weakness in this area is from the 20+ year old townhomes and condos. Last year we did see the more expensive homes selling over their asking prices, however that has not been the case this year. This are 55 properties in foreclosure with the emphasis on condo/townhomes and several multi-family properties.

Zip Code 91107 - Local neighborhoods include Upper Hastings, Lower Hastings and Chapman Woods. Very similar to the characteristics in zip code 91104. Last year 12 recorded sales (townhomes & condo’s) occurred below $500,000, this year not one recorded sale. Again more evidence that the low end market is suffering the brunt of the housing slowdown. This zip code has suffered the largest decrease in unit sales and with the anemic sales in March, the current inventory is close to a 1 1/2 year supply. Foreclosure property count is 90 units and has been on the rise.

Tags: pasadena california homes for sale, pasadena california real estate, Pasadena home sales, Pasadena real estate, pasadena realtor

It is no surprise that the sluggish housing market is also having an impact on real estate that is purchased and held for investment. A few years ago everyone was a wannabe real estate investor, because real estate was the road to quick wealth and cocktail party conversation was dominated by how much our houses increased in value. It was fashionable to be in real estate. Do you really think Donald Chump Trump could introduce a line of neckwear for men had it not been for the rise in real estate?

We would receive calls into our office from people declaring themselves to be a real estate investor, but a quick response such as “Oh, how many properties do you own?” would usually reveal the true status which was “yes, in fact they did see a commercial on TV regarding real estate investment.”

These days investment real estate has lost some of its luster. It is only for the seriously committed and not for the weekend dabbler as indicated by the sales results of the last three months. The two reasons being (1) money and (2) financing. Since both are harder to obtain and increased amounts are required to purchase, many would be buyers who were playing the real estate roulette wheel hoping that values would forever increase are no longer in the market. Plus the only reason to buy income property is for the income stream that is generated. For income to be produced a substantial down payment is required before the rents begin to pay the PITI (principal, interest, taxes and insurance).

Opportunity for the Contrarians

If you do not have the heard mentality, then there could be opportunity for you. If you think that the time to buy is when others are selling, then it might be time to consider jumping into the market. With both Pasadena real estate markets (residential and income) selling about 50% less units this first quarter, it appears from the chart above that prices are definitely softening.

Unlike residential real estate where emotion is a large factor in the purchase decision, investment real estate is just the opposite. Much more of a black and white decision. If it doesn’t make money, there is no reason to buy it.

Tags: pasadena california real estate, pasadena investment property, Pasadena real estate, pasadena units

If the real estate market were on a fiscal year instead of a calendar year, the New Year would begin in March. With the onset of spring, the housing market has typically kicked into gear. We have recovered from the holidays, prioritized and set goals convincing ourselves that this year will be different. With the warmer weather approaching and the end of the school year, people are once again ready to shop for houses.

Or at least they used to be.

The Springtime Effect

I recently posted a graph depicting monthly sales in the Pasadena real estate market. It showed the seasonality in the market with sales peaking in the spring and summer months. Go as far back as 2002 and you get the same results. Set your watch. It was going to happen. Like clockwork.

Then came the spring of 2006 and interest slowly began to fade. The bull housing market began to loose its steam. It just wasn’t recognized as such. Maybe the market was just taking a breather. Housing slowed as the spread between adjustable rate loans and fixed rates began to move closer, eliminating affordability for many would be homeowners. No one expected such a swift and sudden stop. At this point, the housing market only had one strike against it. We weren’t prepared for the next two 95mph fastballs, known as the sub-prime crisis and the increasing rate of foreclosures. Both of which came in high and inside. Strike two, strike three.

Inventory Levels to Be Key

As you can see, people will take their property off the market at the end of they year as evidenced by the two dips in January. Listing inventory began to increase late January 2007. It is beginning to rise again and apparently earlier this year than last.
current Pasadena inventory levels (single family) as of 2/25/08

The rate of homes sold to current inventory will be a critical calculation and will determine the course of the market for the remainder of 2008.

If inventories begin to rise and we do not see a proportional rise in the number of homes sold, Sellers will be forced to take a more aggressive approach, putting more pressure on listng prices.

Currently in Pasadena we have approximately a 9 to 10 month supply of houses on the market for sale. If you are a home seller and that number continues to grow, be patient. The prospects for this year are not likely to be any better than 2007.

Tags: pasadena california real estate, pasadena housing market, Pasadena real estate