The main cause of concern at the moment happens to be the median price of a residential home here in Pasadena. In the just recently published up2date February sales report the median price has gone from about $600,000 in February 2008 to $435,000 in February 2009, discounting the fact that unit sales increased 28%. The graph below can provide an idea of how the market has shifted towards the low end and the resulting impact on median prices.

This analysis only used data from single family homes and did not consider condos or townhomes. If we look at the height of the market in ‘04 and ‘05 we see that very few homes were sold less than $249,000. A visible rise is also seen as more properties were sold and prices increased. The market really began to slow in the first quarter of ‘06 as prices began to level off and activity considerably slowing in ‘07, with very few housing units being sold under the $500,000 threshold.

A Turning Point in 2008

What happened in 2008? We saw the beginning of the foreclosure market establish itself as the market driver. Foreclosure activity started in some of the lower income neighborhoods, where a higher degree of leverage was used to buy homes. As the market slowed, foreclosure activity increased and homeowners with equity began to see their equity erode as distressed property set the new market rates. Homes selling in the high $500,000’s were now selling in the mid to high $300.000’s. The foreclosure activity rolled across the North side of Pasadena from West to East, and then to the Southwest in a clockwise motion.

While the new market dynamic has helped increase the affordability for many wishing to enter the housing market, it has also delayed the plans for those wishing to sell and move up. In an upcoming post we will look at the housing market between $500,000 and $1,000,000 to see what impact the economy has had upon the middle to higher end of the real estate market.

Pasadena CA Homes for Sale Show Changing Market is a post from: Up2Date

In stock market jargon it is referred to as testing the bottom or testing the lows. If prices hover around the previous lows without establishing a new benchmark it can be recognized as a positive sign. It may be perceived that price stabilization will occur and that the free fall is over, at least for a while. Maybe it’s just a psychological barrier more than a realistic barometer of market indicators, but sometimes all that may be needed is some innocuous event indicating a market change.

Home prices in Pasadena hit a four year low in October 2004 and then took on a meteoric rise for the next 49 months before returning for a landing in November 2008. With Pasadena home prices in a downward spiral the last couple of months, there seems to be returning momentum in the housing market. Momentum however is a relative term when compared to the recent events of the last few months.

Increased activity has been precipitated by declining interest rates, motivated sellers and plenty of property to choose from. If you were aiming to buy a house a couple of years ago and were priced out of the market, today’s events must be looking pretty good to you.

Look for December home prices to modestly rise or at the very minimum, at least stabilize. Home prices have been known to rise in December if the previous months activity has been slow as evidenced by December 2006 in which prices jumped considerably over the preceding months.

A Discriminating Real Estate Market

The new real estate market is going to pick and choose who benefits. You would think with very favorable interest rates that a re-fi boom would be in the works. Not necessarily so. Consider the plight of the self employed. Today’s refinance rules are based upon one thing….. does your income fall in line with the debt to equity ratios of your new loan? It doesn’t matter that you have never been late on a payment or that your current payment is higher than your new lower refinanced payment would be. Forget credit scores, anyone ever heard of FICO! Now you have to pay to play.

And if you were thinking about a construction loan to build your dream house. Well it seems that you can forget that too. A conversation with a direct lender last week informed me that construction loans were harder to find than consumers paying full retail this holiday season!

I don’t know about you, but I am sure glad the $700 billion federal bailout has retuned a sense of normalcy to our credit markets.

Are Pasadena Home Prices About to Bottom? is a post from: Up2Date

While reviewing homes listed for sale in Pasadena last week, I noticed something odd. Many homes currently listed for sale had taken a price increase. With fewer homes being sold every month and the median price falling faster than the stock market, I wondered what could possibly be behind the recent increases in many of the properties on the market. Prices were increasing from 2 to 3%, when they had been listed and actively for sale for a period of 30 to 45 days? Looking more closely it finally dawned on me. The real estate agents were manipulating the price of the homes in an attempt to increase the short term visibility of the property. For instance, a property that was listed “for sale” on August 15 for $600,000 was reduced on September 15 to $585,000. The again a few days later the price was increased to $600,000. And there you have the first definition of boomeranging, moving the price only to have it return to the original point of inception.

The Philosophy

A property that is newly listed for sale or has a change to its status such as “pending”, “back up”, “sold”, a price increase or decrease is displayed on a special page called the Hot Sheet. These properties tend to get more viewers, and therefore more awareness if only for a brief time. Therefore moving the price up and down obtains key prominence on the “Hot Sheet”. While this practice appears to be acceptable (no bylaws prohibiting it) at least for a while, to me it borders on unethical. Manipulating a home price without the approval of the seller is a violation of the MLS and the California Department of Real Estate. The seller decides the listing price, not the broker. I saw a property that was lowered from $619,000 to $618,000 recently. I bet their phone is still ringing!

Buyer Beware

If you happen to be looking to buy a property make sure your agent does a diligent search on the pricing history of the home. Do you want to be making your offer to purchase based upon the lowest listing price or the current price? As you have just learned, they may not be the same. Then the second definition can become applicable, “an act that backfires on its originator”.

Pasadena Home Prices Boomerang is a post from: Up2Date