South Pas Home Sales Ignore National Trends

By all published reports the market for home sales is beginning to slow. There have been recent reports (CNNMoney, Housing Wire) stating the real estate market could very easily experience the dreaded double dip. The double dip. Ice cream cones good, housing prices bad.

While it’s true that home prices in some areas are falling faster than Anthony Weiner’s career, the City of South Pasadena has not adopted the story about ‘The Man Who Sold Hot Dogs." It’s a great little short story and was given to me very early in my sales career.

South Pasadena Home Sales

Home buyers in South Pas seem to be taking advantage of the low interest rates and also accepting of the fact that a home may cost more, but it can be offset by lower interest rates. The net effect of cheaper money is being able to buy a more expensive house and therefore comply with the cost of admission into the neighborhood.

When I try and analyze home sales, I prefer to look for trends that develop over a few months. With South Pas being a much smaller market, a few home sales can have a much more volatile impact of the monthly reporting. Therefore trends established over a few months are very important. Secondly, I look at how the current month compares to the same month last year, and finally I compare numbers from month to month. I place less emphasis on the month to month number, (ex. May to June) because they tend to have more variations and are usually less informative as to the direction of the market.

From the beginning of the year, we have seen the market trend in a positive direction with respect to the number of recorded home sales. May was a good month as 16 homes were sold in 2011, compared to only 11 in 2010. Also the number of homes that were in escrow increased to its highest level in 15 months. Another positive sign.

Home Values in South Pasadena

So now that we have looked at the market statistics, the next question is ‘What impact is this having on home prices?” I have seen housing reports from other agents that address only “average” prices. To me, analyzing “average” does not give a true indication of market activity. That is why I prefer to look at the “median” number. Here’s why: Suppose this month a home sells for $5 million. Using this number is going to dramatically move the “average” number much higher. When this $5 million sale is included in the “median” price, the number may still move up, however this $5 million sale will have much less impact since we are looking in the middle range of all homes sold. The variations in “average” price will be much more pronounced than they will be in “median” price.

Monthly SF Median Home Prices in South Pasadena

The “median” price represents the number at which half of the homes sold for a higher price and half of the homes sold for a lower price. Looking at housing numbers is akin to reading poetry. We are going to read the same words on the page; it’s just that our interpretations may be vastly different. For instance, which was a better month for housing? April 2010 when the median price was reported at $985,000 with 7 home sales or May 2011,with 16 home sales and a median price of $831,000?

When I look at the last four months, I see increasing home sales and a median price that exceeds $830,000. That sure beats what’s happening in most other places.