At last we come to price in our series. What could there be to write about price, Sam? Buy low, sell high just like the stock market, right? Yes, that's true but it's not quite as simple to use that rule for Pasadena real estate as it is for the stock market.
If you want to buy shares of stock and you like Google, you would watch the price of Google each day in the newspaper or on the web. And you might keep your eye on the S&P 500 and NASDAQ indexes to see whether prices are rising and falling in general. By watching these prices you could get a good an idea of when to "buy low" for shares of Google stock.
But real estate is a different. You can find the median price trends for a given area (although only some sites actually publish this data), which would be like tracking the S&P 500 in the stock market. But this doesn't tell you everything you need to know about when to buy your home. Would you make your decision to buy Google stock simply because the market as a whole is down? You shouldn't. Even on days where the stock market drops dramatically, there are many stocks that make substantial gains. The same is true with real estate. You need to watch the price of the specific house you want to buy, not just general market trends. The general trends can help, but your dream home might be at it's rock bottom price now even if prices are still dropping.
Another reason why you need more info than the median prices relates to how "median" is calculated. The median price is not the same as the average price. It's the "middle" price. 50% of the homes sell for more than that price and 50% sell for less. So if there are more first-time buyer homes, more short-sales, or REOs, that will reduce the median price. But that doesn't mean that prices above the median price are dropping. It also reduces the median price if owners of higher-end properties are waiting to sell, and from our conversations with sellers many are.
So now that I've told you the potential problems with the data, I'll actually show it to you. Here's the median prices for homes in Pasadena, CA. My analysis is that prices have dropped far enough that it's time to start your search. You can at least narrow in on a few properties to watch. Going back to the stocks comparison, when the market's way down it's a good time to start looking at specific stocks like Google to see if they are way down too. But you've got to take that closer look to know whether the specific home you want is priced right.
If we can give you some help on finding a great price on a home you really want, let us know. Feel free to search for homes or find out the value of your home. Or if you're more comfortable, just leave a comment on the blog here.
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