That is incorrect. Goblin has 1/3 CR, less than some other playable races.
Regarding game balance, I think that this need some considerations.
His bonus stats are +0 (-2,-2,+4) against the usual +2 (all base races).
Powers: fast (30 feet movement), +4 stealth and ride, darkvision.
His stats are lower (in media) but optimize classes that requires DEX and good hit chance. Better if dmg doesn't depend on weapon size (sneak attack).
It's faster than other small races, and +4 stealth it's very powerful. If you consider a human rouge that puts the +2 bonus on dex goblin will have a bonus on stealth of +9 (size, racial bonus and better dex).
Darkvision is good but nothing exceptional.
So, my conclusion is that goblin is an underpowered race, but that this is not true for certain classes, like rogue, in this case is more powerful. By the way, nothing that should cost 1 level.
Goblins are CR 1/2 and are easily a 1st level pc.
The only thing you would have trouble with is adventuring with and in Human/Elvin/Dwarven etc. Villages, Towns, Hamlets etc. People would see you as a monster and either attack, throw cabbage, garbage or shun you. Mind, you could make it work. Some places goblins are gypsies and not monsters, others goblins are bankers. Other fantasy settings they are street urchins.
In Pathfinder you could do it if the party favors you and you take levels in something and wear a cloak and use disguise or become a travelling Bard or Mage or such. Get popular as a Bard and locally you could be a hero that people actually come to, or you could be the bumbling comic relief. Watch the cartoon W.I.T.C.H. for a goblin in the party.
Our party had a Goblin Wizard who was the party cook. The Barbarian woke up and couldn't find his boots, and there was bacon frying with bird eggs... "Ooo, breakfasts time..." He was the best cook around, if you didn't mind eating whatever. "A little salt, a little thyme, some port, some toenail clippings, a bit of venison, oh and that dead crow..." Mix in a bit of Golum from LotR and the Goblin song from the Rise of the Runelords and how they were played in that and in the free Goblin adventure from Paizo Pathfinder... and you have a weird fun character. Of any alignment.
The "We be Goblins" module is for level 1, and you play as goblins. That should be a pretty hard example.
The We Be Goblins module document does state "goblins are not a legal PC race for Pathfinder Society Organized Play".
Mechanically, it's probably not unbalanced for a home game.
According to the Advanced Race Guide playtest, Goblins have an RP of 10, the same as the core races, more than an Orc, but less than a Tiefling or Aasimar. (This will all change from the playtest, though)
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Goblin Characters
Goblins are defined by their class levels—they do not possess racial Hit Dice. All goblins have the following racial traits.
–2 Strength, +4 Dexterity, –2 Charisma: Goblins are fast, but weak and unpleasant to be around.
Small: Goblins are Small creatures and gain a +1 size bonus to their AC, a +1 size bonus on attack rolls, a –1 penalty to their CMB and CMD, and a +4 size bonus on Stealth checks.
Fast: Goblins are fast for their size, and have a base speed of 30 feet.
Darkvision: Goblins can see in the dark up to 60 feet.
Skilled: +4 racial bonus on Ride and Stealth checks.
Languages: Goblins begin play speaking Goblin. Goblins with high Intelligence scores can choose any of these bonus languages: Common, Draconic, Dwarven, Gnoll, Gnome, Halfling, Orc.
Goblins make fun PCs. The only issue I can see is stealth. Lets say they go crazy and get an 18 dex before racial mods and take stealth. Level one you get 1 rank +4 ( small ) , +4 ( racial ) , +3 ( class skill ) +6 ( dex mod ) = +18 to stealth rolls at level 1.
edit - Skill focus for a total of +21?
More frightening than the Stealth nonsense is the Goblin Gunslinger, which has the unholy combination of optimization and RP at its disposal.
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I don't know what you people are saying about goblins being underpowered. A goblin fighter 1 has the exact same CR as a human fighter 1; yes the fighting style will be different, but they're perfectly fine as PCs if you can justify it for your story.
Our party had a Goblin Wizard who was the party cook. The Barbarian woke up and couldn't find his boots, and there was bacon frying with bird eggs... "Ooo, breakfasts time..." He was the best cook around, if you didn't mind eating whatever. "A little salt, a little thyme, some port, some toenail clippings, a bit of venison, oh and that dead crow..." Mix in a bit of Golum from LotR and the Goblin song from the Rise of the Runelords and how they were played in that and in the free Goblin adventure from Paizo Pathfinder... and you have a weird fun character. Of any alignment.
How did your wizard get around the "goblins are afraid of literacy" aspect?
More frightening than the Stealth nonsense is the Goblin Gunslinger, which has the unholy combination of optimization and RP at its disposal.
That sounds like the most awesome thing i've ever read....must...play...it!