Unit sale, median price, demand chart and sales by price point for Southwest California

1. The word on the street is that this is the strangest market most agents have ever worked. Even agents who
have been through 2 or 3 of these cycles know this one’s a little different.
Why? Probably the biggest reason is that the Federal Government has never been as involved in the market as
they are right now. On the financial side they are regulating banks, they are a direct lender (Fannie, Freddie,
FHA), they are imposing moratoriums, and delivering incentives & stimuli. You name it, they’re there along
with their unintended consequences.
In some respects it has served to stabilize the market but in a broader sense it has prevented the market from
achieving its own balance, finding a real bottom and starting a real recovery. The market is being artificially
manipulated right now and we just don’t know what’s next.
Federal Reserve officials are worried that serious delinquency and foreclosure rates continue to move higher
and house prices are still under downward pressure. "We have yet to see evidence of a sustained recovery for
the housing market. Mortgage delinquencies for both subprime and prime loans continue to rise as do
foreclosures," Fed chairman Ben Bernanke told the Dallas Regional Chamber recently.
Locally the reviews are also mixed but mostly positive. On the 1st chart you’ll note that sales are generally up
in Q1 2010 over Q1 2009. This in spite of the reduced inventory and shift in market activity from REO to short
sale as indicated in the last chart. The new Federal HAFA Program is still too recent to have had any
appreciable impact in expediting short-sales but observers are doubtful it will generate any more positive
results than the highly touted but largely ineffective Making Home Affordable Program. As evidenced by the
69% FAIL rate of short sales, they remain problematic and frustrating.
In what is generally positive news, median prices remain relatively stable 1st quarter to 1st quarter – the first
time we’ve seen that in 4 years. In fact, median price levels have been relatively stable inside a narrow range
since 3rd quarter 2008. After dropping like a rock for the past 3 years, stability is a good thing.
As I’ve pointed out before, while the rumored release of new REO inventory may spell further price declines for
some areas of the state and country, locally we can only benefit from it. Our inventories remain very low and
when you factor in the percentage of short-sales that will not sell and the $500,000 + inventory that is also
languishing (page 3), there is a desperate need for reliable, salable inventory. That’s why we’re seeing more
standard sales creeping into the market as some regular sellers are making a decision to use their equity (yes,
Virginia, there is equity) and either make a move up or downsize while prices are still affordable and interest
rates remain near record lows.
Another positive – several of you have indicated your cities are starting to see an increase in new construction
permits. The builders that have survived this far are venturing back into the market cautiously. That is
excellent news because unless we start bringing new product on the market we face the very real possibility of
another price spike when inventory is absorbed. Of course rising interest rates may stifle that, increasing tax
burdens won’t help, and our county unemployment rate over 15% doesn’t inspire consumer confidence either.
We were pleased that the Governor provided some relief for people who have lost their homes to foreclosures
and short-sales by signing SB401. This brings California into compliance with the federal Mortgage Debt Relief
Act of 2007 providing debt forgiveness for qualifying home owners facing a potentially daunting tax bill as the
result of a short sale. Of course unlike the federal bill, SB401 is a ‘revenue neutral’ bill which means that for
every dollar of forgiveness somebody receives, somebody else gets to pay that dollar. If you’re not on the
receiving end of that equation, guess what that makes you. Join the club.
Finally, from our good news/bad news file. Just last week the California legislature passed a new home buyer
/ 1st time homebuyer tax credit allocating $100 million to each of those categories. That’s good news. The bad
news? We are selling 60,000 homes a month in California right now. That $200 million dollars is estimated to
be all used up in just 10 – 20 days! It starts May 1 and may be gone by the ides. If you’re thinking about using
the federal 1st time homebuyer tax credit you’ve got until the 30th of this month to get into escrow. If you were
hoping to use the state tax credit, you better be in escrow by May 15 or sooner. Active duty military can access
the federal program for another year – which is good news for them.
Please feel free to contact me with any questions you may have on this or anything the Southwest Riverside
County Association of Realtors can do for the community.

2. 180
2009 – 2010 Q1 Unit Sales
160
3 Month Average
2009 2010
140
120
100
80
60
40
20
0
Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake
$300,000 Median Price
3 Month Average
$250,000
$200,000
$150,000
$100,000
$50,000
$-

3. 500
Monthly Unit Sales
450
400
350
300
250
200
150
100
50
0
3/08 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10
Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake
$450,000
$400,000
Monthly Median Price Point
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
3/08 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10
Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake

4. 4 3
450
3 3 9
3 7 3 3 March Demand Chart
400 1 3
9
350 2
2
6 7
300 4
8 2
1 1
250 9 1
8 1
7 7
6
200 2 1
1 2
1 2 1
150 9 3 0
2 8
6 7 6 6 4 7 7 7 7 7
100 6 6 5 6
4 8 0 9 1 2 1 6 4
0 3 1 3 0
3
3 2 2 2 2 6 1
1 8
50 . . . . . .
7
5 3 2 1 9 6
0
On Market Pending Closed (Demand) Days on Market % Selling Months Supply
(Supply)
Murrieta Temecula Lake Elsininore Menifee Canyon Lake Wildomar
March Unit Sales by Price Point
Current Inventory by Price Point
(in 1,000's)
<100 101-200 201-300 301-400 401-500 501-1 mil 1 mil +
Temecula 4 17 91 41 9 12 1
4 39 107 17 19 93 47
Murrieta 7 47 116 32 7 3 1
16 95 194 92 17 58 63
Lake Elsinore 24 70 49 4 0 0 0
27 75 48 7 4 9 1
Menifee 5 62 43 3 0 0 0
47 209 128 24 6 8 2
Wildomar 5 10 27 2 0 0 0
5 29 32 10 0 1 1
Canyon Lake 2 15 8 3 3 4 0
12 24 35 21 11 30 11
Market Activity by Sales Type
Active Closed Failed In Escrow % Activity
Bank Owned 19% 49% 8% 34% 30%
Short Sales 50% 29% 69% 39% 46%
Standard Sales 31% 22% 24% 17% 24%
Other 1% 1% 2% 1% 1%
Reports are intended to be generally descriptive, not definitive
Statistics are generated from different sources so all totals may not match