1. Carrying our weight again
As we begin this new year with a degree of cautious optimism and/or arrogance about our future,
(we can’t stay down indefinitely - we’re Americans, after all), I must start by applauding the
leaders of our cities for the exceptional job you have done shepherding us through this morass.
Our region was among the hardest hit in the nation yet our cities have come through this
relatively intact, without resorting to a variety of new taxes, fees and regulations to hamper a
recovery or burden out residents.
In the recent past:
• Murrieta was frequently atop the state and national foreclosure charts
• The record price appreciation we enjoyed until 2007 plummeted 50% - 60% in 18 months
• Abandoned homes and brown-lawn neighborhoods dotted our cities
• Jobless claims skyrocketed
• We had 24 months of inventory but nobody was buying
• Fraud stripped millions of dollars from homeowners and lenders – including local banks
• Commercial properties languished as businesses closed their doors
Did I miss anything?
But our cities have used this time to regroup, refocus, renew and especially retain the quality of
life that makes our area an attractive destination.
I’ve mentioned before how 6 of the last 8 national economic recoveries have been driven by the
housing market. (The other two were assisted by wars.) In this current ‘recovery’, housing has
been conspicuously absent leading to questions about the underlying sustainability of the
recovery.
Until now (maybe).
Sales were generally down in January for our region but that’s not unusual and no cause for
concern. Demand remained strong and pending sales indicate strong months ahead. Inventory
remains a problem and will likely stay that way until significant numbers of existing home sellers
are ready to move. An uptick in new home construction will slowly help mitigate the demand
curve but that’s only just beginning. Rumors of bank releases of foreclosed properties remains
just that – a rumor. And with the Homeowners Bill of Rights recently enacted, many banks and
homeowners are waiting to see what that will mean to short sales and foreclosures.
But while sales were down, prices were up, contributing $145,678,963 in sales transactions to
the region in January. That’s just for the sale of single family homes – it doesn’t include condo’s,
or escrow fees, title fees, home inspection revenue, bringing delinquent taxes current, new
owners buying furniture or Realtors springing for a night out at Chili’s when an escrow closes.
Over $40 million worth of property changed hands in Murrieta, $37 mil in Temecula, $28 mil in
Menifee, $23 mil in Lake Elsinore, $8 mil in Canyon Lake and $7.6 mil in Wildomar. The
hemorrhaging has stopped – now it’s time to rebuild from a more stable base and housing is
poised to assist.
Of course then I hear about Sacramento trying to reduce vote requirements for future tax
increases, statewide attacks on prop 13, federal discussions about limiting or eliminating the
mortgage interest deduction and foisting more regulations on individuals and businesses and I
realize – the recovery is still very fragile. Our local cities have been excellent partners in spite of
these externals factors. Imagine what we could do with that kind of support in Sacramento and
Washington DC. Imagine.
2. 250
Southwest California Homes
Single Family Homes
200 Unit Sales
150
100
50
0
3/11 6/11 9/11 12/11 3/12 6/12 9/12 12/12
Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake
Sales were down from last month and off 5 sales from last January (561/556). Menifee recorded 142 sales in
January, Murrieta had 139, Temecula had 111 and Lake Elsinore had 100.
Prices were up across the board – up 17% from last January for the region ($217,924/$261,445).
January over January prices rose
• 30% in Lake Elsinore ($162,622/$233,280),
• 18% in Canyon Lake ($233,445/$284,577),
• 17% in Menifee (161,143/$195639),
• 15% in Temecula ($286,246/$334,928),
• 12% in Murrieta ($259,975/$294,929) and
• 9% in Wildomar ($204,109/$225,299).
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
Southwest California Homes
$100,000
Single Family Homes
Median Price
$50,000
$0
3/11 6/11 9/11 12/11 3/12 6/12 9/12 12/12
Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake
3. 300
2 January Demand Chart
2
3 2 2 .
250 2 2
8 1 1 . 2
6 .
1 2 1 . 1
1 0 8
8 8 9
200 6 6 1
1 1 1
9
3 4 .
1 1 1
9 2 4
150 1 1 1 1
6 8 1 0 9
.
0 9
7 7 9
100 6 6
5 5 0 4 5
4 9 2
6 5
2 2 3 3
50 0 4 1 1 1 0 2 0
6 8
. . . . . .
2 7 2 8 1 8
0
On Market Pending Closed (Demand) Days on Market Months Supply Absorption rate *
(Supply) Murrieta Temecula Lake Elsininore Menifee Canyon Lake Wildomar
* Absorption rate - # of new listings for the month/# of sold listings for the month
Demand remained strong in January as we again absorbed 2 homes for every new listing that came on the
market. Pending sales indicate continued strong months ahead. For a more accurate inventory picture, you
should back out 75 properties over $700,000 in Temecula and another 60 in Murrieta. Temecula sold 4 of those
last month and none sold in Murrieta. Now you know why homes under $400,000 are generating 10 – 20 – 30
bids within hours. Our price point has shifted up the range but hasn’t caught up with the jumbo market yet.
Standard sales accounted for more than 50% of sold inventory last month though distressed properties are still
selling at an accelerated pace. While standard sales closed 53% of the time, bank owned homes sold 122% and
short sales closed 237%. What a difference a year makes.
January Market Activity
By Sales Type
Standard Sale Bank Owned Short Sale
% of % of % of % of % of % of
Active MKT Sold MKT Active MKT Sold MKT Active MKT Sold MKT
Temecula 157 84% 59 53% 9 5% 15 14% 18 10% 34 31%
Murrieta 138 82% 77 55% 14 8% 15 11% 16 9% 46 33%
Wildomar 17 65% 13 38% 5 19% 6 18% 4 15% 14 41%
Lake
Elsinore 86 74% 45 45% 10 9% 14 14% 18 16% 36 36%
Menifee 77 65% 73 51% 18 15% 18 13% 19 16% 46 32%
Canyon
Lake 55 86% 13 43% 4 6% 5 17% 4 6% 11 37%
Regional
Average 530 76% 280 52% 60 8% 73 14% 79 12% 187 35%
4. The Last Word…
Some things that we should probably worry us but we can’t do anything about so why worry?
Frequent readers are aware that the real estate industry is more manipulated by the government today than
at any time in our history, with all its unintended consequences, frequent mis-steps and outright blunders.
Lenders, homeowners, Realtors, property rights – increasingly co-opted by legislation and/or regulation. And
what emanates from Sacramento and DC is increasingly driven by our membership in the ‘global economy’,
which is largely out of our direct control. Or even their direct control.
For those of you unable to attend the most recent World Economic Forum in Davos last month, that’s where
some of the control lies – and they’re more than a little worried. It was reported from the forum, “We are
now in historically uncharted territory in terms of how much central bankers are doing, in lieu of real political
action, to try to boost the global economy. They are buying up trillions of dollars worth of bonds and buoying
up the world markets in the process.
Everyone is fretting about how the Fed, the European Central Bank, the Bank of Japan and even Chinese
authorities have distorted the price of assets from stocks to bonds to real estate, quite possibly laying the
foundation for a market crash or, in the longer term, hyperinflation.”
Many there were reportedly worried that these monetary policies are covering up the fact that most ‘rich’
countries (we still qualify), need to pay down their debt and create a lot more jobs. “We’re buying short-term
fixes at the expense of future generations” according to Alex Weber, UBS Chair and former Bundesbank head.
Whew, thank heaven that doesn’t apply to us.
Concerns were also expressed about the consequences of long term cheap interest. By keeping our interest
rates low, we encourage more purchases or bigger ticket items like homes, as banks borrow money virtually
for free. One side-effect of this is a weaker currency which you might think is a bad thing. But it’s actually a
good thing in that it spurs exports of our goods overseas to markets with a relatively stronger currency.
The problem is that in 2013 the Japanese Yen will weaken to a point that makes Japanese cars and consumer
goods more popular than German ones. Germany has arguably been the financial backbone of Europe during
this recent crisis and a disruption to their economy could have far reaching consequences on the continent.
And we won’t even mention the potential replacement of the dollar by the Chinese Yuan as the world’s
reserve currency.
Lenders fret that they are being asked to do more lending while at the same time being required to keep risk
low and retain more capital. That’s one of the side-benefits of new CFPB rules under Dodd-Frank we’ve talked
about before – the Qualified Mortgage (QM) and the Qualified Residential Mortgage (QRM). (First rule in the
proposed QM policy? ‘Borrower must show that they can repay the loan.’ Wouldn’t you think that would have
been covered in Banking 101?)
Meanwhile, competition is starting to emerge in the lending arena from sovereign wealth funds and peer-to-
peer lending . Amongst the muddied massage to banks – if you don’t lend, other will, but be smart and
careful. Almost sounds like the old days.
Well, Davos is interesting. Once again, I was not invited My e-vite probably got sent to my SPAM filter. If you’re
an Agenda 21 conspiracist, the WEF is a poster child for the black helicopter brigade. Together with the
Bilderbergs, they manipulate everything we do, think and see. Or not. Some of their stuff is probably spot-on
and will impact us in ways we don’t even worry about yet. Other elites, like George Soros, have an agenda of
their own.
Bottom line – if these guys were actually that prescient and accurate in their prognostications, we’d have far
fewer problems than we do today, wouldn't you think. If these guys were that damn good, they’d be running
things. Oh, wait…
