The Real Estate Market is Always Good... for somebody.

For example, while I was on vacation last month, Bob Shiller of the Case-Shiller Report was widely quoted opining that ‘housing prices will decline another 30%.’ Really Bob? Where I was vacationing, median prices have continued to increase this year – up to $1.2 million in fact. Actually median prices have increased in about 30% of the country to a greater or lesser degree. In another 30% of the country prices have held pretty steady with only minor ups or downs the past couple years. So with 60% of the country at least breaking even or better, does Bob mean the rest of us are going to drop another 90% for his estimate to be accurate? Or is every single market going to suddenly start dropping 30% across the board? Does a reporter ever stand up and say ‘What the hell does that mean, Bob?’ I do. Bring on the salt and lime.

Here’s where our local housing market stands as of the end of the first half. In Lake Elsinore they’ve sold 255 homes through the end of June, up 25% over the 191 homes sold in the same period last year. Murrieta sold 613 homes, up 46% over their 393 homes last year and even Temecula sold 490 homes, posting a modest 2% increase over 480 sold last year. So that’s good news. It’s still below 2005 & 2006 run rates and well below the peak 1^st half results posted in 2004 when Lake Elsinore sold 444 homes, Murrieta sold 885 and Temecula sold 1017, but it’s a start.

What makes it even better is the quarter-over-quarter run rate. While last year found our sales volumes in month-to-month and quarter-to-quarter free fall, this year Lake Elsinore sales increased 53% from Q1 to Q2 - from 82 to 173, Murrieta increased 45% from 218 to 396 and Temecula posted a whopping 59% increase from 142 to 348 homes sold.

So is the housing crisis over? One month doesn’t make a trend but 3 of them together equals a quarter of growth. One quarter doesn’t make a trend either but if we can put two or three of them together, we might be turning the proverbial corner on sales.

ON SALES!

But there’s a dark side to this sales growth. The reason more people are buying right now is very simple – prices are at their lowest levels since I started tracking them back in 2004. Each city hit its pricing peak at different times. For Lake Elsinore that high water mark was Q1 ’05 when their median price hit $438,850 with an average price of $273/per SqFt (APSF). Today Lake Elsinore’s median price home is $236,824 with an APSF of $123. That’s a negative shift of 46% in the median price of a home. Murrieta’s median spiked up to $540,547 in Q1 ’07 at an APSF of $233. Q2 ’08 median stands at $307,368 with an APSF of $136 for a drop of 43%. Temecula prices reached their zenith in Q2 ’06 at $554,580 and APSF of $297. Last quarter that median had fallen to $338,931 with an APSF of $159 for a drop of 39%.

That is definitely a good-news/bad-news scenario. The good news is that first time home buyers are flocking into a market they’ve been frozen out of for the past 4 or 5 years. Assuming they can get a loan (not always easy today), they have a selection of affordable homes available to them unmatched in our market since the late 90’s. There are dozens of homes available under $200,000 and many condos are dipping toward the $100,000 level. Buyers looking to increase their home size are finding homes for $350,000 that cost nearly double that as recently as 18 months ago. Nearly 20% of homes in La Cresta are back under $1 million with some bank-owned homes available in the $600,000 range. Our local Housing Affordability Index has jumped more than 20 points in just the past 14 months.

While this is great news if you are a home buyer, it’s not what you want to hear if you bought your home after 2004. It’s also not great news if you want or need to sell or refinance a home that you bought anytime during the past decade. You will take anywhere from a light shower to a full bath if you are trying to compete with today’s most successful sellers – BANKS. And that’s not likely to end anytime soon. According to most sources, they forecast another couple of rate resets that will impact the market between this fall and next spring and each of those resets results in another wave of foreclosures and more inventory.

Does that mean a continued drop in prices? Not necessarily. In the early 90’s it took our market nearly 4 years for prices to drop as far as they’ve dropped during just the past 14 months. This has been the most precipitous price decline in most analysts’ memory, but the drop may be over or nearly so. As sales increases offset inventory gains, prices will tend to stabilize for awhile even as more foreclosures hit the market. Once that inventory drops and the balance shifts in the sellers favor, banks will get their issues sorted out and get back into the lending business (after all, that’s what they do for a living) and you can expect our market to start another expansion cycle.

You’ve got a few months left of depressed prices and a spectacular inventory of choices – then prices will firm up, your selection will start to narrow and the momentum will have shifted. If you factor in the inevitable interest rate increases to combat inflationary pressure, your window of prime opportunity will be even narrower. Or you can continue to wait for the ‘absolute bottom of the market’ and I’ll remind you of this column next year.

One last bit of good news, the County Recorder and Assessor has decided that rather than have you all file a Prop 8 property tax reduction form, they are automatically re-assessing every home sold here since 2004. Some of you have already received your notice of evaluation, some of you are still waiting. If you purchased prior to 2004 or feel your re-assessed tax value is still too high, you can still file for a reduction. Contact the County Recorder & Assessors Office at http://www.riversidetaxinfo.com/ for more info.

Gene Wunderlich - Selling Southwest California Homes including Temecula, Murrieta & The Southern California Wine Country
                   

Remember, Don't wait to buy real estate - Buy real estate and wait.

' The Real Estate Market is Always Good....for somebody'

THE OPINIONS IN THIS COMMENTARY ARE STRICTLY GENE WUNDERLICH's PERSONAL OPINION. WHILE PRESCIENT & OF PROVEN HISTORICAL ACCURACY,  MAY NOT REFLECT THOSE OF ACTIVERAIN, COLDWELL BANKER RESIDENTIAL BROKERAGE OR ANY  OTHER ORGANIZED ENTITY. TOO BAD FOR THEM. .