Southwest California Homes Sales - Murrieta, Temecula & Lake Elsinore

Every year about this time it's been my custom to provide you a market overview. Twelve, fifteen years ago this column wasn't much fun to write. Then it got pretty entertaining for awhile between 1996 and 2005. Nowadays it's not that much fun either, but makes for an interesting read if you don't have anything better to do.

Let's start local, shall we?

Look at that nice spike back in Q2 '04. Temecula sold an average of 202 homes every month that quarter while Murrieta came in close behind at 180. In '05 we experienced another run-up starting with the springtime selling season that reached its peak in August of that year selling an average of 178 homes a month in Temecula, 168 in Murrieta. In '06 there was a mini-spikelett starting off the springtime season but it disappeared faster than cold beer on a hot day. If you're looking for any kind of spike in '07, keep lookin'.

Murrieta home sale, which peaked at 1,679 in 2004, dropped to 1,252 in 2006 but will reach just 667 units in 2007. Temecula sold 1,975 homes in 2004, down to 1,236 in 2006 and will hit about 797 units in 2007. Lake Elsinore, which saw sales surge to 1,054 units in 2005 will post sales of around 330 for 2007 and Riverside sales, which peaked at 3,790 units in 2005 will follow with just over 1,300 in 2007. (December numbers are not yet available - projections based on run-rate.)

While sales numbers have declined precipitously, median prices have fared somewhat better. In Q1 '04, Murrieta median home values were $392,845 or $184 /SqFt. Temecula median was $391,383 at $198 /SqFt. By Q2 '06, Temecula reached its peak at $556,980 while Murrieta hit its peak in Q1 '07 with $540,547. We'll end 2007 at a median of $460,084 in Murrieta, $459,568 in Temecula. Murrieta reached $233 /SqFt in Q2 '06 while Temecula just posted its peak period in Q3 '07 at $286 /SqFt. That reflects an anomalous spike from their 1^sthalf average of $236 /SqFt and may be indicative of several factors - anything from an error in the numbers (theirs, not mine) to a surge in smaller home sales that carry a relatively higher price per square foot.

(By the way, all the numbers I've used come courtesy of Chicago Title. You may see numbers that are a little higher or lower depending on the source - but using the same source through time eliminates multi-source variables and at least illustrates major trendlines and activity.)

One last number that you people seem to enjoy - figuring that there were 1,794 homes sold in Southwest California last year, with 2 paychecks per sale, that equals 3,588 paychecks for the year. We currently have over 5,000 agent members. That's .72 of a paycheck for every agent last year, FOR THE WHOLE YEAR! How's your job lookin'?

Now the good news.

California median price declined by nearly 12% past year to $488,640. Temecula/Murrieta will see their median drop by about 16% to 459,826, San Diego area will drop 7% to $535,780 and Orange County will drop 5.4% to $661,580. Why is this good news? Because our region continues to grow and add jobs (remember the fundamentals). If people are coming to the region to work, where do you suppose they can afford to live? I mean, at $460,000 we're a long ways from the ‘affordable housing' mecca we were just a decade ago, but still affordable relative to our neighbors. You can buy single family homes in Murrieta and Temecula for $250,000 again folks! I haven't been able to say that for 6 or 8 years. And while it sucks if you bought that place for $350,000 or $400,000, it's great news if you're a first time homebuyer who figured your chase for the American Dream was just a pipe dream.

The Housing Affordability Index for the state remained unchanged at 24% in 2007 but several key areas improved including our own. From a point ten years ago when our HAI stood at over 50%, we saw that erode until less than 20% of people who worked here could afford to live here. That number climbed to 39% in 2007 and will likely increase a bit more this year. San Diego and Orange County also posted HAI gains up to about 24%, from the 12% - 16% range. The most affordable region continues to be the High Desert where housing sales declined 52% last year and prices dropped 22%. Their HAI, which had long led the state up around 55% had dropped to 39% in 2006 but climbed back up to 48% in 2007. Santa Clara, Santa Barbara and Monterey enjoyed year over year price increases last year, although the poor folks in Santa Barbara South Coast saw their values plummet 1.3% but still retaining the highest state median price at $1,075,000.

All these elements point to one thing - our housing market is in an adjustment phase. We'll reach that point where the perceived value is there, the media-fed panic dissipates and the demand that's been pent-up for months will come winging back into the market. If you've considered buying up or investing in rentals, the next 6 - 12 months will be primo buying season. Interest rates will remain attractive and the ‘fear-factor' will gradually give way as the foreclosures work their way through the market and buyers realize the value in land. If you sit this one out, you'll only have yourself to kick around later. Listen to ole' Uncle Gino and we'll do awright.

Gene Wunderlich - Selling SouthwestCaliforniaHomes, including Temecula, Murrieta and the Southern California Wine Country.

Don't wait to buy real estate - buy real estate and wait.