Gene Wunderlich - Realtor®, Government Affairs Director

The Californian 2/28/08

MURRIETA -A federal agency alleged Wednesday that three Murrieta-area men sucked $11 million from 75 amateur investors they recruited through networks of church friends and military comrades and then left a trail of more than 100 foreclosed houses in their wake.

The complaint, filed in U.S. District Court in Riverside by the U.S. Securities and Exchange Commission, seeks a federal court order barring James Duncan, Hendrix Montecastro and Maurice McLeod from continuing to offer the sort of investments that it alleges to be fraud.

The agency generally doesn't file criminal charges, but an attorney for one of the men said the allegations left little doubt that other federal agencies would follow up with prosecutions.

The securities commission Wednesday also demanded in the complaint that the three men repay an unspecified sum to their investors and potentially to lenders, who were left holding $120 million in bad mortgages. Some of Murrieta's most upscale neighborhoods, including Bear Creek, Copper Canyon and Greer Ranch, are dotted with foreclosed homes that the three men and their clients bought and later abandoned.

Finally - some response from a law enforcement agency. Frequent readers of my blogs and local columns have been aware of this mortgage fraud scam as early as 2005. Our Association and our attorney documented 64 cases in 2005 but have not been able to get our DA, AG or the FBI to act.

Finally last year the Dept. of Real Estate pulled the Brokers license, but only after the documented case load had expanded to 128 properties and numerous copy-cat's had pushed that number far higher. The impact this has had on our community has been enormous, helping propel our market into the the #1 or #2 spot among California cities for foreclosures. Our cities and county are being presented with critical revenue decisions because they based budgets on inflated property values which have now declined by as much as 40% during the past 18 months.

Our Association, the Southwest Riverside County Association, has joined with the Inland Valley Association (City of Riverside) to form a Fraud Task Force representing over 10,000 Realtors in an effort to:

1. educate our citizens to beware of these mortgage fraud scam
2. head off new scams aimed at foreclosure fraud and reverse mortgage elder abuse
3. work with our city governments to provide citizens an avenue of recourse
4. pressure law enforcement to get involved

We want our customers and our elected city and county leaders to know that Realtors are part of the solution - not part of the problem. Hopefully this action will send a message to perpetrators that this activity will no longer get a free pass in our community. We have worked very closely with our two daily newspapers to shine a light on this problem and we appreciate the cooperation we have received from the local media in our efforts.

Please help me welcome new ActiveRainer Mark Hawley to the group.

Mark has lived in the Coachella Valley area of the Inland Empire since 1972. He knows everything there is to know about La Quinta, Indio, Bermuda Dunes, Palm Desert, Rancho Mirage, Cathedral City and Palm Springs. If Mark doesn't know it - it ain't worth knowing.

To help you find a specific answer to the question above, I have dozens of tools and resources designed to minimize the stress of selling and maximize the value you receive from your home, such as:

* Detailed photo reports of homes recently sold or on the market in your area
* Evaluation of whether or not this is the optimal time to sell, given current market trends
* Keys to maximizing 'curb appeal' to capture the interest of more buyers
* Latest marketing techniques that use the Internet to reach busy, discriminating buyers

Mark's been a little shy on the whole blogging thing so far but with a little help and encouragement from you all, I know he'll be enlightening us in no time.

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

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

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.

I just saw this new group and wanted to reach and and tap the members. I'm sure many of you have been victimized or had clients preyed upon by mortgage fraud scams when our market was rolling. In Murrieta we had one outfit - Stonewood Financial - who pulled off over 120 of these scams where they would come in offering 100,000+ over asking price with the overage going to a third party - namely themselves. Over 120 at 100,000 each - you do the math. Another agent, whose company was headquartered in Ontario, pulled off more than 70 of these just in our area - we don't know how widespread he was throughout the region.

The cost to our markets in terms of foreclosures, inflated property values, credit and home loss to individuals and the subsequent revenue loss to our cities and county as hundreds of foreclosures sit vacant and unsold is incredible. So the Southwest Riverside County Association of Realtors (Temecula, Murrieta & Lake Elsinore) has joined with the Inland Valley Association of Realtors (Greater Riverside) to form a Fraud Task Force. We are meeting with Rod Pacheco, Riverside District Attorney this Friday and making the first of many powerpoint presentations to the City of Murrieta next week.

We are in the process of gathering information on mortgage fraud, foreclosure fraud and elder abuse through fraudulent reverse mortgages. If you have knowledge of this type of scam in your area, or you are aware of something going on that just smells a little fishy, please share it with our group. Your input will be strictly confidential. To date we have had limited success in getting local law enforcement, our DA, the DRE or FBI involved, although they are very involved in other states around the country (see mortgagefraudblog.com). The DRE finally pulled the brokers license from Stonewood last year, 2 1/2 years after we started documenting this fraud to the authorities.

Please help us shine the light on the practitioners that are giving our industry a bad name and that are costing our clients, lenders and cities millions. Thanks.

If you read my rant at the media in this column a couple months back, you remember one of the things I told you was how the media tends to generalize. If you believe what you read and see in the mainstream media, network TV, syndicated columns, etc., you're laboring under the delusion that the entire housing market from one coast to the next is failing, prices plummeting, foreclosures skyrocketing - and it's just not true.

Areas like ours that grew the fastest during the past 5 year run-up, (Riverside County led the nation with 155% appreciation from 2001 - 2006) are those that are tumbling the fastest as well. California, Florida, New York, Boston, Denver, Las Vegas are all in about the same leaky boat. Some got in a little sooner, some will stick around a little longer.

All of us will make it back out and continue to prosper and real estate will continue to be the greatest builder of wealth for the average American family. How you fare through this cycle depends on how you prepared during the past few years. If you've been through a cycle or two before, whether it's housing, stocks, weather, whatever, you know the cycle can either make you or break you if you're a gambler, they can be your best friend if you stay the course.

Now I want to tell you about one of the many places across the country where real estate continues to boom - and boom loud. It's only one of many but it's a good story.

I was blessed to grow up in a tiny little town high up in the Colorado Rockies. It was a mining town for many years and went through it's share of boom and bust cycles depending on the price of gold and other minerals. The town never suffered much during the depression because all the old European mining families exhibited a flair for making and exporting bootleg liquor of reputable quality. I've still got the '29 Buick my grandparents used to make runs to thirsty areas that had more cash than entrepreneurial talent.

When the country went off the gold standard it shook the place to it's roots. William Jennings Bryan, campaigning for President of the Unites States on a ‘Return to the Gold Standard' platform, even brought his campaign to town knowing he could count on the mining vote. (He still lost). Lots of mines closed during those days. The town went from 33 saloons, a prosperous Red Light District and a total area population of around 10,000, to less than 1,000 hardy souls, 1 mine, a couple seedy taverns and a grocery store. The banks went bust and took peoples savings right along with them. There were no government bail-outs.

When I was growing up there, the town was down to about 450 people year-round. Not exactly prosperous but certainly comfortable. Mining was the backbone and tourism swelled our coffers during the summer as a result of the spectacular scenery and 14,000 foot peaks surrounding our little valley. We didn't know if we were rich or poor but we were happy and real estate was what you lived in, not a speculation or an investment.

In the early 70's prospectors discovered another kind of gold in our mountains, one that the locals has been enjoying all along, ‘White Gold'. Seemingly overnight we became a world class ski resort with movie stars living next door to old hard rock miners, TV personalities and music celebrities rubbing elbows with aging ex-Madams and cattle ranchers at the local diner. Tom Cruise, Oprah, Oliver Stone - the list is endless of 'A' list homeowners.

Today a house in town goes for an average of about $1,000 a square foot. Those are the old homes, the ones built in the early 1900's or even the late 1800's. Fixer-uppers and tear-downs, for the most part. Residential lots in town go for upwards of $1 million if you can find them. A residential lot in town is 25' X 100'.

And real estate is selling like hot cakes. But like anywhere, you must be fairly priced to get sold. The basic rules don't change, only the ratios. I've got a neighbor trying to sell his 2,400 SqFt home for $6.5 million. He'll likely be on the market for quite awhile until he gets real - same rules different ratios. The markets are relative but if you want to get your home sold - regardless of the market, you must be priced right or you're gonna sit on it for awhile.

My point is this. We're going through some rough times in the the real estate market right now there's no denying, and even the optimists like Dr John Husing and others figure it'll take us a couple years to climb out. Meanwhile there's going to be bad things happening to a lot of good families housing-wise. But it's important to keep your eyes on the goal. The entire real estate market is not crumbling. It's actually a dynamite buyers market in our area right now between low interest rates and inventory to select from. And while the Temecula Valley may never become a world class ski resort (hopefully), we certainly have lots to offer and people will continue to migrate to our little corner of the world - probably more people than we might like.

Real estate is often a matter of boom and bust cycles - as anybody living in California more than 10 years can attest - yet the bottom line always trends up. Treat your home like a place for your family to live first and foremost and not like an ATM machine or a hot-tip stock investment. If you follow that simple rule, which has always stood the test of time, you'll do allright. If you're a gambler, well then it don't matter much whether it's Vegas or Pechanga or dot.com stock or housing, your money's at risk. You've never been as close to becoming a ghost town as Telluride, Colorado -  you may never reach the peaks they've rebounded to either, but a sound plan will get you through the housing booms and busts with nary a scratch. If you didn't learn your lesson last bust, try to take notes this time because it'll be around again in a few years.

Well, that's just my opinion - I could be wrong. 

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.