Carrying our weight againAs 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 theleaders 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 thisrelatively intact, without resorting to a variety of new taxes, fees and regulations to hamper arecovery 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 doorsDid I miss anything?But our cities have used this time to regroup, refocus, renew and especially retain the quality oflife that makes our area an attractive destination.I’ve mentioned before how 6 of the last 8 national economic recoveries have been driven by thehousing market. (The other two were assisted by wars.) In this current ‘recovery’, housing hasbeen conspicuously absent leading to questions about the underlying sustainability of therecovery.Until now (maybe).Sales were generally down in January for our region but that’s not unusual and no cause forconcern. Demand remained strong and pending sales indicate strong months ahead. Inventoryremains a problem and will likely stay that way until significant numbers of existing home sellersare ready to move. An uptick in new home construction will slowly help mitigate the demandcurve but that’s only just beginning. Rumors of bank releases of foreclosed properties remainsjust that – a rumor. And with the Homeowners Bill of Rights recently enacted, many banks andhomeowners 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 tothe 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, newowners 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 inMenifee, $23 mil in Lake Elsinore, $8 mil in Canyon Lake and $7.6 mil in Wildomar. Thehemorrhaging has stopped – now it’s time to rebuild from a more stable base and housing ispoised to assist.Of course then I hear about Sacramento trying to reduce vote requirements for future taxincreases, statewide attacks on prop 13, federal discussions about limiting or eliminating themortgage interest deduction and foisting more regulations on individuals and businesses and Irealize – the recovery is still very fragile. Our local cities have been excellent partners in spite ofthese externals factors. Imagine what we could do with that kind of support in Sacramento andWashington DC. Imagine.
250 Southwest California Homes Single Family Homes200 Unit Sales150100 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
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 9200 6 6 1 1 1 1 9 3 4 . 1 1 1 9 2 4150 1 1 1 1 6 8 1 0 9 . 0 9 7 7 9100 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 monthDemand remained strong in January as we again absorbed 2 homes for every new listing that came on themarket. Pending sales indicate continued strong months ahead. For a more accurate inventory picture, youshould back out 75 properties over $700,000 in Temecula and another 60 in Murrieta. Temecula sold 4 of thoselast month and none sold in Murrieta. Now you know why homes under $400,000 are generating 10 – 20 – 30bids 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 stillselling at an accelerated pace. While standard sales closed 53% of the time, bank owned homes sold 122% andshort 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 MKTTemecula 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%LakeElsinore 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%CanyonLake 55 86% 13 43% 4 6% 5 17% 4 6% 11 37%RegionalAverage 530 76% 280 52% 60 8% 73 14% 79 12% 187 35%
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 thanat 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. Andwhat 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 wheresome of the control lies – and they’re more than a little worried. It was reported from the forum, “We arenow in historically uncharted territory in terms of how much central bankers are doing, in lieu of real politicalaction, to try to boost the global economy. They are buying up trillions of dollars worth of bonds and buoyingup the world markets in the process.Everyone is fretting about how the Fed, the European Central Bank, the Bank of Japan and even Chineseauthorities have distorted the price of assets from stocks to bonds to real estate, quite possibly laying thefoundation 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-termfixes 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 interestrates low, we encourage more purchases or bigger ticket items like homes, as banks borrow money virtuallyfor free. One side-effect of this is a weaker currency which you might think is a bad thing. But it’s actually agood 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 consumergoods more popular than German ones. Germany has arguably been the financial backbone of Europe duringthis 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’sreserve currency.Lenders fret that they are being asked to do more lending while at the same time being required to keep risklow and retain more capital. That’s one of the side-benefits of new CFPB rules under Dodd-Frank we’ve talkedabout before – the Qualified Mortgage (QM) and the Qualified Residential Mortgage (QRM). (First rule in theproposed QM policy? ‘Borrower must show that they can repay the loan.’ Wouldn’t you think that would havebeen 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 andcareful. 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’rean Agenda 21 conspiracist, the WEF is a poster child for the black helicopter brigade. Together with theBilderbergs, they manipulate everything we do, think and see. Or not. Some of their stuff is probably spot-onand will impact us in ways we don’t even worry about yet. Other elites, like George Soros, have an agenda oftheir own.Bottom line – if these guys were actually that prescient and accurate in their prognostications, we’d have farfewer problems than we do today, wouldnt you think. If these guys were that damn good, they’d be runningthings. Oh, wait…