1. Nothing but Blue Skies…
First off I’d like to extend my thanks to City Managers Bob Johnson (Temecula), Rick Dudley (Murrieta), Frank
Oviedo (Wildomar), Bill Rawlings (Menifee) and Tom Evans (Lake Elsinore) for joining Realtors® at our 3rd
annual ‘Breakfast with the City Managers’ this week.
This event is one of the highlights of the year for many of our members and this year was no different. Our
City Managers reminded us how terrific it is to be living and working in this region. Our cities may not exactly
be thriving through these challenging times, but they are all doing better than most. Despite last years state
pilferage of redevelopment funds, and the added insult of stripping VLF funds equaling 22% of Wildomar’s
budget and 18% of Menifee’s, infrastructure improvements, job attraction and parks continue to figure into
each city’s action plan.
Every city is experiencing some revitalization. Unemployment rates are lower than the national rate and
significantly lower than much of the rest of the County. There are new apartments going up in Temecula and 5
new housing tracts springing up in Wildomar. New restaurants, shops and businesses are starting to fill in
some of those shuttered buildings that have populated our region for the past few years. Public safety in our
cities is among the best in the nation as is our education system. There have been lay-offs but our cities have
been able to negotiate with their employees and service providers to maintain a level of service for residents
within the economic realities of the times.
All acknowledge that there are still challenges ahead for our region. One opined that it might be 20 years
before the cities see a return to the level of property tax revenue they had just four years ago. But as the
cities diversify their base that becomes less significant. Temecula currently gets only about 10% of its budget
from property taxes while Menifee, one of our newest cities, relies on property taxes for nearly 50% of their
budget.
And as you’ll see In this months report, housing is doing all it can to move our local recovery forward. Through
the first half of the year sales are up over our previous high water mark in 2010 and prices continue to edge
up ever so slightly across the region. Last month we sold 2.5 houses for every new listing that came on the
market and our inventory dipped even further. It’s not unusual for a new listing to receive 8 – 14 – 20 offers
the first few days and there was a rumor of one local home receiving 100 bids the first week. Wasn’t mine.
Couldn’t say for sure. You know how some people are.
Sacramento and DC continue to do their best to derail our recovery. Last week legislators passed the Attorney
Generals suite of housing bills dubbed the California Homeowners Bill or Rights and the Governor signed off.
While there are many positive aspects of the law, the California Association of Realtors opposed the measure
due to its high propensity to further delay, manipulate and ultimately stall a market still reeling from the worst
decline in memory. More on that in The Last Word…
Thanks again to our City Managers and their staffs for answering every last question from the crowd. This
group can be raucous (both the City Managers and the Realtors®) and we all thought it was too bad there isn’t
a brewpub in Wildomar. Yet.

2. 250
Southwest California
Single Family Residence
Unit Sales
200
150
100
50
0
3/10 6/10 9/10 12/10 3/11 6/11 9/11 12/11 3/12 6/12
Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake
Sales were up over the same period last year in 5 of our 6 cities, up 15% in Temecula
(186/218), up 14% in Menifee (159/184), but down 4% in Murrieta (200/192).
Across the region, June sales were up 4% over the previous year (730/757) but down 5% from
the prior month (796/757).
Don’t spend too much time on this one. This month we’ve got the numbers for the 1st half and
they're better.

3. $400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000 Southwest California Homes
Single Family Residences
Median Price
$50,000
$0
3/10 6/10 9/10 12/10 3/11 6/11 9/11 12/11 3/12 6/12
Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake
June marked the 4th consecutive month with Temecula’s median price over $300,000.
It was also the first time since April 2008 that Murrieta’s median price has ventured above the
$300,000 level.
Canyon Lake enjoyed a 47% spike over last June ($208,014/$329,125), Murrieta was up 11%
over last June ($271,233/$303,196) and Temecula bumped 3% ($296,949/$304,997).

4. 1st Half
1200
9
1
Sales 1 9 8
1 8 8 1
1
9
2
1000 1 6 0
8 1 0 3
0 5 4 9
0 7 7
4 3 6
8 5 7
2
800 8 6
6 5
5 2
0 8
5 7
4 5
2 5
600 4
5
3
2
400 2
9 2 2
1
1 1 0 0 1
8 1 1
4 5 9 1 8
5 2 3
200 8 1 4
1
0
2009 2010 2011 2012
Temecula Murrieta Menifee Lake Elsinore Wildomar Canyon Lake
Residential sales continue strong through the 1st half. Following a good 1st quarter, 2nd quarter
for the region kicked up an additional 4% (2,114/2,212) lead by Menifee, which posted a 27%
increase quarter over quarter (388/535), Temecula with a 24% gain (475/602) and Murrieta
with a 17% bump (496/600).
1st half sales were up 9% over 1st half 2011 ((3,675/4,033) and even up 3% over our previous
bellwether year in 2010 (3,929/4,033). Sales were up 36% from 1st half 2009 (2,565/4,033).
IF we can keep enough product on the market to meet demand, 2012 will easily establish a new
benchmark for SFR sales for the region. Keep in mind that the 1st half of 2010 was aided by the
federal 1st time homebuyer program and a variety of state programs for 1st time buyers and
buyers of new homes. That program expired in June 2010 and from that point through the end
of the year sales faltered. 2012 sales were accomplished without artificial stimulus or market
manipulation so there is some expectation that sales should continue to increase in 3rd quarter
before seeing some dip toward year-end.

5. 350,000
2 2 2
2 2
2 2 2 2
1 2 1
0 1 5 2
300,000 1 6 0 1 7 1 3
8 , 2 1 , 1 1 , 2
8 , 2 3 8 , 8 0
2 , 5 9 7 8 7 7 8 9
2 5 9 , 1 5 3 4 2
8 2 7 5 21 7 2 5 7 6 7 0 7
250,000 , 1 1 , 5 , , 7
2 6 9 5 69 2 , 6 , 9 , , 5 ,
4 0 , 3 2 5 0 2
2 4 1
, 5 2 2 3
48 4 1 6
1
1 1 , 8
8 3 5 5
0 , , 7 2 , 3 1 5
200,000 8 9 0 6 4
1 8 9 4
7 6 0
4 , 2 1 9 9
,
7 7 4 8 9 7
0 8 9 9 4
150,000
0 6
0
100,000
1st Half Median $
50,000
0
2009 2010 2011 2012
Temecula Murrieta Menifee Lake Elsinore Wildomar Canyon Lake
There’s good news on median prices as well. Nothing earth shattering, mind you, but positive.
For the region we are up 5% since 2009 ($229,505/$241,798). Temecula has posted a 1st half
price increase in each of the past four years ($282,077/$291,390/$297,122/$304.011) totaling
7%. Murrieta is up 3% since 2009 ($265,670/$272,493).
If you live in Wildomar your home is worth $1,250 more than it was in 2009. Menifee dropped
15% since 2009 ($208,792/$176,459), but just 4% since last year. Last year was the first year for
the expanded City of Menifee, which added substantially to their volume of sales, but much of
that in lower cost areas than the Menifee core.
A couple bright spots. Canyon Lake median price has increased 27% since 2009
($216,510/$297,859). Why is that good for anybody but Canyon Lake? Because Canyon Lake is
primarily a custom home area with higher priced properties. Those homes are starting to sell
more briskly and for better prices which is a good sign for the rest of the region too. (At a
$300,000 median price, Canyon Lake is less than half of its peak of $696, 385 in March of 2007.)
Temecula and Murrieta are also starting to see more activity in mid-upper end homes. As that
activity increases our median price will reflect that improvement.

6. July 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 171 81% 111 51% 10 5% 31 14% 30 14% 75 34%
Murrieta 161 69% 101 53% 15 6% 28 15% 57 24% 60 31%
Wildomar 23 55% 13 36% 5 12% 8 22% 13 31% 15 42%
Lake
Elsinore 62 55% 38 41% 14 13% 27 29% 34 30% 26 28%
Menifee 105 58% 78 42% 19 10% 43 23% 52 29% 59 32%
Canyon
Lake 65 79% 20 59% 4 5% 6 18% 12 15% 8 24%
Regional
Average 587 66% 361 47% 67 8% 143 20% 198 24% 243 32%
The product mix continues to shift. 4 years ago 92% of our market was distressed homes with
most of those being bank-owned. Just 8% could be considered standard sales, the old
normal. Today it’s bank-owned properties that make up 8% of our active market and short-
sales have dropped from 60+% to just 24%. Standard sales have made up just over 50% of our
active market for the previous 2 months. In June they were 2/3rd of the active market and
nearly half the closed sales were standard.
Also for the first time in the history of short sales we closed at a prodigious rate. As recently
as six months ago short sales were failing more than 70% of the time. Last month we sold
1.25 short sales for every one on the market. Realtors® have become more adept at working
through the process and it appears that lenders might, at long last, be coming to grips with
the issue and figuring ways to expedite.
The process is still very time consuming with 6 – 12 month decisions being commonplace.
But at least if there’s a light at the end of the tunnel, buyers are willing to hang on –
especially investors who don’t have the same time constraints as ‘normal’ buyers.
And while investors and 1st time buyers continue to make up the lion’s share of the market,
move-up buyers and standard (non-flip) sellers are gradually moving back in as well.
And all of our cities are reporting some level of permitting and building activity in both multi-
family and single family residences. That’s definitely good news.

7. 350
2
July Demand Chart 9 2
9 8
3 3
300 3 2
2 3 2 2
0
52 7
5
5 2
6 4 9
2 4
6 2
250 0
1
2 1 8 1
1 1
3 9 8
2 8 8
3 2 9
200 2 4
1
1
150 1
1
2 9 9
9
8 8 8 8 6 6
3 7
100 2 5 4 3
6 6 8
4 2
4
3 3
2
50 4 6 1 1 1 1 2 1
. . . . . .
2 0 2 0 4 2
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
This is the scary sheet. Last month as a region we sold 2.6 homes for every new home listed
(757/286). In fact we sold nearly as many homes as ALL the homes on the market (862/757)
and we have another 1,340 in escrow. Our inventory stands at just 1 precarious month across
most of the region.
Temecula sold 3 homes for every new listing (218/73), Murrieta 2.6 (192/74), Lake Elsinore 2.8
(93/33) while Canyon Lake brought up the rear only selling 1.9 homes for every new one
(34/18).
Inventory is down 62% since February (2,240/862) and down another 11% from last month
(974/862). While a large number of pending properties bodes well for sales in the next month
or two, it literally spells that we are running out of homes to sell. You can only sell 2 or 3 homes
for every new one coming on the market for so long before you run out of houses completely.
Prices SHOULD be going up. (It’s Bush’s fault).

8. The Last Word…
As I’ve mentioned before, the local housing market is trying to climb out of this hole in spite
of tighter lending standards, increased regulation & oversight, disincentives and tax scares.
But sometimes you win. Just last week a five year effort by our national association to get a
long term extension of the National Flood Insurance Program:
WASHINGTON (July 6, 2012) – The National Association of Realtors®applauds Congress
for passing a five-year reauthorization of the National Flood Insurance Program (NFIP).
The Biggert-Waters Flood Insurance Reform Act of 2012 was passed late last week as
part of a transportation funding bill and signed into law by the president today. The
legislation extends NFIP authority through September 30, 2017.
That will help bring some stability to the market. For the past five years it has been renewed
every 30 – 180 days, and been allowed to expire more than once. Last time it expired some
42,000 real estate transactions nationwide were impacted during the 30 days it was not in
force. This is a big win for homeowners across the country including many right here in
Southwest California who live in flood or low lying areas.
Last month I also mentioned concerns Realtors® had on the Attorney Generals suite of
housing & lending bills known as the California Homeowners Bill of Rights. Last week the
bills moved swiftly to a floor vote, passed, signed by Jerry and Chaptered by the SoS in just 2
days. Who says they can’t get anything done in Sacramento?
While there are some good elements of the bill, the California Association of Realtors
opposed this measure. Even in its final version we are concerned that it encourages the filing
of lawsuits intended to delay true market recovery and further discourage lending.
The Homeowners Bill of Rights has four major components:
• Prohibiting “dual track” foreclosures that occur when a servicer continues
foreclosure while also reviewing a homeowner’s application for a loan modification;
• Creating a single point of contact for homeowners who are negotiating a loan
modification;
• Expanding notice requirements that must be provided to a borrower before taking
action on a loan modification application or pursuing foreclosure; and
• Allowing injunctions against foreclosure until violations are corrected and
permitting civil penalties against servicers that file multiple, inaccurate mortgage
documents or commit reckless or willful violations of law.
We are hopeful the positives outweigh the negatives of this new law, scheduled to be
implemented January 2013. We’ll continue working with them to make sure NO ONES
property rights are assailed.
We’re all for a healthy housing market.