Home prices rose 3.8% year-over-year in July according to CoreLogic, marking the 5th consecutive month of increases. CoreLogic forecasts a 4.6% rise in August and overall gains for 2012. While some slowing is expected, the housing market is seeing "the light at the end of a very long tunnel." Activity in Southwest California is running slightly ahead of national numbers with year-over-year increases of 6% in both July and August. However, sales were down in August due partly to severe inventory shortages, with demand still strong if more homes were available.

1. “…the light at the end of a very long tunnel”
CoreLogic® has just published their most recent Home Price Index showing a 3.8% rise in home prices
for July marking the 5th consecutive month of year-over-year increases. They are forecasting an increase
of 4.6% in August and are now anticipating that we will see a gain for the full year. "It's been six years
since the housing market last experienced the gains that we saw in July, with indications the summer will
finish up on a strong note," said Anand Nallathambi, president and CEO of CoreLogic. "Although we expect
some slowing in price gains over the balance of 2012, we are clearly seeing the light at the end of a very
long tunnel.“
As you’ll see in this report, activity in Southwest California is running slightly ahead of these national
numbers with year-over-year increases of 6% in both July and August putting us ahead of 2011 median
price by 5% year to date. Temecula posted its 6th consecutive monthly median over $300,000 and its
highest month since April 2008.
Sales were generally down again in August, at least in part due to our increasingly severe inventory
shortage. Demand activity remains strong and if we had more homes to sell, they would be selling. Year-
to-date sales are 9% ahead of 2011 and still running 4% ahead of 2010 keeping us on pace to set a new
high water mark for the region.
Back in June, I updated you on a bill H.R. 5823, authored by California Congressman Gary Miller called
the “Saving Taxpayers from Unnecessary GSE Bulk Sales Act of 2012”. This bill followed months of direct
lobbying to the FHFA and others to carve California out of their proposed pilot program to remove
hundreds of homes from our inventory and convert them to rentals for 5 years in an ‘effort to stabilize
the market’.
Well, the bill is still languishing in committee. Meanwhile the FHFA has announced its intention to
proceed with the program and remove 500 for-sale homes in LA and Riverside County to fire-sale to an
investor as rentals by year-end. Even if we knew how they were selecting these homes, where they were
located and who they were going to sell them to, this would still be a bad program. The fact that we don’t
know any of those things only makes it worse.
I would like to thank the Riverside County Board of Supervisors, the Southwest California Legislative
Council and the Cities of Temecula and Murrieta (so far) for joining us in SUPPORTING H.R. 5823 and
opposing this FHFA program. Simply stated, the goal of this program is to stabilize the market by
removing ‘excess inventory’. But our region has no excess inventory, there is strong demand for the
properties we have and our prices have been stable for 3+ years and have recently started to appreciate.
This program would make it even more difficult for qualified buyers to find a home in our communities
while exposing our neighborhoods to numerous rentals owned by an absentee landlord (hedge fund) just
waiting out their 5 years to dump them back onto the market.
If you would like to join the coalition supporting H.R. 5823, follow this link, save the file to your computer
and fax and/or send it to the parties copied on the second page. Thank you.
I SUPPORT H.R. 5823.

2. 250
Southwest California Homes
Single Family Homes
200 Unit Sales
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 are remaining robust into the 3rd quarter of the year with year-to-date sales tracking 9% ahead of last
year ((4,963/5,454). Temecula sales are up 14% (1,242/1,446) as is Canyon Lake (168/195). Menifee is up
12% (1,126/1,279) and Murrieta sales have bumped 8% (1,324/1,445).
Median prices continue to improve slowly, up 5% year to date. Canyon Lake median increased 18% year to
date ($235,704/$286,778), Temecula was up 3% ($301,376/$310,521), Murrieta up 4%
($267,361/$277,182), Lake Elsinore up 3% ($175,336/$180,176) and if you live in Wildomar, your home is
worth $615 more than last year. Menifee prices are off about 3% ($185,035/$179,751).
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
Southwest California Homes
Single Family Homes
$50,000 Median Price
$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

3. 450
August Demand Chart
4
3
400 . 3
.
3 2 .
3 3
2 5 2
350 . 8
6 5
0
3 2 0
300 .
1 3
2 4
72 0
3 3
2 5
250 2 1
1
1 9 1
7 1 7 1
200 2 1
5 2 .
0 4
4
8 8
1 1
150
9 0
9
9 2 8 8
7 4 8 7
100 6 5 0 0 9 6
4 5
1 7
3 0 3 2
50 4 1 1 1 0 2 1
1 7
. . . . . .
3 1 0 9 4 3
0
On Market Pending Closed (Demand) Days on Market Months Supply Absorption rate *
(Supply) Murrieta Temecula Lake Elsininore
* Absorption rate - # of new listings for the month/# of sold listings for the month
Inventory of available homes continues to shrink. Last month we were down to 841, this
month we’re at just 795 single family homes available for sale. That’s down 65% in the past 6
months. Across the region we sold just 97 homes fewer than our total inventory putting our
months supply at 1.3 months. A healthy inventory is considered to be 6 – 7 months yet the
FHFA believes we have an excess supply of inventory and wants to subtract another 500
homes so they can help ‘stabilize’ our market.
This month, like last month, we sold nearly 3 homes for every new listing coming on the
market. Lake Elsinore sold 4.25 homes for every new listing, Temecula, Wildomar and Menifee
sold about 3.25 and Murrieta sold 2.5 for every new listing.
How long the supply of available housing holds out at this rate of absorption is anybody’s
guess but it does create problems. First time homebuyers are increasingly frustrated finding
affordable homes as many of these properties on the lower end of the price scale are snapped
up by cash buyers and investors. Fortunately many of the investors are purchasing for resale
which is a big help for new buyers entering the market who would otherwise find their options
even more limited.

4. August Market Activity
By Sales Type
Standard Sale Bank Owned Short Sale
Activ % of % of Activ % of % of Activ % of % of
e MKT Sold MKT e MKT Sold MKT e MKT Sold MKT
Temecula 161 77% 103 54% 11 5% 25 13% 35 17% 62 32%
Murrieta 169 73% 86 49% 15 6% 21 12% 45 19% 66 38%
Wildomar 20 59% 9 33% 5 15% 4 15% 9 26% 14 52%
Lake
Elsinore 60 61% 33 32% 12 12% 20 20% 24 24% 46 45%
Menifee 96 130% 74 43% 13 18% 37 22% 35 47% 55 32%
Canyon
Lake 57 39% 19 61% 4 3% 5 16% 13 9% 7 23%
Regional 563 72% 324 46% 60 7% 112 16% 161 21% 250 37%
Market mix has stayed about the same the past couple months with standard sales making up
nearly ¾ of the active listings. Because standard sales have a higher percentage of more
expensive homes, they are selling at a lower rate than distressed properties, having a
probability of 58% depending on price. We’re selling 1.8 bank owned homes for every one on
the market and 1.5 short sales. The fact that banks are becoming more adept at short sales is
a boon to the market, helping keep prices up and homes in better condition than the REO
market
250 Current inventory levels
45
200 35
11 15
150
35
9 13
100 161 169 24
5 12 13
4
96
50 60 57
20
0
Temecula Murrieta Wildomar Lake Elsinore Menifee Canyon Lake
Standard Sale Bank Owned Short Sales

5. August Sales by Median Price & Average Days on Market
Standard Bank Owned Short Sale
ADOM Median ADOM Median ADOM Median
Tem 46 $387 27 $302 159 $303
Mur 43 $336 33 $300 154 $255
Wil 70 $278 26 $185 78 $199
LE 59 $194 27 $186 154 $184
Men 44 $208 46 $169 160 $185
Cyn 73 $299 39 $256 120 $202
56 $284 33 $233 138 $221
We hear so much about the bank owned homes and short sales driving prices down. You can
see the trend in the chart above. But keep in mind that standard sale homes have a greater
proportion of upper end properties which will inevitably drive the price higher. For a more
accurate comparison you would have to look at each category with all the variables broken out
– things like $/square foot, amenities and acreage. I don’t have time to do that. Sorry.
So instead I’ll give you some other insights. Backing Canyon Lake out due to its volatility (with
apologies), standard sales sell for 20% higher than short sales, on average, 15% higher than
REO’s. They also sell in an average of 52 days whereas an REO will sell in 30 days and a short
sale will take 141 days. Again keep in mind that standard sales include more upper end homes
which bring nearly double the price per square foot of a tract home which comprise the lions
share of distressed properties.
In the past 6 months the median price of a standard sale has risen 11% across the region, REO
prices are up 6% and short sales are up 7%. For this particular snapshot, Temecula median for
a standard sale has jumped from $318,000 to $387,000 and Murrieta from $298,000 to
$336,000 but Menifee has dropped from $208,000 to $185,000 and Lake Elsinore has dipped
from $205,000 to $194,000. Distressed properties have not varied by a significant amount
over that time.
Again, part of the reason for this differential is because Temecula and Murrieta have more $1
million+ homes listed and sold, which skews the median for standard sales. This also accounts
for the extreme volatility in the Canyon Lake market as a single $1 million sale could double
their overall median. If/When this market segment picks back up there will be an immediate
and positive impact to regional median price.
Time on market has also declined substantially, dropping 31% on standard sales (75 days to 52
days). REO’s and short sale cycles have fallen by 26%, 43 days to 32 for REO’s and 168 to 141
days for short sales. Still not exactly short, but nearly a month less than they were. That’s
progress.

6. The Last Word
From CoreLogic. The Home Price Index (HPI) showed that home prices nationwide, including distressed
sales, increased on a year-over-year basis by 3.8 percent in July 2012 compared to July 2011. This was the
biggest year-over-year increase since August 2006. On a month-over-month basis, including distressed
sales, home prices increased by 1.3 percent in July 2012 compared to June 2012*. The July 2012 figures
mark the fifth consecutive increase in home prices nationally on both a year-over-year and month-over-
month basis.
Excluding distressed sales, home prices nationwide increased on a year-over-year basis by 4.3 percent in
July 2012 compared to July 2011. On a month-over-month basis excluding distressed sales, home prices
increased 1.7 percent in July 2012 compared to June 2012, also the fifth consecutive month-over-month
increase. Distressed sales include short sales and real estate owned (REO) transactions.
The CoreLogic Pending HPI indicates that August home prices, including distressed sales, will rise by 4.6
percent on a year-over-year basis from August 2011 and at least 0.6 percent on a month-over-month basis
from July 2012. Excluding distressed sales, August house prices are also poised to rise 6.0 percent year-
over-year from August 2011 and by 1.3 percent month-over-month from July 2012. The CoreLogic Pending
HPI is a proprietary and exclusive metric that provides the most current indication of trends in home
prices. It is based on Multiple Listing Service (MLS) data that measure price changes in the most recent
month.
Highlights as of July 2012
Including distressed sales, the five states with the highest appreciation were: Arizona (+16.6 percent),
Idaho (10.0 percent), Utah (+9.3 percent), South Dakota (+8.3 percent) and Colorado (+7.3 percent).
Including distressed sales, the five states with the greatest depreciation were: Delaware (-4.8 percent),
Alabama (-4.6 percent), Rhode Island (-2.2 percent), Connecticut (-1.7 percent) and Illinois (-1.7 percent).
Excluding distressed sales, the five states with the highest appreciation were: Arizona (+11.3 percent),
Utah (+10.5 percent), Montana (+9.1 percent), South Dakota (+8.6 percent) and North Dakota (+6.9
percent). Excluding distressed sales, the five states with the greatest depreciation were: Delaware (-3.5
percent), Alabama (-2.4 percent), New Jersey (-1.2 percent), West Virginia (-0.5 percent) and Connecticut
(-0.2 percent).
We’re not among the best but we’re no longer among the worst either.
That’s progress.