The document provides an annual report on the real estate market. It summarizes sales volumes and median home prices for several cities in Southwest California for 2010. Several key points are made: - Home sales increased over 30% year-over-year in 4 cities and over 25% in the other two cities compared to 2009 levels. Total sales revenue also increased. - Median home prices remained largely stable compared to 2009 and 2008 levels, suggesting the market may have stabilized after declines in prior years. - Strong first half sales volumes helped annual numbers despite slowing in the second half of the year. The outlook for 2011 is uncertain depending on broader economic and jobs trends.

1. Your Happy New Year Report
This report is going to be a long one but I hope you find the information useful, or at least mildly
interesting. In addition to the normal volume and price statistics, I’ve included annual recap numbers,
some historic trends and where our foreclosure market stands.
While it’s easy, helpful and at times depressing, to see where we’ve been, it’s much trickier to forecast
the future without a crystal ball. Why? Because there are so many variables at play right now – in the
economy in general and the housing market specifically. Experts far more knowledgeable than myself
are equally mixed on what to expect in 2011 and beyond.
Most agree that we will not see significant shifts in either sales or median prices over the next 12
months as we shoulder through more foreclosures and a sagging employment base. Until the residential
market picks up some steam, the commercial market will continue to lag as well. There is even
unprecedented talk out there of implementing short sales and loan modifications for commercial
properties in hopes of avoiding mass default. If they do that let’s hope they’re more effective than they've
been in the residential sector. Yeah, that could happen.
Our local market produced some pleasant surprises of its own last year. While sales statewide were off
their 2009 pace and Riverside County sales were down nearly 25%, Southwest California sales were up
more than 30% year-over-year. 4 cities set new volume records.
Inventory levels remained virtually unchanged when adjusted for unsalable homes (like short sales and
$600,000+ homes) and in spite of the length of time lost to short sale negotiations, average days on
market also remained fairly constant. That’s all good news compared to spiked inventories, months on
market and no sales, which was more the norm just 3 years ago.
While the state median price was up a few points year over year, our city medians were largely
unchanged over 2009 and back into 2008. Hopefully this stability in our market is a positive harbinger
that we’ve established a baseline in spite of a market shift from bank-owned properties to one
dominated by short sales. 2011 is widely anticipated to produce another tsunami of foreclosures but as
long as demand stays as strong as it has been, we’ll weather that storm with minimal impact to our
price level.
The downsides? Distressed properties continue to make up nearly 75% of our sales. Until that number
drops well below 50% we will not see any appreciable increase to our property values. And as long as
unemployment numbers stay high, and construction jobs languish, we will continue to accumulate
distressed properties. Many expect that trend to continue well into 2012 at least. If California continues
to chase higher paying jobs out of state at the current rate (144 companies in 2010), the employment
picture will not improve any time soon, keeping housing values low and increasing pressure on
commercial properties.
One final area to watch in 2011 – while distressed and underwater homeowners attract the headlines
and have defined our market for the past couple years, 75% of homeowners are NOT upside-down and
still have equity in their homes. Granted it’s considerably less cash than it was in 2006 but equity
nonetheless. If banks start to relax their current overly-regulated loan programs and get some of their
money back into circulation, this could represent a significant boost from pent-up move-up-demand –
especially into those upper end homes. Not only would this boost sales in 2011 but there would be an
immediate positive impact on median price and general property values.
Consumer confidence is they key. Here’s hoping for more of that in 2011.

2. Real Estate: Finally a good investment?
The housing market still looks pretty bleak: There were a record 1 million foreclosures
last year, home prices are still falling in many regions, and the number of "underwater"
properties is at a record high.
And things don't look much better in other areas of real estate. The number of
construction jobs continues to decline, even as other parts of the economy have added
jobs. And mortgage rates have moved higher as long-term Treasury yields have backed up
during the past few months.
Basically, the real estate market remains a mess.
Real estate encompasses a wide range of markets – homes, apartments, hospitals, office
buildings, strip malls, dormitories and other properties. But for our purposes, let's focus
on residential real estate, or homes. Here are four reasons to think residential real estate
might represent a bargain – with one big caveat.
• Everyone hates homes - When the housing market is in the doldrums, people tend to avoid thinking
about the value of their home. Sellers complain they’re not getting offers and buyers bemoan the strict
lending requirements. However, prospective buyers should be contrarian and take advantage of a down
housing market.
• Smart people are buying real estate - A prominent hedge-fund manager said in a speech last fall: “If
you don’t own a home, buy one. If you own a home, buy another one, and if you own two homes, buy a
third and lend your relatives the money to buy a home.” He believes that interest rates and home prices
will rise this year, so real estate bargains won’t last much longer.
• Real estate performs well during inflation – Convention says Treasury Inflation Protected Securities,
commodities, and real estate do well in an inflationary environment. Real estate performed well during the
period in the 1970s, when persistent inflation and high unemployment occurred.
• Demand may be coming back - Job creation and getting people employed are the two major factors in the
housing rebound. There’s much debate about when the job market will recovery. Optimists say the
recovery will happen this year, while pessimists say it won’t happen for several years.
Read the full story
CNN Money
Existing home sales jump 12 percent
Sales of existing homes jumped in December, marking the fifth month of gains in the past six
months, based on an industry report released Thursday.
Read the full story
Los Angeles Times
Home seizures by banks decline in state
Fewer Californians grappled with foreclosure last year, bucking a national trend and giving homeowners
fresh hope that the state's housing market could be on the mend.
Read the full story
CNN Money
1 million homes repossessed in 2010
Foreclosures were at a record high in 2010, and more than 1 million people lost their homes, even as
notices started leveling off during the end year.
Read the full story

3. 7 Year Regional Housing Summary
Temecula, Murrieta, Lake Elsinore, Menifee, Wildomar & Canyon Lake
Single Family Residential - Full Value Sales *
Prepared by GeneWunderlich@srcar.org
2004 2005 2006 2007 2008 2009 2010
Temecula
# Sales 1,975 1,742 1,141 805 1,569 1,334 1,987
Median $ $437,158 $484,978 $526,237 $475,522 $337,735 $289,875 $300,234
Total $ $863,387,544 $844,831,095 $600,261,385 $382,795,143 $529,906,738 $386,693,250 $596,564,958
Avg $ / SqFt $222 $249 $252 $251 $152 $124 $128
Murrieta
# Sales 1,679 1,661 1,252 687 2,054 1,666 2,236
Median $ $432,511 $488,747 $530,912 $473,562 $304,466 $271,107 $270,878
Total $ $726,186,109 $811,809,044 $664,702,241 $325,336,865 $625,373,335 $451,664,262 $605,683,208
Avg $ / SqFt $204 $227 $231 $206 $126 $105 $110
Wildomar
# Sales 361 327 317 218 473 287 398
Median $ $393,540 $442,018 $463,920 $435,608 $296,054 $225,739 $220,745
Total $ $142,067,790 $144,539,913 $147,062,772 $94,962,580 $140,033,463 $64,787,093 $87,856,510
Avg $ / SqFt $218 $242 $238 $246 $149 $97 $97
Lake Elsinore
# Sales 924 1,054 700 335 1,154 959 1,387
Median $ $306,607 $363,543 $431,158 $366,358 $183,819 $179,965 $182,925
Total $ $283,304,406 $383,174,322 $301,810,425 $122,729,874 $264,169,930 $172,586,435 $253,716,975
Avg $ / SqFt $197 $237 $265 $221 $121 $87 $91
Menifee
# Sales 820 763 520 498 1,005 651 1,142
Median $ $323,138 $364,695 $418,974 $370,671 $259,504 $201,899 $206,414
Total $ $264,972,818 $278,262,603 $217,866,263 $184,594,241 $260,801,185 $131,436,249 $235,724,788
Avg $ / SqFt $197 $214 $215 $190 $119 $91 $96
Canyon Lake
# Sales 468 342 286 133 330 306 379
Median $ $443,384 $480,200 $567,071 $548,205 $300,561 $241,416 $251,006
Total $ $207,503,712 $164,228,400 $162,182,306 $72,911,265 $99,185,130 $73,873,296 $95,131,274
Avg $ / SqFt $225 $264 $289 $271 $148 $114 $119
### denotes new peak sales volume
* Summary data courtesy of Chicago Title & MRMLS. All figures presumed to be accurate but not guaranteed.
You may have read recent articles citing drops in 2010 home sales in Riverside County, California
in general and the weakest year nationwide since 1997.
Not so in Southwest California!
All cities in the region exceeded 2009 sales volumes while 4 of the 6 surpassed previous high water
marks. Menifee set the sales pace outstripping 2009 sales by 43%. Temecula sales were up 33%,
Lake Elsinore 31%, Wildomar 28%, Murrieta 25% and Canyon Lake 18%. Temecula exceeded their
2004 peak by just 12 homes while Murrieta added 182 homes to the record set in 2008.
Median prices weren’t bad either. We’ve been pointing out that stability all year long and you can
see where we ended up. Maintaining stable prices in spite of a substantial increase in sales and the
changing product mix is a very good sign (hopefully) that we have hit bottom and are poised to
recover as soon as the general economy allows.
And the total revenue from real estate, which impacts city coffers so directly, has also shown
improvement as a result of increased sales volumes – although still well shy of the boom years.

4. 500
7 Year Sales by Month
450
(w/polynomial trendline)
400
350
300
250
200
150
100
50
0
9/04 9/05 9/06 9/07 9/08 9/09 9/10
Murrieta Temecula Lake Elsinore Menifee Wildomar Canyon Lake
While unit sales in the region have described an almost perfect smile during
the past 7 years, the trendline for median price is more like a sneer, or a
grimace. The good news is that it appears to have bottomed out.
$800,000
7 Year Median Price by Month
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
3/04
9/04
3/05
9/05
3/06
9/06
3/07
9/07
3/08
9/08
3/09
9/09
3/10
9/10

5. 700
Quarterly Unit Sales
600 Single Family Residential
500
400
300
200
100
0
Temecula Murrieta Wildomar Lake Elsinore Menifee Canyon Lake
3rd Quarter '09 4th Quarter '09 1st Quarter '10 2nd Quarter '10 3rd Quarter '10 4th Quarter '10
In spite of slowing sales volumes in the last half, as indicated above, the
year ended on a up note thanks to strong first half sales. With an up-tick in
December sales and improving economic and jobs data, we’ll just have to
wait and see what 2011 brings.
2 2
2,500 1 1
, ,
, ,
9 1 9
0
5
2
3
Annual Unit Sales
8 1 1 1
7 ,
4 6 Single Family Residential
5 7 1 7 , , ,
2,000 , 6 6 6
4 1
5 1 7 6 6
2 ,
6 , 9 1 1 6
1 9 3 , 1 3 1
, 2 1 , 8 ,
3 1
1,500 , 1 7
1 4 5 , 1
4 2 0 5 4
0
1 9 5 4 9 2
0
2 4 5 8
8 5
9 7
1,000 0 6 4 7 2
6 6
5 8 0 0
3 5 5
7 4 0 4 4
2 9 1
3 3 7 3 6 3 3
3 3 0 8 3 3
6 2 3 2 9 3 8 4 2
3 0
7
500 1 2 8 8 8
1 7 2 1 0 9
7 1 5 6
7 6
8 3
3
0
Temecula Murrieta Wildomar Lake Elsinore Menifee Canyon Lake
2004 2005 2006 2007 2008 2009 2010

6. 350000
Quarterly Median Price Chart
300000
250000
200000
150000
100000
50000
0
Temecula Murrieta Wildomar Lake Elsinore Menifee Canyon Lake
3rd Quarter '09 4th Quarter '09 1st Quarter '10 2nd Quarter '10 3rd Quarter '10 4th Quarter '10
Median prices – ehhhh, not so much. However, many areas of the state that enjoyed sales
increases this year did so while sacrificing median price. Not so in our region. Prices
generally showed some quarter over quarter improvement over the course of the year to
end up about the same as last year. Two years of price stability in this market is definitely
a good thing.
Annual Median Price Chart
$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
$600,000 $
4 4 5 4 4 4 5 4 3 4 4 4 $ 4 $ $ 4 4 4 5 5
3 8 2 7 $ 3 8 3 7 9 4 6 3 3 3 3 3 1 3 4 8 6 4
$ 7
7 4 6 5 3 2 8 0 3 $ 3 2 3 5 $ 6 1 6 6 8 3 0 7 8
$ $ 3 $
3 $ 3 6 4 0
$500,000 , , , , 3 , , , , 3 $ $ , , , , 3 , , , , , , 3
2 2 2 , $
1 9 2 5 7 5 7 9 5 0 5 0 9 6 0 , 1 , , 9 3 2 0 2 0 $
0 2 2 9 3 $
, 8 $ 3 6 6 2 2
5 7 3 2 0 1 4 1 6 4 7 7 4 1 2 0 $ 6 5 5 7 8 0 7 0 0
9 6 , 5 $ 2
8 8 7 2 7 1 7 2 2 , 0 8 0 8 2 2 , 4 8 5 9 4 7 $ 4 0 1 5 5
, 1 0 , $ $ $ 1 2 , 4
$400,000 3 , 2 8 5 1 9 2 1
2 4 , , 2 6 3 5 1
8 0 1 1 1 3 , 0
5 5 0 0 0 ,
3 6 1 8 5 8 8 8 6 ,
7 7 5 1 6
6 , , 7 0
4 0 7 4 3 9 2 , 1 4
5 7 0 , 0
$300,000 7 8 7 , , 1
, 4 8 4
3 4 6
8 9 9 1 6
9 5 9
1 6 2 4
9
$200,000 9 5 5
$100,000
$0
Temecula Murrieta Wildomar Lake Elsinore Menifee Canyon Lake
2004 2005 2006 2007 2008 2009 2010

7. 6
December Demand Chart
700
6 5
3 3 4
600 7
6
500 5
3
2
400 2
4
4 2 1
1
300 1 2 0 7
1
1 1
3 2 6 5
4 1 8
200 9 9 0 9 1 8
9 8 7 7 7 8 7
6 4 4 9 4 5 6 4 3 3 4 2 6 3
2 3 0 5 5 7 3 1 3 3 1
100 1 6 4 8 1 8 . . . . . .
2 2 9 7 6 7 8 3 0
0
On Market Pending Closed (Demand) Days on Market % Selling Months Supply
(Supply)
Murrieta Temecula Lake Elsininore Menifee Canyon Lake Wildomar
December Market Activity by Price Point
Price On 60 Day 60 Day REO Percent
Point Market Close Fail Close Selling
Temecula, Murrieta, Lake Elsinore, Menifee, Wildomar, Canyon Lake
Sun City, Hemet, Winchester, Perris & San Jacinto
$80,000 17 29 15 0 86%
$100,000 341 257 175 130 58%
$200,000 1,632 857 738 400 54%
$300,000 1,295 671 532 202 56%
$400,000 315 207 193 38 52%
$500,000 80 36 61 7 37%
$600,000 48 21 33 2 39%
$700,000 36 15 25 5 38%
$800,000 36 7 19 1 27%
$900,000 22 6 9 2 40%
$1,000,000 19 2 7 0 22%
$2,000,000 72 5 33 0 13%
$3,000,000 17 2 10 0 17%
$4,000,000 2 0 1 0 No Sale
$5,000,000 3 0 0 0 No Sale
$10,000,000 4 0 0 0 No Sale
$25,000,000 2 0 0 0 No Sale
TOTAL 3,924 2,086 1,834 787 53%
December Market Activity by Sales Type
Active Closed Failed In Escrow % Activity
Bank Owned 22% 42% 14% 38% 27%
Short Sales 52% 30% 68% 48% 50%
Standard Sales 26% 28% 18% 14% 23%
Other 1% 1% 2% 1% 1%

8. 8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
Inventory / Months Supply
0.0
3/10 6/10 9/10 12/10
Murrieta Temecula Lake Elsinore Menifee Wildomar Canyon Lake
Inventory is defined as how long it would take to sell the homes currently on the
market if nothing new came along. A healthy inventory is pegged at 5 – 6 months to
strike a balance between buyers and sellers. During the past 3 years we’ve seen
inventory as high as 32 months and as low as 2. Neither inventory nor days on
market increased appreciably during 2010. Referring to a previous chart, if you
back out the homes listed for $600,000 and over, salable inventory remains right at
the 2 month level. High end properties also remain on the market for longer periods
and short sales (50% of the market) take much longer than average to close,
extending average days on market. If you adjust for those variables, ADOM for
salable properties actually declined during 2010.
120
Average Days on Market
100
80
60
40
20
0
3/10 6/10 9/10 12/10
Murrieta Temecula Lake Elsinore Menifee Wildomar Canyon Lake

9. Source: ForeclosureRadar.com

10. Source: ForeclosureRadar.com

11. Source: ForeclosureRadar.com

12. Source: ForeclosureRadar.com

13. Source: ForeclosureRadar.com
Menifee CA Foreclosure Trends
Canyon Lake CA Foreclosure Trends

14. As you have questions regarding your city or have
requests for specific information not covered in these
pages, please don’t hesitate to call me.
Gene Wunderlich
951-205-1911
GeneWunderlich@srcar.org
http://gadblog.srcar.org