2007 Temecula, Murrieta, Menifee and Wildomar CA Real Estate Update

Early last year, Temecula Valley Real Estate started off pretty strong. As we moved into spring and summer, the traditional peak season was slow. And August 2006 saw a severe oversupply of homes on the market. This increased competition and lowered prices. Through the remainder of 2006 and now into mid-2007, the supply of homes on the market has remained very high and the market is moving steadily toward a buyer’s market. Prices have fallen between 10 and 15%.

During the first six months of 2007, we have finally seen business pick up. As we move into the summer, things are looking brighter. Prices seem to be holding steady and some houses are beginning to move. But they are still moving very slowly and sellers need to be patient and do their best to make their home stand out.

There are some major challenges to home prices right now, namely foreclosures and short sales. Many people bought houses using 100% financing at the height of the real estate market and those houses have lost some value. Buyers who used adjustable mortgages or even chose short-term, fixed-payment loans are now experiencing increased payments and, due to the low market price of their home, are no longer able to refinance. If these buyers owe $300,000 (100% financing) and it is now only worth $280,000, there is really no option to refinance their loan. On top of that, your adjustable rate continues to increase, making your payment even higher.

This is a difficult financial bind. Once in this situation, many Southern California properties go into short sale or even foreclosure. When these transactions close, they reduce comparison properties in the market and thus further affect market prices and people’s ability to refinance.

Even with all that said, nice houses in good condition are still selling. But sellers need to adjust their expectations from last year’s prices. And if a seller needs to sell his house to buy another house, he often loses money on the sale, but will make it back on the new house he is buying.

With all of that said, right now is a great time to be a buyer. Interest rates remain historically low. The buyer’s ability to negotiate is also an important factor. As we move into the summer, some of that trading capacity may run out as demand picks up and rates stay low. If you know someone who has been considering making a purchase now is a great time for you to start looking again.

Overall, the market is moving in the right direction and many economic professionals say that we are on the road to recovery. Southern California has always been a leading real estate market and historically has an average appreciation of 3-5% a year. It will take some time to outgrow existing supply and banks will significantly adjust lending options. You should expect problems in the subprime loan and mortgage market to remain a minimal drag on real estate over the next year.

One thing that is very important to keep in mind as we negotiate in this challenging time, real estate is still the best investment with the most benefits. And while Temecula, Murrieta, Wildomar and Menifee Real Estate won’t see gains like we’ve had over the last 5 years (29.5%), we should start to level off a bit in 2008 and have a soft landing as the market starts to straighten out. in 2009.