The word on the street is that this is the strangest market most agents have ever worked. Even agents whohave been through 2 or 3 of these cycles know this one’s a little different.

Why? Probably the biggest reason is that the Federal Government has never been as involved in the market asthey are right now. On the financial side they are regulating banks, they are a direct lender (Fannie, Freddie,FHA), they are imposing moratoriums, and delivering incentives & stimuli. You name it, they’re there alongwith their unintended consequences.

In some respects it has served to stabilize the market but in a broader sense it has prevented the market fromachieving its own balance, finding a real bottom and starting a real recovery. The market is being artificiallymanipulated right now and we just don’t know what’s next.

Federal Reserve officials are worried that serious delinquency and foreclosure rates continue to move higherand house prices are still under downward pressure. "We have yet to see evidence of a sustained recovery forthe housing market. Mortgage delinquencies for both subprime and prime loans continue to rise as doforeclosures," Fed chairman Ben Bernanke told the Dallas Regional Chamber recently.

Locally the reviews are also mixed but mostly positive. On the 1st chart you’ll note that sales are generally upin Q1 2010 over Q1 2009. This in spite of the reduced inventory and shift in market activity from REO to shortsale as indicated in the last chart. The new Federal HAFA Program is still too recent to have had anyappreciable impact in expediting short-sales but observers are doubtful it will generate any more positiveresults than the highly touted but largely ineffective Making Home Affordable Program. As evidenced by the69% FAIL rate of short sales, they remain problematic and frustrating.

In what is generally positive news, median prices remain relatively stable 1st quarter to 1st quarter – the firsttime we’ve seen that in 4 years. In fact, median price levels have been relatively stable inside a narrow rangesince 3rd quarter 2008. After dropping like a rock for the past 3 years, stability is a good thing.

As I’ve pointed out before, while the rumored release of new REO inventory may spell further price declines forsome areas of the state and country, locally we can only benefit from it. Our inventories remain very low andwhen you factor in the percentage of short-sales that will not sell and the $500,000 + inventory that is alsolanguishing (page 3), there is a desperate need for reliable, salable inventory. That’s why we’re seeing morestandard sales creeping into the market as some regular sellers are making a decision to use their equity (yes,Virginia, there is equity) and either make a move up or downsize while prices are still affordable and interestrates remain near record lows.

Another positive – several of you have indicated your cities are starting to see an increase in new constructionpermits. The builders that have survived this far are venturing back into the market cautiously. That isexcellent news because unless we start bringing new product on the market we face the very real possibility ofanother price spike when inventory is absorbed. Of course rising interest rates may stifle that, increasing taxburdens won’t help, and our county unemployment rate over 15% doesn’t inspire consumer confidence either.

We were pleased that the Governor provided some relief for people who have lost their homes to foreclosuresand short-sales by signing SB401. This brings California into compliance with the federal Mortgage Debt ReliefAct of 2007 providing debt forgiveness for qualifying home owners facing a potentially daunting tax bill as theresult of a short sale. Of course unlike the federal bill, SB401 is a ‘revenue neutral’ bill which means that forevery dollar of forgiveness somebody receives, somebody else gets to pay that dollar. If you’re not on thereceiving end of that equation, guess what that makes you. Join the club.

Finally, from our good news/bad news file. Just last week the California legislature passed a new home buyer/ 1st time homebuyer tax credit allocating $100 million to each of those categories. That’s good news. The badnews? We are selling 60,000 homes a month in California right now. That $200 million dollars is estimated tobe all used up in just 10 – 20 days! It starts May 1 and may be gone by the ides. If you’re thinking about usingthe federal 1st time homebuyer tax credit you’ve got until the 30th of this month to get into escrow. If you werehoping to use the state tax credit, you better be in escrow by May 15 or sooner. Active duty military can accessthe federal program for another year – which is good news for them.

Please feel free to contact me with any questions you may have on this or anything the Southwest RiversideCounty Association of Realtors can do for the community.

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2009 2010

Temecula Lake ElsinoreMurrieta Menifee Wildomar Canyon Lake

2009 – 2010 Q1 Unit Sales3 Month Average

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$300,000 Median Price3 Month Average

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3/08 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10

Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake

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3/08 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10

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Monthly Median Price Point

Monthly Unit Sales

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On Market (Supply)

Pending Closed (Demand) Days on Market % Selling Months Supply

433

393

172

70

71

2.5

371

339

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69

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2.3

268

274

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218

197

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Murrieta Temecula Lake Elsininore Menifee Canyon Lake Wildomar

March Unit Sales by Price PointCurrent Inventory by Price Point

(in 1,000's)<100 101-200 201-300 301-400 401-500 501-1 mil 1 mil +

Temecula 4 17 91 41 9 12 14 39 107 17 19 93 47

Murrieta 7 47 116 32 7 3 116 95 194 92 17 58 63

Lake Elsinore 24 70 49 4 0 0 027 75 48 7 4 9 1

Menifee 5 62 43 3 0 0 047 209 128 24 6 8 2

Wildomar 5 10 27 2 0 0 05 29 32 10 0 1 1

Canyon Lake 2 15 8 3 3 4 012 24 35 21 11 30 11

Market Activity by Sales TypeActive Closed Failed In Escrow % Activity

Bank Owned 19% 49% 8% 34% 30%Short Sales 50% 29% 69% 39% 46%Standard Sales 31% 22% 24% 17% 24%Other 1% 1% 2% 1% 1%

March Demand Chart

Reports are intended to be generally descriptive, not definitiveStatistics are generated from different sources so all totals may not match