The National Home Builders Association has just released their June numbers for new housing starts and it’s notgood news. The modest revival they enjoyed the past year ended in May after Federal Tax credits expired. Unsoldinventory is only 213,000 units nationwide, the lowest level in nearly 40 years, and even at that it would take morethan 8 months to sell off.

The National Association of Realtors® will be releasing their numbers in a day or two and again, if the winks andnods in the media are to be believed, the news will not be good. Housing sales, which had been growing in manymarkets, appear to have hit a wall in May after the Federal Tax credits expired. Unsold inventory remains at 24months or longer in some areas of the country.

The Mortgage Bankers Association is bemoaning the fact that in spite of interest rates lower than any time inmemorable history, new mortgage applications are way down and refi’s, which should be driving the business, are inthe tank.

AND NOW FOR SOMETHING COMPLETELY DIFFERENT! (with apologies to Monty Python).

Southwest California must have missed the memo telling us to drive off a cliff. Month over month unit sales in 4 ofour 6 markets were up in June after small drops in May. Temecula sales were up briskly in June and both Murrietaand Temecula set new sales volume records in June. (Chart 1). This helped drive sales to record levels for the 1st halfof the year – up substantially over 2009 sales and nearly double sales volume from 2008. Murrieta and Lake Elsinorenearly tripled their sales volume over 2007. (Chart 3).

Inventories have crept up ever so slightly throughout the region but are still hovering in that 2 – 3 month range,which is less than half of what is considered healthy and less than 10% of some other regions of the country. Demandis still with us. The percentage of listings that sell has crept down slightly but we’re still selling 70+% of inventoryacross most of our markets. (Chart 5). The reason inventory is up and selling percentage is down reflects the productmix – nearly 50% of our market is comprised of short-sales, which are still failing 65% of the time. Standard sales –those old fashioned harbingers of good times, made up 33% of our market last month while bank-owned propertiesonly contributed 21% - down from almost 92% 18 months ago.

Prices continued to stabilize across the market with half our cities up a little, half down a little. The ones that were upthis month were down last and the ones down last were up this – we’re bumping along the bottom. (Chart 2). Of longterm interest, 1st half comparisons show the price performance from our 2007 peak. Down 50% - 60% across theregions, Chart 4 shows a precipitous decline from 2007 to 2008 and a more moderate drop from 2008 to 2009. Thegood news is after that unprecedented dive, median prices across the region have stabilized the past two years andshown slight improvement in a couple markets.

What lies ahead? Well, given the fact that loan mods and short-sales are failing at prodigious rates nationwide,Notices of Trustee Sales are creeping up again as a possible prelude to banks taking more properties back. That hasn’thappened yet but there are those who still worry about a shadow inventory as a precursor of a double-dip in pricing,especially if unemployment remains a concern. After all, there are still an estimated 1/3 of homeowners upside-downin their mortgage (11 to 15 million homeowners). People who are upside down can’t take advantage of the interestrates to refi and people who are out of work can’t buy a new home regardless of interest rates or tax credits. We arealso seeing some trending among middle and upper income homeowners to exercise strategic defaults to the degreethat both Fannie & Freddie have issues new guidelines to dis-incent that practice.

Bottom line – when you read the national headlines and witness the angst ridden media fanning the bonfires ofcalamity, keep your eye on the local market. Now more than ever, all real estate is local. The strength of our citiesand promoting local jobs initiatives is key to keeping our region trending against the tide and keeping our localrecovery alive. Of course that’s just my opinion – for what it’s worth.

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Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake

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Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake

Monthly Unit Sales

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Temecula Murrieta Wildomar Lake Elsinore Menifee Canyon Lake

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Temecula Murrieta Wildomar Lake Elsinore Menifee Canyon Lake

1st Half '07 1st Half '08 1st Half '09 1st Half '10

First Half Sales Comparison

First Half Median Price Comparison

Notice ofDefault

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Sold to3rd Party

June Market Activity by Sales Type

Active Closed FailedIn

Escrow%

ActivityBank Owned 21% 39% 8% 30% 27%Short Sales 47% 35% 65% 52% 47%Standard Sales 33% 26% 27% 18% 26%Other 1% 1% 2% 1% 1%

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

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Murrieta Temecula Lake Elsininore Menifee Canyon Lake Wildomar

Data courtesy of ForeclosureRadar.com

Data courtesy of Stats4Agents.com

June Demand Chart