Good News Bad News or Just News According to the National Association of Realtors itrsquos almost as hard to afford a house today as it was back before the financial crisis started to hit in 2008 But is that good or bad for the economy

Well maybe a little of both As the housing market has recovered prices are on the rise Thatrsquos generally seen as a positive sign At the same time mortgage rates have risen dramatically over the past year However median household income hasnrsquot risen as quickly At the end of this report Irsquove attached some of the most recent data from both our state and national associations summarizing the impact of rising prices and interest rates on housing affordability These Affordability Indices are based on median household income home prices and interest rates

The impact of these confluences is also detailed in recent articles from the Washington Post lsquoBuying a House is Harder Than Itrsquos Been for Five Yearsrsquo and the Wall Street Journal lsquoMortgage Lenders Homebuyers Feeling Rate Squeezersquo

As Irsquove reported here in the past this housing lsquorecoveryrsquo is of recent vintage and is extremely fragile Concerns about federal policy regarding mortgage interest deductions for homeowners the proposed dissolution of Fannie amp Freddie continuing high unemployment (or underemployment) and the end of the Fed buyback of $85 billion worth of bonds every month has investors lenders and homebuyers feeling very insecure And insecurity and uncertainty are not friends of the housing market ndash or the economy in general

Keep in mind that as a result of the 5 year recession and the massive wave of distressed properties nearly 60 of potential home re-purchasers have been eliminated from the market for the next 3 ndash 5 years Thatrsquos an unprecedented number that has caused the rate of homeownership to fall to its lowest rate in 18 years Wersquore also seeing a pull-back by investors as the bargains they seek have gone away Add to that the fact that for every 1 increase in interest rates we lose another 4-5 million prospective home buyers especially first timers and you can see how the recent surge in sales fueled largely by investors and first time homebuyers may have assuaged some of that pent-up demand and now wersquore entering a different phase of the recovery

Wersquore seeing that borne out locally as sales numbers decline even as prices continue to rise After a 2 dip in July median price for Southwest California rose 4 in August keeping us 24 ahead of last August Year-to-date median price is averaging a 19 gain over last year Thatrsquos healthy but not rampant and with the increase in inventory should continue to moderate through yearend

Sales dropped 13 month-over-month and are currently running 6 behind the year-over-year run rate Historically the next few months should continue to see slower sales activity which will also decrease pressure on pricing At the current run rate 2013 will end up about the same level of sales as 2011 (7596) which wasnrsquot bad

Standard sales accounted for 90 of the active listings on the market again in August and nearly 80 of sold properties

I agree with the conclusions reached by our state association in the newsletter attached at the end of this report which suggests that none of these changes to the housing market in California indicates that the recovery is in jeopardy On the contrary real estate markets are moving into a state of a more measured and sustainable housing recovery in which traditional buyers and sellers will play a greater role Of course we still have the government to worry abouthellip

SW Market A Glance Southwest California Reporting

Period Current Period Last Period Y ear Ago

Change from Last

Period

Change from Year

Ago Existing Home Sales

(SFR Detached) August 2013 640 735 698 13 8

Median Home Price August 2013 $331081 $318312 $253328 4 24

Unsold Inventory Index (SFR Units)

August 2013 1227 1098 795 11 35

Unsold Inventory Index (Months)

August 2013 19 18 13 5 32

Median Time on Market (Days)

August 2013 48 46 81 4 41

Source CRMLS

August Market Activity By Sales Type

Standard Sale Bank Owned Short Sale

Active of MKT Sold

of MKT Active

of MKT Sold

of MKT Active

of MKT Sold

of MKT

Temecula 311 94 123 83 8 2 7 5 7 2 19 13

Murrieta 303 90 136 81 11 3 4 2 19 6 23 14

Wildomar 31 78 26 87 5 13 2 7 3 8 2 7

Lake Elsinore 156 86 67 80 7 4 1 1 14 8 15 18

Menifee 197 86 124 75 12 5 2 1 15 7 28 17

Canyon Lake 97 99 30 70 0 0 3 7 0 0 9 21 Regional Average 1095 90 506 79 43 4 19 3 58 5 96 15

0

50

100

150

200

250

311 611 911 1211 312 612 912 1212 313 613

Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake

Southwest California Homes Single Family Homes

Unit Sales

$0

$50000

$100000

$150000

$200000

$250000

$300000

$350000

$400000

$450000

311 611 911 1211 312 612 912 1212 313 613

Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake

Southwest California Homes Single Family Homes

Median Price

August Transaction Value

Temecula $59210456 Lake Elsinore $23145897

Murrieta $60933120 Wildomar $9374500

Menifee $40264802 Canyon Lake $17020050

$0

$50000

$100000

$150000

$200000

$250000

$300000

$350000

$400000

$450000

312 612 912 1212 313 613

Southwest California Murrieta Temecula

August Median Price

2012 2013

Temecula $347985 $397386 12

Murrieta $299964 $362697 17

Menifee $191395 $242559 21

Lake Elsinore $187216 $275546 32

Wildomar $223344 $312483 29

Canyon Lake $270342 $395815 32

Southwest California $253328 $331081 23

Southwest California Homes Single Family Homes

Year-Over-Year Median Price

0

500

1000

1500

2000

2500

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6

1462

1446

1767

1469

1562

1744

1794

1963

2072

2197

2154

2171

2224

2240

2045

2120

2087

2009

1997

2009

1978

2132

1882

1812

1997

2240 1

419

1188

974

862

841

795

778

725

782

581

679

617

602

639

677

863

1098

1227

0

50

100

150

200

250

300

350

On Market (Supply)

Pending Closed (Demand) Days on Market Months Supply Absorption rate

337

195

168

45

20

12

330

189

149

43

22

10

192

144 8

4 4

2

23

10

230

219

166

39

14

15

98

24

43

80 2

3

15

40

47

30

37

13

14

Murrieta Temecula Lake Elsininore Menifee Canyon Lake Wildomar Absorption rate - of new listings for the month of sold listings for the month

August Demand Chart

All signs point to a healthy market Inventory levels are continuing to increase and while not back to a lsquohealthyrsquo 65 month level (as dictated by national standards) wersquore back up to 2 months worth of homes With buyer demand down last month we added another 200 homes to our inventory which has increased some 45 since May (6771227) Pending sales that precursor of market health is still strong but has dropped off some indicating that September sales will likely be close to August numbers

California real estate markets in 2013 have so far been riding on a fast and furious road to recovery

Housing prices rose so precipitously in some markets particularity in the Bay Area that some experts even started talking about reoccurrence of a bubble Dramatic increase in prices however was largely driven by lack of available inventory of homes for sale as well as significant presence of investors and cash buyers Tight market conditions led to a substantial rise in multiple offers sales occurring on the day of listing and selling prices far above the asking ones While market conditions are clearly favoring sellers there are indications that some of the Californiarsquos real estate markets may be at a turning point

Rising mortgage rates initially presented a sticker shock for many potential buyers who may have already been discouraged by fiercely competitive bidding wars and the number of cash offers Their first reaction was to postpone their home purchase The slowdown is suggested by a slight decrease in the buyer traffic reported in the REALTORSreg Confidence Index Rapidly increasing home prices also put a dent in affordability The percentage of home buyers who could afford to purchase a median-priced home in California dropped to 36 percent in Q2 2013 down from 44 percent in Q1 2013 and from 51 percent in Q2 2012

However as everyone realizes that mortgage rates will most likely not be coming down to levels observed last year and that housing is still relatively affordable by historical measures buyers are slowly readjusting their expectations and coming back to the market

Other indicators also suggest that real estate in California may be at a turning point Fewer listings are under contract within a week or two than what we saw just couple months ago The statewide median time on the market started inching up in June and again in July after continuously declining since January 2012

Additionally investors are playing a smaller role Rising prices and interest rates have shrunk investorsrsquo profit margins and the share of investors decreased to 16 percent in July from 22 percent at the beginning of 2013 Investors are also hard-pressed to find any supply of distressed properties which has dwindled to less than a month of inventory Distressed sales as a share of total sales have also come down dramatically to 17 percent which was the lowest level since the end of 2007 Fortunately however supply of inventory of equity sales has increase 9 percent from June to July and almost 20 percent from the year before Increase in inventory is a much needed development and will aid the market to continue to grow going forward

None of these changes to the housing market in California suggests that the recovery is in jeopardy On the contrary real estate markets are moving into a state of more measured and sustainable housing recovery in which traditional buyers and sellers will play a greater role The sharp rise in interest rates did cause a pause in the market but continued recovery is on the way as everyone adjusts to new norms

Is Californiarsquos Housing Market at a Tipping Point

The Last Word In a shameful display of political gamesmanship when our state legislature ends itrsquos session this Friday one bill that will likely not see the light of day is SB 30 SB 30 is the bill jointly authored by Senators Ron Calderon (D) and Joel Anderson (R) and sponsored by the California Association of Realtorsreg SB 30 would have granted tax relief on phantom income to thousands of California homeowners who short-sold their home this year

SB 30 started life as a bi-partisan bill which was expected to sail through the process and be signed as an urgency measure After all we had a similar bill poised to do just that last year just waiting for Congress to extend their tax relief provision so we could keep California in compliance with federal regulation

But the feds delayed passage last year only sneaking it through as a provision in their last minute budget bill which was not passed until the early hours of 2013 So California had to introduce this as a new bill for our 2013 session Still nobody was expecting any problems

But somewhere along the way things got messy First Democratic Senators who never met a tax they didnrsquot love decided that linking SB 30 ndash a tax relief bill to SB 391 ndash a tax increase bill was a great idea SB 391 would raise lsquofeesrsquo on real estate transaction by $75 per document (from the current $3 ndash $10) which would be siphoned into some pet projects and lsquoaffordable housingrsquo That bill and similar predecessors has met defeat either in the legislature or by the Governor several times in the past and has always been opposed by Realtors as it increases the cost to a select group of individuals (homebuyers) to give money to another group There is no nexus and itrsquos not fair

So this year they thought if they linked it to our bill we would be forced to support it giving a (supposed) $50 million tax break to some (SB30) while increasing taxes by an estimated $500 million on others (SB391)

WRONG

But as we fought to get the bills de-linked another issue came up ndash the Central California Senate race pitting Republican Andy Vidak again Democrat Leticia Perez Now the California Association of Realtors is notoriously bi-partisan in our support of candidates but the decision was made to support Vidak in this race against Perez who was the anointed candidate of Senate Pro-Tem Darrell Steinberg Needless to say when the dust settled on this very costly and largely negative campaign Vidak won (httpwwwfresnobeecom201307043374710vidak-perez-race-features-negativehtml) Not one to take defeat gracefully Steinberg has pulled out all the stops to see that our bill does not progress Under the watchful eye of Assemblymember Mike Gatto SB 30 has been stalled in committee where it will likely perish at the close of business Friday

What this means is that any California homeowner who short sold their home in 2013 will get a tax bill from California for the amount of forgiven debt If you owed $300000 on your home and sold it for $200000 that $100000 in forgiven debt will be considered regular income by the state of California and you will pay taxes on it to the state but not to the IRS

This is a shameful display or political lsquogotcharsquo with Californiarsquos beleaguered homeowners squarely in the crosshairs Therersquos an outside chance we can get a retroactive bill through next session but with Steinberg still at the helm for another year chances are slim

0

50

100

150

200

250

311 611 911 1211 312 612 912 1212 313 613

Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake

Southwest California Homes Single Family Homes

Unit Sales

$0

$50000

$100000

$150000

$200000

$250000

$300000

$350000

$400000

$450000

311 611 911 1211 312 612 912 1212 313 613

Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake

Southwest California Homes Single Family Homes

Median Price

August Transaction Value

Temecula $59210456 Lake Elsinore $23145897

Murrieta $60933120 Wildomar $9374500

Menifee $40264802 Canyon Lake $17020050

$0

$50000

$100000

$150000

$200000

$250000

$300000

$350000

$400000

$450000

312 612 912 1212 313 613

Southwest California Murrieta Temecula

August Median Price

2012 2013

Temecula $347985 $397386 12

Murrieta $299964 $362697 17

Menifee $191395 $242559 21

Lake Elsinore $187216 $275546 32

Wildomar $223344 $312483 29

Canyon Lake $270342 $395815 32

Southwest California $253328 $331081 23

Southwest California Homes Single Family Homes

Year-Over-Year Median Price

0

500

1000

1500

2000

2500

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6

1462

1446

1767

1469

1562

1744

1794

1963

2072

2197

2154

2171

2224

2240

2045

2120

2087

2009

1997

2009

1978

2132

1882

1812

1997

2240 1

419

1188

974

862

841

795

778

725

782

581

679

617

602

639

677

863

1098

1227

0

50

100

150

200

250

300

350

On Market (Supply)

Pending Closed (Demand) Days on Market Months Supply Absorption rate

337

195

168

45

20

12

330

189

149

43

22

10

192

144 8

4 4

2

23

10

230

219

166

39

14

15

98

24

43

80 2

3

15

40

47

30

37

13

14

Murrieta Temecula Lake Elsininore Menifee Canyon Lake Wildomar Absorption rate - of new listings for the month of sold listings for the month

August Demand Chart

All signs point to a healthy market Inventory levels are continuing to increase and while not back to a lsquohealthyrsquo 65 month level (as dictated by national standards) wersquore back up to 2 months worth of homes With buyer demand down last month we added another 200 homes to our inventory which has increased some 45 since May (6771227) Pending sales that precursor of market health is still strong but has dropped off some indicating that September sales will likely be close to August numbers

California real estate markets in 2013 have so far been riding on a fast and furious road to recovery

Housing prices rose so precipitously in some markets particularity in the Bay Area that some experts even started talking about reoccurrence of a bubble Dramatic increase in prices however was largely driven by lack of available inventory of homes for sale as well as significant presence of investors and cash buyers Tight market conditions led to a substantial rise in multiple offers sales occurring on the day of listing and selling prices far above the asking ones While market conditions are clearly favoring sellers there are indications that some of the Californiarsquos real estate markets may be at a turning point

Rising mortgage rates initially presented a sticker shock for many potential buyers who may have already been discouraged by fiercely competitive bidding wars and the number of cash offers Their first reaction was to postpone their home purchase The slowdown is suggested by a slight decrease in the buyer traffic reported in the REALTORSreg Confidence Index Rapidly increasing home prices also put a dent in affordability The percentage of home buyers who could afford to purchase a median-priced home in California dropped to 36 percent in Q2 2013 down from 44 percent in Q1 2013 and from 51 percent in Q2 2012

However as everyone realizes that mortgage rates will most likely not be coming down to levels observed last year and that housing is still relatively affordable by historical measures buyers are slowly readjusting their expectations and coming back to the market

Other indicators also suggest that real estate in California may be at a turning point Fewer listings are under contract within a week or two than what we saw just couple months ago The statewide median time on the market started inching up in June and again in July after continuously declining since January 2012

Additionally investors are playing a smaller role Rising prices and interest rates have shrunk investorsrsquo profit margins and the share of investors decreased to 16 percent in July from 22 percent at the beginning of 2013 Investors are also hard-pressed to find any supply of distressed properties which has dwindled to less than a month of inventory Distressed sales as a share of total sales have also come down dramatically to 17 percent which was the lowest level since the end of 2007 Fortunately however supply of inventory of equity sales has increase 9 percent from June to July and almost 20 percent from the year before Increase in inventory is a much needed development and will aid the market to continue to grow going forward

None of these changes to the housing market in California suggests that the recovery is in jeopardy On the contrary real estate markets are moving into a state of more measured and sustainable housing recovery in which traditional buyers and sellers will play a greater role The sharp rise in interest rates did cause a pause in the market but continued recovery is on the way as everyone adjusts to new norms

Is Californiarsquos Housing Market at a Tipping Point

The Last Word In a shameful display of political gamesmanship when our state legislature ends itrsquos session this Friday one bill that will likely not see the light of day is SB 30 SB 30 is the bill jointly authored by Senators Ron Calderon (D) and Joel Anderson (R) and sponsored by the California Association of Realtorsreg SB 30 would have granted tax relief on phantom income to thousands of California homeowners who short-sold their home this year

SB 30 started life as a bi-partisan bill which was expected to sail through the process and be signed as an urgency measure After all we had a similar bill poised to do just that last year just waiting for Congress to extend their tax relief provision so we could keep California in compliance with federal regulation

But the feds delayed passage last year only sneaking it through as a provision in their last minute budget bill which was not passed until the early hours of 2013 So California had to introduce this as a new bill for our 2013 session Still nobody was expecting any problems

But somewhere along the way things got messy First Democratic Senators who never met a tax they didnrsquot love decided that linking SB 30 ndash a tax relief bill to SB 391 ndash a tax increase bill was a great idea SB 391 would raise lsquofeesrsquo on real estate transaction by $75 per document (from the current $3 ndash $10) which would be siphoned into some pet projects and lsquoaffordable housingrsquo That bill and similar predecessors has met defeat either in the legislature or by the Governor several times in the past and has always been opposed by Realtors as it increases the cost to a select group of individuals (homebuyers) to give money to another group There is no nexus and itrsquos not fair

So this year they thought if they linked it to our bill we would be forced to support it giving a (supposed) $50 million tax break to some (SB30) while increasing taxes by an estimated $500 million on others (SB391)

WRONG

But as we fought to get the bills de-linked another issue came up ndash the Central California Senate race pitting Republican Andy Vidak again Democrat Leticia Perez Now the California Association of Realtors is notoriously bi-partisan in our support of candidates but the decision was made to support Vidak in this race against Perez who was the anointed candidate of Senate Pro-Tem Darrell Steinberg Needless to say when the dust settled on this very costly and largely negative campaign Vidak won (httpwwwfresnobeecom201307043374710vidak-perez-race-features-negativehtml) Not one to take defeat gracefully Steinberg has pulled out all the stops to see that our bill does not progress Under the watchful eye of Assemblymember Mike Gatto SB 30 has been stalled in committee where it will likely perish at the close of business Friday

What this means is that any California homeowner who short sold their home in 2013 will get a tax bill from California for the amount of forgiven debt If you owed $300000 on your home and sold it for $200000 that $100000 in forgiven debt will be considered regular income by the state of California and you will pay taxes on it to the state but not to the IRS

This is a shameful display or political lsquogotcharsquo with Californiarsquos beleaguered homeowners squarely in the crosshairs Therersquos an outside chance we can get a retroactive bill through next session but with Steinberg still at the helm for another year chances are slim

$0

$50000

$100000

$150000

$200000

$250000

$300000

$350000

$400000

$450000

312 612 912 1212 313 613

Southwest California Murrieta Temecula

August Median Price

2012 2013

Temecula $347985 $397386 12

Murrieta $299964 $362697 17

Menifee $191395 $242559 21

Lake Elsinore $187216 $275546 32

Wildomar $223344 $312483 29

Canyon Lake $270342 $395815 32

Southwest California $253328 $331081 23

Southwest California Homes Single Family Homes

Year-Over-Year Median Price

0

500

1000

1500

2000

2500

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6

1462

1446

1767

1469

1562

1744

1794

1963

2072

2197

2154

2171

2224

2240

2045

2120

2087

2009

1997

2009

1978

2132

1882

1812

1997

2240 1

419

1188

974

862

841

795

778

725

782

581

679

617

602

639

677

863

1098

1227

0

50

100

150

200

250

300

350

On Market (Supply)

Pending Closed (Demand) Days on Market Months Supply Absorption rate

337

195

168

45

20

12

330

189

149

43

22

10

192

144 8

4 4

2

23

10

230

219

166

39

14

15

98

24

43

80 2

3

15

40

47

30

37

13

14

Murrieta Temecula Lake Elsininore Menifee Canyon Lake Wildomar Absorption rate - of new listings for the month of sold listings for the month

August Demand Chart

All signs point to a healthy market Inventory levels are continuing to increase and while not back to a lsquohealthyrsquo 65 month level (as dictated by national standards) wersquore back up to 2 months worth of homes With buyer demand down last month we added another 200 homes to our inventory which has increased some 45 since May (6771227) Pending sales that precursor of market health is still strong but has dropped off some indicating that September sales will likely be close to August numbers

California real estate markets in 2013 have so far been riding on a fast and furious road to recovery

Housing prices rose so precipitously in some markets particularity in the Bay Area that some experts even started talking about reoccurrence of a bubble Dramatic increase in prices however was largely driven by lack of available inventory of homes for sale as well as significant presence of investors and cash buyers Tight market conditions led to a substantial rise in multiple offers sales occurring on the day of listing and selling prices far above the asking ones While market conditions are clearly favoring sellers there are indications that some of the Californiarsquos real estate markets may be at a turning point

Rising mortgage rates initially presented a sticker shock for many potential buyers who may have already been discouraged by fiercely competitive bidding wars and the number of cash offers Their first reaction was to postpone their home purchase The slowdown is suggested by a slight decrease in the buyer traffic reported in the REALTORSreg Confidence Index Rapidly increasing home prices also put a dent in affordability The percentage of home buyers who could afford to purchase a median-priced home in California dropped to 36 percent in Q2 2013 down from 44 percent in Q1 2013 and from 51 percent in Q2 2012

However as everyone realizes that mortgage rates will most likely not be coming down to levels observed last year and that housing is still relatively affordable by historical measures buyers are slowly readjusting their expectations and coming back to the market

Other indicators also suggest that real estate in California may be at a turning point Fewer listings are under contract within a week or two than what we saw just couple months ago The statewide median time on the market started inching up in June and again in July after continuously declining since January 2012

Additionally investors are playing a smaller role Rising prices and interest rates have shrunk investorsrsquo profit margins and the share of investors decreased to 16 percent in July from 22 percent at the beginning of 2013 Investors are also hard-pressed to find any supply of distressed properties which has dwindled to less than a month of inventory Distressed sales as a share of total sales have also come down dramatically to 17 percent which was the lowest level since the end of 2007 Fortunately however supply of inventory of equity sales has increase 9 percent from June to July and almost 20 percent from the year before Increase in inventory is a much needed development and will aid the market to continue to grow going forward

None of these changes to the housing market in California suggests that the recovery is in jeopardy On the contrary real estate markets are moving into a state of more measured and sustainable housing recovery in which traditional buyers and sellers will play a greater role The sharp rise in interest rates did cause a pause in the market but continued recovery is on the way as everyone adjusts to new norms

Is Californiarsquos Housing Market at a Tipping Point

The Last Word In a shameful display of political gamesmanship when our state legislature ends itrsquos session this Friday one bill that will likely not see the light of day is SB 30 SB 30 is the bill jointly authored by Senators Ron Calderon (D) and Joel Anderson (R) and sponsored by the California Association of Realtorsreg SB 30 would have granted tax relief on phantom income to thousands of California homeowners who short-sold their home this year

SB 30 started life as a bi-partisan bill which was expected to sail through the process and be signed as an urgency measure After all we had a similar bill poised to do just that last year just waiting for Congress to extend their tax relief provision so we could keep California in compliance with federal regulation

But the feds delayed passage last year only sneaking it through as a provision in their last minute budget bill which was not passed until the early hours of 2013 So California had to introduce this as a new bill for our 2013 session Still nobody was expecting any problems

But somewhere along the way things got messy First Democratic Senators who never met a tax they didnrsquot love decided that linking SB 30 ndash a tax relief bill to SB 391 ndash a tax increase bill was a great idea SB 391 would raise lsquofeesrsquo on real estate transaction by $75 per document (from the current $3 ndash $10) which would be siphoned into some pet projects and lsquoaffordable housingrsquo That bill and similar predecessors has met defeat either in the legislature or by the Governor several times in the past and has always been opposed by Realtors as it increases the cost to a select group of individuals (homebuyers) to give money to another group There is no nexus and itrsquos not fair

So this year they thought if they linked it to our bill we would be forced to support it giving a (supposed) $50 million tax break to some (SB30) while increasing taxes by an estimated $500 million on others (SB391)

WRONG

But as we fought to get the bills de-linked another issue came up ndash the Central California Senate race pitting Republican Andy Vidak again Democrat Leticia Perez Now the California Association of Realtors is notoriously bi-partisan in our support of candidates but the decision was made to support Vidak in this race against Perez who was the anointed candidate of Senate Pro-Tem Darrell Steinberg Needless to say when the dust settled on this very costly and largely negative campaign Vidak won (httpwwwfresnobeecom201307043374710vidak-perez-race-features-negativehtml) Not one to take defeat gracefully Steinberg has pulled out all the stops to see that our bill does not progress Under the watchful eye of Assemblymember Mike Gatto SB 30 has been stalled in committee where it will likely perish at the close of business Friday

What this means is that any California homeowner who short sold their home in 2013 will get a tax bill from California for the amount of forgiven debt If you owed $300000 on your home and sold it for $200000 that $100000 in forgiven debt will be considered regular income by the state of California and you will pay taxes on it to the state but not to the IRS

This is a shameful display or political lsquogotcharsquo with Californiarsquos beleaguered homeowners squarely in the crosshairs Therersquos an outside chance we can get a retroactive bill through next session but with Steinberg still at the helm for another year chances are slim

0

500

1000

1500

2000

2500

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6

1462

1446

1767

1469

1562

1744

1794

1963

2072

2197

2154

2171

2224

2240

2045

2120

2087

2009

1997

2009

1978

2132

1882

1812

1997

2240 1

419

1188

974

862

841

795

778

725

782

581

679

617

602

639

677

863

1098

1227

0

50

100

150

200

250

300

350

On Market (Supply)

Pending Closed (Demand) Days on Market Months Supply Absorption rate

337

195

168

45

20

12

330

189

149

43

22

10

192

144 8

4 4

2

23

10

230

219

166

39

14

15

98

24

43

80 2

3

15

40

47

30

37

13

14

Murrieta Temecula Lake Elsininore Menifee Canyon Lake Wildomar Absorption rate - of new listings for the month of sold listings for the month

August Demand Chart

All signs point to a healthy market Inventory levels are continuing to increase and while not back to a lsquohealthyrsquo 65 month level (as dictated by national standards) wersquore back up to 2 months worth of homes With buyer demand down last month we added another 200 homes to our inventory which has increased some 45 since May (6771227) Pending sales that precursor of market health is still strong but has dropped off some indicating that September sales will likely be close to August numbers

California real estate markets in 2013 have so far been riding on a fast and furious road to recovery

Housing prices rose so precipitously in some markets particularity in the Bay Area that some experts even started talking about reoccurrence of a bubble Dramatic increase in prices however was largely driven by lack of available inventory of homes for sale as well as significant presence of investors and cash buyers Tight market conditions led to a substantial rise in multiple offers sales occurring on the day of listing and selling prices far above the asking ones While market conditions are clearly favoring sellers there are indications that some of the Californiarsquos real estate markets may be at a turning point

Rising mortgage rates initially presented a sticker shock for many potential buyers who may have already been discouraged by fiercely competitive bidding wars and the number of cash offers Their first reaction was to postpone their home purchase The slowdown is suggested by a slight decrease in the buyer traffic reported in the REALTORSreg Confidence Index Rapidly increasing home prices also put a dent in affordability The percentage of home buyers who could afford to purchase a median-priced home in California dropped to 36 percent in Q2 2013 down from 44 percent in Q1 2013 and from 51 percent in Q2 2012

However as everyone realizes that mortgage rates will most likely not be coming down to levels observed last year and that housing is still relatively affordable by historical measures buyers are slowly readjusting their expectations and coming back to the market

Other indicators also suggest that real estate in California may be at a turning point Fewer listings are under contract within a week or two than what we saw just couple months ago The statewide median time on the market started inching up in June and again in July after continuously declining since January 2012

Additionally investors are playing a smaller role Rising prices and interest rates have shrunk investorsrsquo profit margins and the share of investors decreased to 16 percent in July from 22 percent at the beginning of 2013 Investors are also hard-pressed to find any supply of distressed properties which has dwindled to less than a month of inventory Distressed sales as a share of total sales have also come down dramatically to 17 percent which was the lowest level since the end of 2007 Fortunately however supply of inventory of equity sales has increase 9 percent from June to July and almost 20 percent from the year before Increase in inventory is a much needed development and will aid the market to continue to grow going forward

None of these changes to the housing market in California suggests that the recovery is in jeopardy On the contrary real estate markets are moving into a state of more measured and sustainable housing recovery in which traditional buyers and sellers will play a greater role The sharp rise in interest rates did cause a pause in the market but continued recovery is on the way as everyone adjusts to new norms

Is Californiarsquos Housing Market at a Tipping Point

The Last Word In a shameful display of political gamesmanship when our state legislature ends itrsquos session this Friday one bill that will likely not see the light of day is SB 30 SB 30 is the bill jointly authored by Senators Ron Calderon (D) and Joel Anderson (R) and sponsored by the California Association of Realtorsreg SB 30 would have granted tax relief on phantom income to thousands of California homeowners who short-sold their home this year

SB 30 started life as a bi-partisan bill which was expected to sail through the process and be signed as an urgency measure After all we had a similar bill poised to do just that last year just waiting for Congress to extend their tax relief provision so we could keep California in compliance with federal regulation

But the feds delayed passage last year only sneaking it through as a provision in their last minute budget bill which was not passed until the early hours of 2013 So California had to introduce this as a new bill for our 2013 session Still nobody was expecting any problems

But somewhere along the way things got messy First Democratic Senators who never met a tax they didnrsquot love decided that linking SB 30 ndash a tax relief bill to SB 391 ndash a tax increase bill was a great idea SB 391 would raise lsquofeesrsquo on real estate transaction by $75 per document (from the current $3 ndash $10) which would be siphoned into some pet projects and lsquoaffordable housingrsquo That bill and similar predecessors has met defeat either in the legislature or by the Governor several times in the past and has always been opposed by Realtors as it increases the cost to a select group of individuals (homebuyers) to give money to another group There is no nexus and itrsquos not fair

So this year they thought if they linked it to our bill we would be forced to support it giving a (supposed) $50 million tax break to some (SB30) while increasing taxes by an estimated $500 million on others (SB391)

WRONG

But as we fought to get the bills de-linked another issue came up ndash the Central California Senate race pitting Republican Andy Vidak again Democrat Leticia Perez Now the California Association of Realtors is notoriously bi-partisan in our support of candidates but the decision was made to support Vidak in this race against Perez who was the anointed candidate of Senate Pro-Tem Darrell Steinberg Needless to say when the dust settled on this very costly and largely negative campaign Vidak won (httpwwwfresnobeecom201307043374710vidak-perez-race-features-negativehtml) Not one to take defeat gracefully Steinberg has pulled out all the stops to see that our bill does not progress Under the watchful eye of Assemblymember Mike Gatto SB 30 has been stalled in committee where it will likely perish at the close of business Friday

What this means is that any California homeowner who short sold their home in 2013 will get a tax bill from California for the amount of forgiven debt If you owed $300000 on your home and sold it for $200000 that $100000 in forgiven debt will be considered regular income by the state of California and you will pay taxes on it to the state but not to the IRS

This is a shameful display or political lsquogotcharsquo with Californiarsquos beleaguered homeowners squarely in the crosshairs Therersquos an outside chance we can get a retroactive bill through next session but with Steinberg still at the helm for another year chances are slim

California real estate markets in 2013 have so far been riding on a fast and furious road to recovery

Housing prices rose so precipitously in some markets particularity in the Bay Area that some experts even started talking about reoccurrence of a bubble Dramatic increase in prices however was largely driven by lack of available inventory of homes for sale as well as significant presence of investors and cash buyers Tight market conditions led to a substantial rise in multiple offers sales occurring on the day of listing and selling prices far above the asking ones While market conditions are clearly favoring sellers there are indications that some of the Californiarsquos real estate markets may be at a turning point

Rising mortgage rates initially presented a sticker shock for many potential buyers who may have already been discouraged by fiercely competitive bidding wars and the number of cash offers Their first reaction was to postpone their home purchase The slowdown is suggested by a slight decrease in the buyer traffic reported in the REALTORSreg Confidence Index Rapidly increasing home prices also put a dent in affordability The percentage of home buyers who could afford to purchase a median-priced home in California dropped to 36 percent in Q2 2013 down from 44 percent in Q1 2013 and from 51 percent in Q2 2012

However as everyone realizes that mortgage rates will most likely not be coming down to levels observed last year and that housing is still relatively affordable by historical measures buyers are slowly readjusting their expectations and coming back to the market

Other indicators also suggest that real estate in California may be at a turning point Fewer listings are under contract within a week or two than what we saw just couple months ago The statewide median time on the market started inching up in June and again in July after continuously declining since January 2012

Additionally investors are playing a smaller role Rising prices and interest rates have shrunk investorsrsquo profit margins and the share of investors decreased to 16 percent in July from 22 percent at the beginning of 2013 Investors are also hard-pressed to find any supply of distressed properties which has dwindled to less than a month of inventory Distressed sales as a share of total sales have also come down dramatically to 17 percent which was the lowest level since the end of 2007 Fortunately however supply of inventory of equity sales has increase 9 percent from June to July and almost 20 percent from the year before Increase in inventory is a much needed development and will aid the market to continue to grow going forward

None of these changes to the housing market in California suggests that the recovery is in jeopardy On the contrary real estate markets are moving into a state of more measured and sustainable housing recovery in which traditional buyers and sellers will play a greater role The sharp rise in interest rates did cause a pause in the market but continued recovery is on the way as everyone adjusts to new norms

Is Californiarsquos Housing Market at a Tipping Point

The Last Word In a shameful display of political gamesmanship when our state legislature ends itrsquos session this Friday one bill that will likely not see the light of day is SB 30 SB 30 is the bill jointly authored by Senators Ron Calderon (D) and Joel Anderson (R) and sponsored by the California Association of Realtorsreg SB 30 would have granted tax relief on phantom income to thousands of California homeowners who short-sold their home this year

SB 30 started life as a bi-partisan bill which was expected to sail through the process and be signed as an urgency measure After all we had a similar bill poised to do just that last year just waiting for Congress to extend their tax relief provision so we could keep California in compliance with federal regulation

But the feds delayed passage last year only sneaking it through as a provision in their last minute budget bill which was not passed until the early hours of 2013 So California had to introduce this as a new bill for our 2013 session Still nobody was expecting any problems

But somewhere along the way things got messy First Democratic Senators who never met a tax they didnrsquot love decided that linking SB 30 ndash a tax relief bill to SB 391 ndash a tax increase bill was a great idea SB 391 would raise lsquofeesrsquo on real estate transaction by $75 per document (from the current $3 ndash $10) which would be siphoned into some pet projects and lsquoaffordable housingrsquo That bill and similar predecessors has met defeat either in the legislature or by the Governor several times in the past and has always been opposed by Realtors as it increases the cost to a select group of individuals (homebuyers) to give money to another group There is no nexus and itrsquos not fair

So this year they thought if they linked it to our bill we would be forced to support it giving a (supposed) $50 million tax break to some (SB30) while increasing taxes by an estimated $500 million on others (SB391)

WRONG

But as we fought to get the bills de-linked another issue came up ndash the Central California Senate race pitting Republican Andy Vidak again Democrat Leticia Perez Now the California Association of Realtors is notoriously bi-partisan in our support of candidates but the decision was made to support Vidak in this race against Perez who was the anointed candidate of Senate Pro-Tem Darrell Steinberg Needless to say when the dust settled on this very costly and largely negative campaign Vidak won (httpwwwfresnobeecom201307043374710vidak-perez-race-features-negativehtml) Not one to take defeat gracefully Steinberg has pulled out all the stops to see that our bill does not progress Under the watchful eye of Assemblymember Mike Gatto SB 30 has been stalled in committee where it will likely perish at the close of business Friday

What this means is that any California homeowner who short sold their home in 2013 will get a tax bill from California for the amount of forgiven debt If you owed $300000 on your home and sold it for $200000 that $100000 in forgiven debt will be considered regular income by the state of California and you will pay taxes on it to the state but not to the IRS

This is a shameful display or political lsquogotcharsquo with Californiarsquos beleaguered homeowners squarely in the crosshairs Therersquos an outside chance we can get a retroactive bill through next session but with Steinberg still at the helm for another year chances are slim

The Last Word In a shameful display of political gamesmanship when our state legislature ends itrsquos session this Friday one bill that will likely not see the light of day is SB 30 SB 30 is the bill jointly authored by Senators Ron Calderon (D) and Joel Anderson (R) and sponsored by the California Association of Realtorsreg SB 30 would have granted tax relief on phantom income to thousands of California homeowners who short-sold their home this year

SB 30 started life as a bi-partisan bill which was expected to sail through the process and be signed as an urgency measure After all we had a similar bill poised to do just that last year just waiting for Congress to extend their tax relief provision so we could keep California in compliance with federal regulation

But the feds delayed passage last year only sneaking it through as a provision in their last minute budget bill which was not passed until the early hours of 2013 So California had to introduce this as a new bill for our 2013 session Still nobody was expecting any problems

But somewhere along the way things got messy First Democratic Senators who never met a tax they didnrsquot love decided that linking SB 30 ndash a tax relief bill to SB 391 ndash a tax increase bill was a great idea SB 391 would raise lsquofeesrsquo on real estate transaction by $75 per document (from the current $3 ndash $10) which would be siphoned into some pet projects and lsquoaffordable housingrsquo That bill and similar predecessors has met defeat either in the legislature or by the Governor several times in the past and has always been opposed by Realtors as it increases the cost to a select group of individuals (homebuyers) to give money to another group There is no nexus and itrsquos not fair

So this year they thought if they linked it to our bill we would be forced to support it giving a (supposed) $50 million tax break to some (SB30) while increasing taxes by an estimated $500 million on others (SB391)

WRONG

But as we fought to get the bills de-linked another issue came up ndash the Central California Senate race pitting Republican Andy Vidak again Democrat Leticia Perez Now the California Association of Realtors is notoriously bi-partisan in our support of candidates but the decision was made to support Vidak in this race against Perez who was the anointed candidate of Senate Pro-Tem Darrell Steinberg Needless to say when the dust settled on this very costly and largely negative campaign Vidak won (httpwwwfresnobeecom201307043374710vidak-perez-race-features-negativehtml) Not one to take defeat gracefully Steinberg has pulled out all the stops to see that our bill does not progress Under the watchful eye of Assemblymember Mike Gatto SB 30 has been stalled in committee where it will likely perish at the close of business Friday

What this means is that any California homeowner who short sold their home in 2013 will get a tax bill from California for the amount of forgiven debt If you owed $300000 on your home and sold it for $200000 that $100000 in forgiven debt will be considered regular income by the state of California and you will pay taxes on it to the state but not to the IRS

This is a shameful display or political lsquogotcharsquo with Californiarsquos beleaguered homeowners squarely in the crosshairs Therersquos an outside chance we can get a retroactive bill through next session but with Steinberg still at the helm for another year chances are slim