I wouldn’t even consider buying anything in Temecula/Murrieta until prices get into line with market rents. That’s about a 200K-300K price drop for a lot of the tract homes! The property taxes/mello-roos and HOA’s in some tracts are so high that it’s really a liability to own one. The price I’d be willing to pay to commit to those fixed monthly costs is far lower than current prices. I strongly agree with other posters here that rising gas prices will also push down prices in this area.

I’ve lived up here for a number of years. This year, I’ve noticed that a lot of the people who couldn’t sell their homes are now renting them out. I suspect some of them refinanced to some sort of inerest-only or teaser rate loan so that their monthly cash flow is not too negative. They’re hoping the market will “bounce back” and they can sell before anything hits the fan. I think a lot of them are going to end up foreclosing within a couple years. I think situations like this will continue to flood the market with rental houses, keeping rents down. Prices have nowhere to go but down, down, down. Patience is a virtue. If prices don’t go down enough, just keep renting!

A lot of the houses around here are either rentals with negative cash flow, vacant, or are in some stage of foreclosure already. The shortage of housing supply up here was an illusion caused by speculators, flippers, and over-extended home debtors living above their means. We’re just starting to see the fallout now. It will be a long way down in my view.