I’ve been following the Temecula Valley market closely for over a year, and while I won’t predict a bottom, I would like to describe what I’ve seen in the last few months.
First, available inventory is much lower now than it was back in December or January. The reason for this is simple – the moratoriums put in place by Fannie/Freddie, the banks, as well as the state of California, reduced supply while record low interest rates increased demand. The pick up in sales isn’t just exclusive to TV, but to most of Southern California. As of March 31, the moratoriums have been temporarily lifted. We should see a significant increase in supply during May and June due to the backlog of foreclosures that didn’t get to market during the first quarter. But, and this is a BIG but, the Feds and Obama, as well as the Governor of California, have said they will use as much intervention as possible to prevent future foreclosures. In fact, the Obama administration is on record as supporting the “reinflation” of the housing market. Personally, I think this type of federal intervention is insanity, and will ultimately end up costing the taxpayers even more in the form of hyper-inflation and the devaluation of the dollar, but thats a subject for a different time.
What does all this mean for Temecula prices ? And has TV hit bottom ?
Well, one thing the reduced supply has caused during the last few months is multiple offer bidding wars on the good properties. At a 4.5% interest rate, many more people can qualify for a loan now than back in 2008 when rates were around 6%. But here’s the catch…the Feds have indirectly brought down mortgage rates due to Bernanke’s decision to purchase over a trillion dollars of US treasuries. As the stock market improves, investors will take money out of the safety of US treasuries and put it into the stock market once again. In fact, that is already happening. As a result, the bond market will suffer, which means mortgage rates will go back up. As rates go up, fewer people will qualify for loans, which will result in a drop in demand for real estate.
So, if you really want to get a closer idea as to when the bottom will hit in Temecula, watch for a few things. Federal or state mandated foreclosure moratoriums – interest rates – and prices in Northern San Diego County. A year ago you couldn’t find a decent property in northern San Diego County for under 400K, while in Temecula there were literally hundreds on the market on any given day. But in the past six months prices have dropped significantly in North County, where you now can find a decent home in the 300K-350K range. Many people purchase in Temecula because it has been far more affordable – but the gap has narrowed in the last six months. The point is, Temecula Valley won’t reach bottom until AFTER northern San Diego county first reaches its own bottom – and that has yet to happen.
