Back in 2006 Real Estate in Temecula CA and the surrounding cities started off pretty strong. We then begin to experience a downward shift beginning in August 2006 as an oversupply of homes hit the market. The supply of homes has remained high and the market has moved into a buyer’s market with prices retreating about 10 to 15%. In the first six months of 2007 we have seen business increasing. As we move through Summer things are looking better. Prices seem to be holding steady and some houses are beginning to move.

There are still plenty of key challenges to home prices, namely foreclosures and short sales. Many people bought homes with 100% financing at the peak of the market and those homes have lost some value. Buyers who used adjustable mortgages with a short fixed period are now experiencing rising payments and due to the reduced market price of their home, can no longer refinance. If these buyers owe $400,000 (100% financing) and it is only worth $380,000 now, the banks will not refinance. This is a tough financial bind to overcome for these people.

Once in this bind, many Temecula Valley properties are going into to short sale and then foreclosure. When these transactions close they lower the comparison properties on the market and thereby impact properties active on the market furthering affecting the ability to refinance.

Even with all this said good homes in excellent condition are still selling. But sellers should not expect to get last year's pricing for their homes. And if a seller needs to sell their home in order to buy another home they often loose money on their sale but gain it back from the new home they are buying.

Right now is an excellent time to be a buyer. Interest rates have stayed very low historically speaking and negotiating is a major factor. As we move through summer some of that negotiating ability may dry up as more demand comes into the market and rates stay low. If you know someone that has been considering making a purchase it might be an excellent opportunity for them to start looking again.

To sum things up, the market is moving in the right direction and many economic professionals are saying we are on the road to recovery. Southern California has also been a hot Real Estate market and historically we average about 3-5% appreciation a year. It will take some time to get through the existing supply and the banks will be tightening things up without a doubt. You should anticipate the loan and sub-prime mortgage market issues to remain a drag on Real Estate for the next year minimally.

But it is very important to keep one thing in mind while we negotiate through this time. It is a simple fact that there is truly no investment that offers more benefits than Real Estate. And while Temecula, Murrieta, Wildomar and Menifee Real Estate we won’t see gains like we have over the last 5 years (25%+), we should start coming out of this decline and leveling up a bit in 2008. Hopefully we have a soft landing as the market starts to straighten out and moves into 2009.

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Written by Professional Real Estate Broker Stefan West.  Please visit my site at www.stefanwest.com