South county (Riverside) is taking a beating, I think we all know that by now. Temecula, Murrieta, Lake Elsinore, and Wildomar have all seen whopping price drops. So much in fact that these areas are probably very close to being back to "normal" price levels.
Here's a property that's probably priced about right. 27069 Pumpkin St, Murrieta. This home is in Greer Ranch, which is one of the better tracts in the city. It's a 4 bed, 3 bath home, 3681 sq/ft on a decent size lot (although some of it is a slope). The inside looks in nice shape, but average as far as upgrades go. It does have granite countertops and some tile. New from the builder in 2004 it sold for $584k. At the peak this home sold for a silly $770k. It's bank owned now and listed 61% under that last sale at $295K ($80 sq/ft). That 61% loss, is in only 20 months!
You may think the first home is "cherry picking" or that it will sell for far more. It may be cherry picking but I doubt it will sell for more. To illustrate this point lets look at 27498 Fern Pine Way, in the same tract. This home is also a 4 bedroom, 3 bath. It's slightly smaller at 3362 sq/ft but it does sit on a larger lot. Much of that extra land is also a slope though. There are no homes behind this house, which is a bonus in my mind. This home is also an REO. It is listed for $307K or $91 sq/ft. It's been on the market for 62 days and has already seen one price drop.