Housing market

Analysis of the (primarily) San Diego housing market.

Monthly Economic Report: August 2005

Submitted by Rich Toscano on September 2, 2005 - 6:20pm
The San Diego job market is booming--if you're in construction. (Otherwise it's pretty mediocre). Meanwhile, a nationwide recession looms, but the local economy soldiers on...
(category: )

Piggington's Mailbag: Rates, Prices, and Unwieldy Nautical Metaphors

Submitted by Rich Toscano on August 18, 2005 - 6:23pm
Several folks have requested at one point or another that I chart the correlation between interest rates and housing prices, in order to see if rate movements are a good short-term predictor of price movements. I was sort of dubious of this idea, but being the nerd that I am I had to go ahead and graph it nonetheless.
(category: )

The Condo-Based Economy

Submitted by Rich Toscano on August 10, 2005 - 6:26pm
I have routinely argued that the inevitable slowdown in San Diego housing activity and price growth will lead to local economic hardship. This topic is discussed in some detail here and here, but the basic reasoning is as follows:
  • Flattening prices will remove the artificial "wealth effect" boost that the San Diego economy has enjoyed over the past few years.
  • Flattening prices will also remove the equity-growth safety net that has kept homeowners out of financial trouble during the same period.
  • Given the enormous number of San Diegans employed in the housing sector, a slowdown in housing activity may put a lot of people out of work.

If our friends over in the United Kingdom are any indication, I could be onto something. The UK, as you probably know, experienced a home price bubble of downright San Diego-like proportions. As this graph shows, the similarity is quite striking:

(category: )

Monthly Housing Market Report: July 2005

Submitted by Rich Toscano on July 31, 2005 - 9:36pm
The trouble with real estate sales data is that it is invariably out of date. DataQuick's stats for June, for example, consists of all sales that closed in June, mean that those sales were negotiated in May or even April. Furthermore, DQ takes its time getting the data all cleaned up, and by the time I get the June numbers it is almost the end of July. (I am looking into some ways to get a more timely if less precise picture of sales activity, but that's not ready to go yet.)

Inventory data, on the other hand, is real-time. I can get the number of homes for sale right now. But while there is no lag, MLS inventory has its own issue: it only takes account of homes listed for resale on the MLS, excluding many units available in new developments.

I mention this not just as a reminder of the importance of looking at the market in many different ways, but also because it's important to keep data limitations in mind while translating individual stats into a "big picture" interpretation of what's going on. This is especially true when we see a bit of a divergence between sales data and inventory data—as we did this month.

(category: )

Monthly Economic Report: July 2005

Submitted by Rich Toscano on July 29, 2005 - 9:40pm
The local economy isn't showing any signs of short term trouble. Notices of default remain flat, indicating that those overleveraged San Diego homeowners haven't gotten themselves into serious trouble just yet.

(category: )

Piggington's Mailbag: Why San Diego?

Submitted by Rich Toscano on July 17, 2005 - 9:50pm
Reader Jonathan writes:

I agree that the “everyone wants to live in San Diego” mentality for the recent status of the real estate market is ludicrous. However, what I believe is missing from the argument is; why San Diego? Why haven’t we seen the same speculative bubble happen all across America?

This is an interesting question. Low rates and rock-bottom underwriting standards are national phenomena; why have prices grown so much faster in San Diego than in most of the country?
(category: )

Monthly Housing Market Report: June 2005

Submitted by Rich Toscano on June 30, 2005 - 9:58pm
While I remain as concerned as ever about the eventual fate of San Diego real estate, this past month's housing market data reinforces the messages found in the economic and credit market data: San Diego housing does not appear to be under any imminent threat of decline.
(category: )

In Search of Instability

Submitted by Rich Toscano on June 23, 2005 - 9:59pm
My extensive rambling notwithstanding, the Econo-Almanac really has one primary purpose: to determine what's going to happen to the San Diego housing market before it actually happens. With this goal in mind, I've developed two "price instability indicators" to identify declining pricing power before it actually shows up in the countywide median price figures.
(category: )

Monthly Economic Report: June 2005

Submitted by Rich Toscano on June 21, 2005 - 10:03pm
As discussed in excruciating detail in the overview of Real Estate Market Indicators, I believe tracking mortgage default trends to be the best manner to measure the economic health of the San Diego homeowner population. And since housing pretty much is the San Diego economy, defaults are really one of the most important statistics overall.

The good, if unexciting, news is that at this point San Diego homeowners seem to be doing just fine. Defaults have continued to trend down steadily throughout 2005.

(category: )

A History of the Housing Bubble

Submitted by Rich Toscano on June 19, 2005 - 8:34pm

If San Diego home prices do not reflect fundamentals, exactly how did they get to such rarified heights, and what keeps them aloft? It's a fair question, and an important one: understanding how the bubble started will be crucial in identifying how and when the bubble ends. The purpose of this article is to provide a very brief overview of how we got here.

(category: )

Recession Is Not a Prerequisite for a Housing Downturn

Submitted by Rich Toscano on June 1, 2005 - 10:04pm
The last real estate bust in San Diego was precipitated by a local recession, as thousands of aerospace and defense industry employees lost their jobs and were forced to sell their homes. This fact appears to have engendered an oft-repeated theory that San Diego home prices cannot drop unless we experience a recession. Such a line of reasoning may be comforting, but it is deeply flawed.
(category: )

Get On the Ride

Submitted by Rich Toscano on May 21, 2005 - 10:10pm
All San Diegans should consider reading the Money Magazine article entitled Boomtown USA to get an understanding of what's happening in our city. The article concerns San Diego's multi-year housing runup in general, but in particular it spends a lot of time detailing the resulting perceptual distortions on the part of our citizenry.
(category: )

The Math Skills of Crowds

Submitted by Rich Toscano on April 21, 2005 - 10:15pm
An article in today's Economist concerning the global housing bubble contains this stunning claim:
"A recent survey of buyers in Los Angeles indicated that they expected their homes to increase in value by a whopping 22% a year over the next decade."
Let me get this straight. Real estate is, by every conceivable measure, far more expensive than it's ever been. Homes are already so incredibly expensive that most people can't buy one unless they take out a teaser-rate mortgage or they have a pile of cash from the sale of their prior home. Affordability is at an all-time low, despite the fact that interest rates are about as low as they've been since the 1950s. And from these lofty heights, homebuyers are expecting prices to rise a staggering 22% a year for the next decade?
(category: )

The Madness of Crowds

Submitted by Rich Toscano on April 18, 2005 - 10:17pm
Yesterday the UT ran a story concerning the rampant condo speculation that continues to infest our fine city. I highly recommend reading it if you haven't done so already.

The various data (e.g. the fact that 37% of 2004 condo conversion buyers were speculators) is very interesting, if not terribly surprising. The interviews, on the other hand, are just jaw-dropping, as they really hammer home the enormous amount of money being spent on the basis of threadbare and entirely emotional analysis.

(category: )

Cuckoo For Condo Gluts

Submitted by Rich Toscano on April 3, 2005 - 10:20pm
The recent San Diego Daily Transcript article about condos in Downtown San Diego contains some frightening statistics...
(category: )