Articles that I have written for VoiceofSanDiego.org, a local news publication that provides continuing coverage of San Diego housing and economic issues.

December Medians

Submitted by Rich Toscano on January 6, 2009 - 5:07pm

I will get a data rodeo going in the next couple of days, but in the meantime here's a chart of size-adjusted median resale prices for December, with accompanying writeup to be found at voiceofsandiego.org:

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Mortgage Rates Forced Down by the Fed

Submitted by Rich Toscano on January 2, 2009 - 5:45pm

As I noted a couple weeks back, the Federal Reserve will be conjuring money out of thin air to buy "large quantities" (their words) of mortgage-backed securities. The mere anticipation of this flood of freshly-printed cash into the mortgage market has been enough to increase the demand for mortgages and thus lower rates.

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Higher-Priced Homes Feeling the Pressure

Submitted by Rich Toscano on December 30, 2008 - 5:37pm

The Case-Shiller index data for October was released today. Kelly Bennett has written it up here and here, for those who want the full rundown.

The thing that jumped out at me was that for the first time during this bust, the highest-priced of the three Case Shiller price tiers experienced a greater monthly decline than either of the other two.

The high-priced tier fell 2.9 percent between September and October, easily beating the 1.8 percent drop in the middle tier and just edging out the 2.8 percent drop in the low-priced tier. Until this month, the low tier had almost always declined the most of the three with the middle tier falling the second hardest. The accompanying graph shows that the high tier has been the most resilient of the three.

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The Fastest Population Growth in Five Years

Submitted by Rich Toscano on December 27, 2008 - 4:33pm

The California Department of Finance recently released a new estimate of San Diego County's population growth. According to the DOF, San Diego's population grew by 46,634 people in the year to July 2008. This 1.5 percent increase represents the fastest annual percent growth since 2003.

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San Diego's Job Situation Darkens

Submitted by Rich Toscano on December 22, 2008 - 11:41pm

According to the latest EDD estimates, San Diego's employment situation deteriorated noticeably in November. The retail industry took the worst of it, turning in a year-over-year decline of 6,400 jobs or or 4.2 percent.

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The Fed Has Gone Nuclear

Submitted by Rich Toscano on December 19, 2008 - 10:20am

On Tuesday, Fed Chairman Bernanke announced that the Fed was for the first time in history cutting its target funds rate to 0 percent (a range of 0 to .25 percent, to be exact, but it's close enough). Additionally, the Fed will shunt "large quantities" of money directly into the mortgage market. They will also consider directly buying long-term U.S. Treasury bonds, thus funding the government's activities and putting downward pressure on long-term rates. Finally, they are creating a new lending program to "facilitate the extension of credit to households and small businesses." I'm not sure what that means but I'm pretty certain that it entails the Fed handing out yet more money.

They certainly are spreading it around. One might wonder where all this money is going to come from. Chairman Bernanke left that part out of his statement, but the answer is that the money will largely be created out of thin air.

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Foreclosure Activity Remains Subdued

Submitted by Rich Toscano on December 14, 2008 - 9:48pm

Readers may recall that the number of San Diego homes entering the foreclosure process plummeted in September. This drop was coincident with a new state law mandating an extra 30 days before foreclosure could be initiated.

Yet 30 days have come and gone a couple times over and foreclosures have not started back up again. It seems that there is something else causing a downshift in in foreclosure activity. The manifold bailout attempts would be my guess.

The question is whether the assorted bailouts have merely caused a temporary slowdown in foreclosure processing or whether they are actually inducing troubled mortgages to be worked out in a sustainable manner. I don't know the answer to that question, but I suspect that it's a little bit of both for the time being.

(written for voiceofsandiego.org)

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Unemployment Likely to Keep Rising

Submitted by Rich Toscano on December 2, 2008 - 10:23pm

The National Bureau of Economic Research, the official arbiters of whether or not the United States is in a recession, finally called it yesterday. That's not terribly newsworthy considering that everyone knew we were in a recession already.

What's interesting is that they designated the official recession start date as December 2007, a full year ago. This means that (assuming that the recession didn't end months ago, which seems pretty safe) this is the longest recession since the 16-month long downturn beginning in July 1981.

Now that we have a start date, we can compare unemployment trends during the current recession to those of recessions past.

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Home Price Chartfest

Submitted by Rich Toscano on November 28, 2008 - 12:58pm

Kelly Bennett has written extensively on the latest release of the Case-Shiller home price index, so I'm just going to throw a couple extra charts into the mix. OK, and one comment (I just can't help myself).

I'll begin with the charts. First, here is a table showing the last time the Case-Shiller index value for each price tier was lower than September's level. The right-hand column is the same thing but with prices adjusted to remove the effects of inflation.

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Cheap Homes Selling Fast, Expensive Homes Not

Submitted by Rich Toscano on November 20, 2008 - 10:22pm

Home sales have increased dramatically in recent months, but that brisk activity is far from uniform. While cheap homes are positively flying off the shelves, sales have actually slowed in many of the more expensive markets.

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Financial Flood Insurance

Submitted by Rich Toscano on November 3, 2008 - 5:15pm

Credit default swaps have been a major element in the ongoing financial crisis. That doesn't mean it's necessarily easy to understand just what the problem is with them. I've taken a crack at it in the past, but more recently I heard an analogy that makes the entire situation a lot easier to visualize.

I heard the analogy during a radio interview with Doug Noland, a mutual fund manager who's been writing dire weekly analyses of the credit market for years. It went something like the following.

Imagine a city near a river that is prone to the occasional flood. At some point, an enterprising citizen gets into the business of writing flood insurance, collecting premiums from insurees in exchange for a promise to pay back the insurees should a flood do any damage to their properties.

Now, imagine that there is an unusually long drought and the river goes a long time without experiencing a flood. Other enterprising types begin to notice that the flood insurer has for years been collecting all this money for doing absolutely nothing. A flood hasn't taken place for ages -- maybe climate patterns have changed so that the river doesn't flood any more. And even if it does flood at some point, they will probably be retired by then. They want in to the easy money flood insurance game too.

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Where the Jobs Were in September

Submitted by Rich Toscano on October 27, 2008 - 9:15am

Here's a graph I haven't updated for a while. It shows how many jobs were gained or lost, according to the latest monthly employment estimates, by varying San Diego employment sectors in the year leading up to September 2008. (Sectors that changed by fewer than 300 jobs have been excluded to keep the graph a little more readable).

Here's how this chart looked a little over a year ago. Back then, the leisure and hospitality sector was providing a huge boost. That sector is still growing, but not nearly so fast. Meanwhile the housing bubble beneficiary sectors (construction, finance, and retail) have deteriorated significantly. One bright spot: the manufacturing sector, while still shrinking slightly, is doing so at a notably slower pace than it was last year.

(written for VoiceofSanDiego.org)

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Regional Employment Declining Slowly but Steadily

Submitted by Rich Toscano on October 21, 2008 - 8:45pm

San Diego County employment declined in September, according to the monthly estimates provided by the state's Employment Development Department.

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Mortgage Defaults Plummet, For Now

Submitted by Rich Toscano on October 8, 2008 - 8:11pm

The number of homes entering the foreclosure process declined steeply in September -- but the drop is likely temporary.

The blue line on the accompanying graph represents how many Notices of Default, which are the nastygrams sent to delinquent borrowers, were delivered in September. The orange line tracks Notices of Trustee Sale, which inform said delinquent borrowers that their homes are about to be repossessed.

The graph makes it pretty clear that NODs dropped like a rock last month. We haven't seen a number of default notices this low since February 2007 -- a breezier time, when it would have seemed laughable to suggest that mainstream media outlets would be publishing stock photos of Depression-era breadlines a year and a half down the road.

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A Step in the Wrong Direction

Submitted by Rich Toscano on October 7, 2008 - 10:22am

In response to the prior column on the latest bailout, some people asked for more specific thoughts on the Paulson Plan and what would have happened if it hadn’t been passed.

In truth, I don’t actually know what would have happened had the plan not gone through. Most of the people offering predictions on the topic don’t know either; I’m just admitting it.

I do know this. Our economy has become far too dependent on finance and debt-fueled consumption. We need to return to our economic roots of production and saving. This shift will be painful, and one could make a case for some sort of government intervention to ease the transition.

But the Paulson Plan, the central focus of which is to prop up the prices of financial assets that no private buyer wants to touch, is not intended to ease the transition. It is intended to prevent it.

The plan is thus a giant step in the wrong direction. But this is exactly what you’d expect given that it was developed by the same group of people, using the same flawed analytical framework, that has misdiagnosed the problems all along.

(written for VoiceofSanDiego.org)

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