~Welcome to the Econo-Almanac~

I started this website in mid-2004 to chronicle San Diego’s spectacular housing bubble.  The purpose of the site remains, as ever, to provide objective and evidence-based analysis of the San Diego housing market. A quick guide to the site follows:

  • New visitors are advised to begin with the Bubble Primer or (if wondering about the site name) the FAQ list.
  • Housing articles I’ve written are found in the main section below.
  • Discussion topics posted by site users are found in the “Active Forum Topics” box to the lower right.
  • This website is an avocation; by day I help people with their investments as a financial advisor*.  Market commentary, an overview of our investment approach, and more can be found on my firm's website.

Thanks for stopping by…

Return to Return to the 90s

Submitted by Rich Toscano on November 17, 2006 - 7:04pm

We determined in a previous episode that despite an overwhelming belief in the idea, job losses did not trigger the early-1990s housing downturn. Something else must have been at work... but what?

Today we'll turn our suspicious eye toward interest rates. After all, potentially higher mortgage rates are the clouds on the horizon of even the sunniest real estate forecast. As long as rates stay low, bullish housing analysts routinely tell us, home prices should hold up. (This statement is often followed by a silent prayer to the gods of the bond market). So it seems reasonable to wonder whether uncooperative interest rates were at least partly responsible for the 90s downturn.

The answer in this case is a resounding "no."

read more at voiceofsandiego.org

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Big Profits, Little Relevance

Submitted by Rich Toscano on November 15, 2006 - 1:06pm

The permabulls are drooling all over themselves with glee about a recent study indicating that the median San Diego home seller in recent months collected a tidy 91% profit on his or her home. Of course, this doesn't include transaction costs, improvements, or cash-out refis along the way... it is just a comparison of prior sale price and recent sale price. Even considering all that, though, 91% sure isn't bad.

But this is all a waste of perfectly good permabull drool, because the statistic in question has nothing positive to say about the future disposition of home prices.

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Return to the 90s

Submitted by Rich Toscano on November 14, 2006 - 4:49pm

Break out the flannel shirts and re-insert those body piercings, because we're headed back to the early 1990s. The good news: no Judge Ito jokes are forthcoming. The bad: I can't say the same about housing charts.

The idea that San Diego's early-1990s housing bust was caused entirely by local job losses has provided comfort to many a real estate investor in recent years. If job growth can just stay positive, the soothing logic goes, then we can avoid the ugly outcome that took place the last time around. The appeal of this line of thinking, which appears to be almost universally accepted as truth, should be obvious.

But the evidence doesn't support the theory that unemployment was the sole cause of the housing bust. Have a gander at the following chart, which details the monthly changes in San Diego home prices and employment from 1990 through 1997:

read more at voiceofsandiego.org

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October Housing Data

Submitted by Rich Toscano on November 9, 2006 - 11:28am

The following slew of charts depicts October's housing market activity here in San Diego. Executive summary: the slow grind downward continues apace.


From the prior month, median prices declined 2.7% and 1.3% for detached homes and condos respectively.

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NAR's Propaganda Patrol

Submitted by Rich Toscano on November 6, 2006 - 8:44pm

Sometimes I wonder if the folks at the National Association of Realtors are actually trying set themselves up for future trouble.

First they released their so-called anti-bubble reports to demonstrate that "the facts simply do not support the possibility of a housing bust." In addition to the usual poor analysis we have come to expect from this outfit, the San Diego edition contained a blatant falsehood that remains there to this day, despite the fact that I repeatedly notified NAR of its existence back in March.

Now, they are at it again with their new $40 million dollar ad campaign to let us know that "It's a great time to buy or sell a home."

read more at voiceofsandiego.org

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Intro to Credit Default Swaps

Submitted by Rich Toscano on November 3, 2006 - 12:18pm

Last week, Scott Lewis SLOP'd about the San Diego County pension system's sizable investment in D.E. Shaw, a hedge fund that is heavily involved in so-called "credit default swaps."

If you're like most people, you probably started to lose consciousness by the end of that last sentence. But stay awake if you can. Because it turns out that San Diego's fortunes are very much tied to these arcane financial instruments

Credit default swaps, or CDSs, are basically a form of insurance that lenders of money purchase in order to ensure that they will be paid back. That, at least, is the idea. Let's examine a hypothetical, certainly oversimplified, but hopefully illustrative day in the life of a CDS.

read more at voiceofsandiego.org

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Population Followup

Submitted by Rich Toscano on October 30, 2006 - 12:33pm

Some folks didn't cotton to my conclusion that the DOF population data was probably better than the Census Bureau data, so I thought I'd clarify my reasoning.

I do not pretend to know much about the ins and outs of tax returns vs. driver's license issuance or for that matter any of the other methodological differences between the two organizations' figures. Nor do I really care to take the time that would be required to dig into it (for reasons that are explained below).

I mentioned in the last article that positive job growth belied a population decline. This was, for me, the deciding factor. Let's look at those numbers:

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Population Positive

Submitted by Rich Toscano on October 28, 2006 - 11:14am

We never quite settled the issue of the dualing statistical bureaus and their respective takes on San Diego population growth. The U.S. Census Bureau, as you may recall, indicated that San Diego County was experiencing negative net migration, meaning that more people were moving out of the county than moving in, to such an extent that population growth had actually gone negative in 2005. The California Department of Finance, meanwhile, reckoned that both net migration and population growth were positive.

So why the big difference, and more importantly, who was right?

read more at voiceofsandiego.org

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September Job Data

Submitted by Rich Toscano on October 26, 2006 - 1:33pm

Employment within San Diego's "housing boom beneficiary" job sectors (construction, finance/real estate, and retail) has been effectively flat since last year. The number of people employed in this sector in September was down a razor-thin .1 percent from the prior September, according to the latest batch of Bureau of Labor Statistics data.

read more at voiceofsandiego.org

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CAR's 2007 Forecast

Submitted by Rich Toscano on October 25, 2006 - 3:28pm

Back in February, I wrote here about a California Association of Realtors' prediction that when all was said and done, the median price for California homes sold in 2006 would be $575,500. Such was their apparent confidence, I noted at the time, that they didn't even feel the need to round to the nearest $1,000. Yet the forecast turned out to be off by a bit more than that, as CAR's most recent projection for the 2006 median has fallen to $561,000.

read more at voiceofsandiego.org

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September Prices and Sales

Submitted by Rich Toscano on October 20, 2006 - 8:34am

It's time for the belated monthly sales data roundup. Let's dive right in...

Median prices were down year over year for all involved:

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Back to Work

Submitted by Rich Toscano on October 18, 2006 - 7:35pm

Hi everyone - I am back in action after a road trip with the missus up beautiful Highway 1. I need a little time to put together the most recent housing data; in the meantime there is a sneak peak at voiceofsandiego.org.

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A Wrench in the EZ-Credit Works

Submitted by Rich Toscano on October 7, 2006 - 11:24am

Last week, a consortium of federal regulatory agencies released their long awaited "Guidance on Nontraditional Mortgage Product Risks." The linked-to press release tells us exactly what they mean by "nontraditional":

These products, referred to variously as "nontraditional," "alternative," or "exotic" mortgage loans (referred to below as nontraditional mortgage loans), include "interest-only" mortgages and "payment option" adjustable-rate mortgages. These products allow borrowers to exchange lower payments during an initial period for higher payments later.

As Will Carless pointed out back in June, 70 percent of San Diego home loans in 2005 were of either the interest-only or payment-option type. So it would appear that the new regulations put some of San Diego's favorite loan products directly in the crosshairs.

Some highlights of the new guidelines follow:

read more at voiceofsandiego.org

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A Word from Our Sponsor

Submitted by Rich Toscano on October 6, 2006 - 9:31am

Some readers wanted to know more about my semi-cryptic reference to "the new gig," so I thought I'd provide a little more detail here.  Don’t worry, I'm not going to start incessantly shilling for the new business. However, I may occasionally shill for the new business. Like now, for instance.

I have joined an existing firm called Pacific Capital Associates*. The firm offers "comprehensive financial planning" -- investment management, estate planning, insurance, and the like.  They also offer real estate services and home loans, although they are firmly in the real estate bear camp and have routinely talked people out of buying. (And I’m proud to say that they have never put a single client into an Option ARM).

What I do is talk to people about their finances, make recommendations, and directly manage their investment portfolios.  This investment management is the primary focus of what I do, and I employ the same analytical approach to global investment markets -- independent, fundamentally-based, and forward-looking -- that I have taken with San Diego real estate.

I'd be happy to meet with any Econo-Almanac readers who would like to get my thoughts on their financial situations or on investing in general. It doesn't cost anything, and there will be absolutely no pressure – I may be the least salesy guy on Earth.  I simply talk to people and help them make informed financial decisions.  After that, if it is appropriate and desired, I can help implement a plan or manage investments (and it is only at this point that any cost is incurred).  If you're interested, please e-mail me at rtoscano@pcasd.com and we can set up an appointment.

While on the topic of scheduling, I am leaving town next week so the site will probably be devoid of content during that time.

Okay, we now return you to your regularly scheduled doom-mongering.

* - Pacific Capital Associates offers securities and investment advisory services through Girard Securities, NASD/SIPC

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Rates On the Decline

Submitted by Rich Toscano on October 5, 2006 - 5:17pm

After what seemed like an unstoppable rise since the beginning of the year, long-term mortgage rates have since plummeted in an equally relentless manner.

Here in San Diego, though, the majority of buyers do not use 30-year fixed rate mortgages like those depicted by the blue line in the chart. The local housing market is influenced less by fixed rates than by adjustable mortgage rates, the the decline in which has been less dramatic.

read more at voiceofsandiego.org

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