~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…

Much Ado About Renting

Submitted by Rich Toscano on August 17, 2006 - 8:25pm

I was just re-reading Catherine MacRae Hockmuth's excellent piece on her personal decision to become a renter. And I was pretty blown away by the volume (lots) and tenor (highly emotional) of user comments.

Catherine has already addressed some of the comments in a followup article. My purpose today is not to address any specific point, but rather to take note of the fact that her article created such a firestorm.

Let's try a little thought experiment. Imagine if Catherine had written that article in the year 2000. Would anyone have gotten lathered up enough to accuse the author (and, in one case, the entire Voice staff) of immaturity and ignorance? Would they have scornfully written off the author as a new and well-deserving member of the permanent renter underclass?

read more at voiceofsandiego.org

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Take 5, Take 2.5

Submitted by Rich Toscano on August 17, 2006 - 10:06am

A thousand apologies to those who tuned in to KSWB last Sunday. There was a mixup on the date: I will be appearing on Take 5 this Sunday, August 20. That's Sunday, August 20, 10:30PM on KSWB (channel 5).

This time I mean it.

To those who have requested such, I will try to get an online video of the appearance. However, I can't promise anything. I'm just a simple software guy, and your video streams confuse and frighten me.

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The Wealth Effect Illustrated

Submitted by Rich Toscano on August 16, 2006 - 3:18pm

When home prices rise, homeowners tend to spend more money. In some cases their newfound real estate wealth emboldens them to save less and spend more, while in other cases they actually borrow against increased home values to increase their spending money. In either scenario, the net effect is that people buy more stuff.

This so-called "wealth effect" is a widely acknowledged side effect of asset market booms.

read more at voiceofsandiego.org

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ARM Wrestling with Bernanke

Submitted by Rich Toscano on August 11, 2006 - 1:26pm

San Diego homeowners with adjustable rate mortgages can breathe a sigh of relief. After 17 consecutive -- albeit modest -- rate increases, the Federal Reserve has decided to stand pat and keep its federal funds target rate at 5.25 percent.

The accompanying chart shows the seemingly unstoppable rise in the 1-Year Constant Maturity Treasury, an index often used to adjust monthly mortgage payments, during the Fed's tightening campaign.

read more at voiceofsandiego.org

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July Price and Sales Data

Submitted by Rich Toscano on August 10, 2006 - 10:18pm

After getting hammered last month, the median prices for both SFRs and condos were up... the latter slightly, the former somewhat dramatically:

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Happenings at the Econo-Almanac

Submitted by Rich Toscano on August 10, 2006 - 9:05pm

Hi everyone. It's time for yet another administrative update on the state of things here at Econo-Almanac world headquarters.


I put together a very brief FAQ list. Should be old hat for many of you, but I thought I'd mention it.

More Forums

I forgot to add this item on the original post, so this is an update... now that forum activity has taken off, I've expanded the number of forums to hopefully make things more usable. Existing content will all be in the generic "housing market" format, but from here on out folks should feel encouraged to create new topics in the most appropriate forum.

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Take 5, Take 2

Submitted by Rich Toscano on August 9, 2006 - 12:37pm

The Take 5 episode from a couple weeks back actually generated record email and viewership for the show, so they invited me back for another round. This time my counterpart was a realtor named Lee Sterling, who I am pleased to report is a really nice guy and did a good job presenting his case.

As for myself, I was much more at ease than in my virgin appearance and I think that overall it went really well. If you want to check it out, tune in to KSWB/Channel 5 this coming Sunday at 10:30PM.

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July Inventory

Submitted by Rich Toscano on August 2, 2006 - 10:23am

San Diego inventory continues to climb, although the rate of growth slowed a bit last month:

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Rates vs. Rates of Change

Submitted by Rich Toscano on July 27, 2006 - 5:15pm

During the Take 5 taping, my counterpart from SDAR frequently mentioned that today's low rates (in comparison to those in the 80s) are a good reason to buy. There was no time for me to address this topic on the show, but it gives me a good opportunity to rehash some related thoughts that I wrote for the May credit market update:

People argue that home prices are unlikely to decline because rates are still historically rather low, but that makes little sense. The raw level of rates is irrelevant in determining future price movements. What matters in this case is the directional movement of rates. If rates are historically rather low, that actually strengthens the case that they could rise to more normal levels and thus put downward pressure on home prices in the future. If that happens it will clearly not be good for home prices.

We need look no further than the current environment to see this dynamic at work. Last year at this time, the permabulls were telling us that home prices wouldn't decline because rates were nice and low.

June 2005
June 2006
Loan Amount
Rate, 30-Year Fixed
Rate, 1-Year ARM
Payment, 30-Year Fixed
Payment, 1-Year ARM

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Media Appearance

Submitted by Rich Toscano on July 27, 2006 - 1:28pm

I just got back from a taping of KSWB's "Take 5," where I discussed the real estate market with Will Carless (voiceofsandiego.org) and Charles Jolly (SD Association of Realtors).

As far as I can tell, the appearance went just ok. I was kind of nervous, being entirely new to the TV thing, and I only realized about halfway through that you have to be pretty aggressive about getting a word in (something that is very much not in my nature). So I did sort of a middling job of defending the bear case. The unabashedly bullish case made by Jolly was light on factual backing, to put it charitably, but he certainly had more poise delivering his message than I did mine.

Anyway, it's going to air on Sunday at 10:30 PM, if any San Diegans are interested.

Update: I've now watched the segment. I didn't look as nervous as I felt, and although I was remiss in rebutting some of the SDAR guy's points, many of them were weak enough to effectively rebutt themselves. So all in all it came out better than I expected, for what that's all worth.

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The Bulls Strike Back

Submitted by Rich Toscano on July 23, 2006 - 10:19pm

"Hold off on that panic attack," suggests a piece in today's LA Times. The implication of the article's title and opening-paragraph reference to Chicken Little suggests that those who expect a housing price decline are simply being emotional.

The article proceeds to trot out the usual suspects for this week's round of "permanently high plateau"-style nonsense. There is a new tack, however. While acknowledging the signs of trouble in San Diego, the article attempts to distance Los Angeles and the rest of Southern California from our fine city:

"...median home price there [San Diego] fell 1% and the number of sales dropped 24% from the same month a year ago — a tumble experts attribute largely to conditions peculiar to that area, most pointedly the overbuilding of downtown condominiums."

"Peculiar?" What seems peculiar to me is the idea that overbuilding of downtown condos could somehow be responsible for a decline in overall sales volume. Aside from the absurd idea that increased supply would cause a decrease in demand, the fact is that downtown is far too small to have any measurable effect on countywide stats. (To put this argument in perspective: ziprealty.com shows 759 homes listed downtown versus over 20,000 listings countywide).

Have a look at some graphs I put together late in 2005:

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Questionable Career Moves

Submitted by Rich Toscano on July 21, 2006 - 1:05pm

As suspected, there has been a fairly serious media response to the first year-over-year decline in median prices.

We've known for a while that home prices were on the decline, thanks to the Shiller index and to numerous examples of specific properties selling for less than their prior purchase prices. But I guess that there's nothing like having it all wrapped up in a single stat like that (despite the previously noted issues with using the median to gauge actual pricing power).

Despite the recent spate of concerned commentary, including some backpeddling by no less than the chief economist of CAR, there are still plenty of optimists out there. As my man Calculated Risk has helpfully charted, California real estate salesperson licenses are up 14% over last twelve months. Brokers licenses are up 8%.

So not only are there still plenty of buyers, there are actually still plenty of people who are bullish enough on real estate to actually be entering the field.

That's optimism. And it underscores my point that, despite a recent directional shift in pricing momentum, we are just at the very beginning of the housing bubble aftermath. This correction will probably not be over until sentiment is almost universally pessimistic on housing. As the continued rush into the real estate industry clearly demonstrates, that day is still far in the future.

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Piggington Makes the News

Submitted by Rich Toscano on July 17, 2006 - 9:15am

I was interviewed in an LA Times article running today: For San Diego Real Estate, the Skies Are Not So Sunny. (I'm on page two.)

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That's More Like It

Submitted by Rich Toscano on July 13, 2006 - 9:37pm

Since I mentioned yesterday that I was surprised at the sanguine tone of the UT article on the median price drop, I must in fairness mention that (as suspected) they came out with an expanded and more gloomily-titled piece today.

While I'm here, I can't help but comment on a couple of sections from the article. This:

San Diego real estate agent Calvin Goad, who represents the Fleischmanns, says the region is experiencing a normal cycle of decline following a boom. “The prices are coming down right now, but it is a good time for the buyer to jump into the market,” he said. “San Diego historically does take a small drop in price, but then the market levels.”

...is simply outrageous. The "normal cycle of decline" is pictured here:

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The U-T Makes It Official: Prices Are Falling

Submitted by Rich Toscano on July 12, 2006 - 1:30pm

The Union-Tribune reports that, as predicted here last week, year-over-year medians have gone negative. As of June 2006, the median price of a San Diego home was down 1% from a year prior. The median was down 6% since its peak last November, representing a loss of $30,000 on the median priced home.

Get ready for all the pundits to claim victory on their "soft landing" forecasts. Prices are down 1%, and that's a soft landing—get it? Of course, this interpretation requires you to pretend that prices have fallen as much as they are going to, despite the lack of any evidence to that effect.

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