~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…

Liar Loans

Submitted by Rich Toscano on August 24, 2006 - 5:25pm

Over the two-plus years I've been publicly rambling about the San Diego housing market, I've spilled very little ink on the topic of stated income mortgages--the so-called "liar loans" that require no proof of borrower income.

It's not that I find this particular spawn of the housing bubble uninteresting. Far from it. But the fact is that I try to concentrate my efforts in the realm of the measurable and verifiable, whereas most information about stated income loan abuse is of the more anecdotal variety. There ever plenty of anecdotes, to be sure--I think we've probably all heard a version of the story wherein the landscaper or Starbucks barista is mysteriously pulling down six figures. But there has really been no way to measure how serious the problem really is.

It seems now that some more reliable information is beginning to surface.

read more at voiceofsandiego.org

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Affordability Wars

Submitted by Rich Toscano on August 22, 2006 - 10:54pm

The California Association of Realtors (CAR) recently announced a new index to measure home price affordability for first time buyers. The distinguishing feature of this new affordability index appears to lie in its looser definition of what exactly is affordable: whereas the prior index assumed a 20 percent down payment and a maximum of 30 percent of household income spent on housing costs, this new index allows for a 10 percent down payment and up to 40 percent of income devoted to house payments.

This is entirely ridiculous. Buyers now shell out a record portion of their earnings for home payments, as well as taking on previously unthinkable levels of debt in order to purchase their homes. The fact that people are so commonly forced to stretch their fiscal limits does not, as CAR would seem to imply, indicate that it is now more affordable to do so. It means precisely the opposite.

read more at voiceofsandiego.org

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The March of Progress, Revisited

Submitted by Rich Toscano on August 22, 2006 - 6:59pm

I heard some folks were having trouble with the rich text editing capabilities so I wanted to expound on that a bit. (To non-nerds, “rich text” enables the use of italics, bolding, clickable links, and the like).

Techies among you can manually enter the typical markup codes if you’d like, but for the rest, you are able to utilize a rich text editor. To enable this editor, click the "enable rich-text" link when you are writing a comment, as pictured here:

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A Face for Radio

Submitted by Rich Toscano on August 18, 2006 - 11:11am

It's a media frenzy! For me, anyway, as I'm now making two media appearances this weekend—but that's well up from my typical rate of 0 media appearances per weekend.

Actually, "appearance" isn't the most fitting term. I've been invited to chat with Mark Miller on his radio show, "Talk to the Lawyer." The show will air this Saturday, August 19, at 2PM, on KCBQ 1170AM. You can also listen online at www.kcbq.com.

Also joining will be Ben Jones of The Housing Bubble Blog fame. The show will be broadcast live, so feel free to call and harass us at 888-344-1170.

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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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