~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…

Measuring the Downturn

Submitted by Rich Toscano on May 31, 2006 - 3:36pm

Tomorrow's voiceofsandiego.org column, a link to which will be available on the upper right of the page*, concerns the shortcomings of the median price as a gauge of broad pricing power.

The executive summary is that the median price does a good job of measuring how much people are willing to spend on housing, but there is a margin of error in translating that to changes in the market price of a given property. Depending on the dynamics involved, this error can go either way: the median price overstated price growth until 2003, after which time it began to understate actual price growth. As has been discussed in the forums, we seem to be getting back to a situation where median prices are once again overstating housing market pricing power.

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We Are Back

Submitted by Rich Toscano on May 28, 2006 - 10:17am

Update - May 30 - It looks like the resource usage issues are still occurring. The site may go down from time to time in the near future until I can work with my ISP to figure this out... please bear with me. The original message follows.

Upgrades to the Site

We had to shut down last week because the site was putting tremendous load on my ISP's server. Because there was no concomitant spike in traffic, I believe the excess load was either due to a denial-of-service attack or some sort of memory leak or other bug with the content management software I use. The ISP applied all security patches on their end and it kept happening, so the only thing left to do was to upgrade to the latest and greatest version of the content management software and see if that fixes the problem, be it security- or performance-related.

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Rates Are Low -- So?

Submitted by Rich Toscano on May 23, 2006 - 4:31pm

Check out The Big Picture for a good take on why the "it's ok because interest rates are low" gambit is so ridiculous. In short, it is because it is the directional change in rates from the time you buy the asset, and not the actual level of rates at which you buy the asset, that matters:

To risk assets, the cost of capital is like the wind. It is the change from the start of the race that matters, the more headwind the more trouble, and the more wind one can summon to their back, the faster the ship sails.

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Turn That Frown Upside-Down

Submitted by Rich Toscano on May 15, 2006 - 8:57pm

Who spiked the water cooler at the Union-Tribune office? Or, maybe, who stopped spiking it?

Ah, I kid because I love. But seriously, their latest piece on the sharp rise in mortgage defaults is unusually somber. And it has some cool graphs.

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Is This Really the Best Time to Become a Realtor?

Submitted by Rich Toscano on May 10, 2006 - 8:54am
Señor Risk has published an interesting chart showing that Californians' rush into real estate as a career is still going strong. There is still optimisim aplenty out there.
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Borrower Speculation

Submitted by Rich Toscano on May 9, 2006 - 10:11am

Will Carless at voiceofsandiego.org wrote a piece yesterday on San Diego's rising foreclosure rate. That's certainly an ominous sign, as a surge of "must-sell" inventory is the most likely catalyst to drive prices substantially lower at some point. But foreclosures are rising off their "everyone has a huge equity cushion"-lows and are still fairly contained, from a historical perspective. So while the directional growth trend is bad news, the amount of foreclosures is not as of yet a big problem.

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Housing Market Report: April 2006

Submitted by Rich Toscano on May 7, 2006 - 4:27pm

The market is starting to give us a more conclusive view of what's to come. This month's report will check in on the widely-expected spring rally and will use the resulting conclusions to forecast where things may go from here.

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How Much Inventory is Too Much?

Submitted by Rich Toscano on May 1, 2006 - 6:07pm

I found an interesting tidbit on the Housing Bubble Blog. A researcher looking at historical California inventory levels found that once the supply of homes hits 9 months worth of sales, median prices fall "on a consistent basis." This is a statewide stat, but it at least gives us some general insight as to the location of that line in the sand past which increased inventory starts to push prices south.

In regard to price declines, what's more important than the overall inventory level is the amount of "distressed" inventory supplied by owners who have to sell at whatever price they can get. But those two numbers tend to trend up and down together.

As I will discuss more in the monthly housing report (which is coming very soon, and will include new data sources to provide a more current read on the market than is supplied by DataQuick) the combined condo and SFR inventory in San Diego is currently a little below 8 months.

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Credit Market Report: April 2006

Submitted by Rich Toscano on April 24, 2006 - 11:16am

It's been an exciting month in the credit markets—that is, if you are the type of person who considers anything that happens in the credit markets "exciting." Sadly, I am just such a person, so without further ado let's have a look at everything that's happened since last month's report.

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San Diego Tophat and Monocle Sales Plummet

Submitted by Rich Toscano on April 19, 2006 - 8:34am

Will Carless at voiceofsandiego.org has written a piece about an apparent exodus of wealthy investors from San Diego real estate. It has an interesting bit of data: 18% of San Diego home purchases last year were made for investment purposes. (This is out-and-out investing, not the stealth speculation I discussed last week).

Elsewhere in the article, various financial advisors tell us that it may be a good time to unload those alligators. "If you have an investment property, this is a wonderful time to get the heck out," counsels one. I completely agree... though I would posit that last year would have been an even more wonderful time.

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The Forest and the Trees

Submitted by Rich Toscano on April 17, 2006 - 9:23am

The Union-Tribune recently issued a piece about last month's housing numbers. As is usual in the media these days, the tone was "cautiously optimistic." In other words, things have seriously slowed down, but the median price is still hanging in there... so things are going to be fine, right? Karevoll illustrates the sentiment nicely:

“It looks to me as if the market, at all levels, has ratcheted itself back a notch but is still stable,” said DataQuick analyst John Karevoll. “There is nothing I can see that looks particularly ominous.”

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Hello, 5%

Submitted by Rich Toscano on April 13, 2006 - 8:45pm

The 10-year Treasury yield just busted through 5% for the first time in almost 4 years. Is the global liquidity party finally starting to wind down? Whatever's going on, it bodes poorly for the housing bubble.

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Submitted by Rich Toscano on April 10, 2006 - 11:08am

Calculated Risk informs us that the new guidance on non-traditional mortgages may be with us in a few months.

Lansner at the OC Register is worrying about late tax payments, correctly identifying that homeowners are starting to get squeezed now that rates are rising and prices have flattened.

And—I know this is week-old news, but it bears repeating—the wonderful folks at the NAR inform us that 40% of homes purchased last year were for investment or vacation purposes. That, friends, is a little something we call speculative excess. But it's ok, says NAR: "Some of these purchases may be a third, fourth or fifth investment property, showing that housing is a good investment." Huh?

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Forums and Comments

Submitted by Rich Toscano on April 7, 2006 - 11:01am

I've been very pleased in general with what's happened with the article comments and forums. A lot of really smart and sophisticated people have taken to posting, and I myself have learned an awful lot. Additionally, all the conversations have (hopefully) made this site more useful and interesting without me really having to lift a finger. (I don't always have time to repond to forum posts and comments, but I do read almost all of them).

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Housing Market Report: March 2006

Submitted by Rich Toscano on April 4, 2006 - 10:03am

Below we will take a look at the action in the housing market as we wrap up the winter season. Data to be crunched includes prices, price growth (or shrinkage) between varying regions, sales volume, and inventory. We'll also discuss the merits of the "median price" statistic as an indicator for real estate pricing power.

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