~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…

Trouble In ABS-Land

Submitted by Rich Toscano on December 7, 2005 - 9:37am

A couple of my fellow online housing pundits have beaten me to the punch on this article, but it's an important one so I thought I'd link to it as well. It's a Bloomberg article on the declining demand for subprime mortgage-backed securities. The market finally appears to be pricing in the risk of people defaulting on these mortgages. If the trends described in the story keep up, which they likely will, it's going to be a lot harder for less well-to-do homeowners/homebuyers to refinance/buy at such low rates.

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A Picture of the California Housing Bubble

Submitted by Rich Toscano on December 5, 2005 - 10:04pm

Since I spend a lot of time focusing on San Diego statistics, I thought I'd do some charts comparing rents and home prices in both San Diego and other regions in Southern CA.

Mapping rents and home prices is probably the most important single piece of analysis one can perform. Population growth, incomes, housing availability, and other fundamental factors should feed into both rent prices and sale prices. When there is a disconnect between the two, we know that there is something besides fundamentals driving the market.

As can be seen in the graphs below, the speculative premium placed on Southern California home ownership has caused home price increases to absolutely dwarf those of rents:

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Housing Market Report: November 2005

Submitted by Rich Toscano on December 4, 2005 - 5:28pm

The condo and SFR markets may be converging somewhat, but both held their own from a price standpoint. SFR volume soared, however, turning in a 30% increase over October 2004. Below I will discuss the reasons behind the volume spike, along with the trends in prices and inventory.

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Credit Market Report: November 2005

Submitted by Rich Toscano on December 3, 2005 - 8:34pm

Mortgage rates have finally taken a breather, but they are still noticably higher than they were last month—and much higher than they were this summer. Meanwhile, inflation expectations are too high for the Fed to stop tightening, and the OCC has purveyors of non-traditional mortgages in its crosshairs. None of this looks very promising for a housing market that lives and dies by E-Z credit...

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E-Z Credit Under Fire

Submitted by Rich Toscano on November 29, 2005 - 10:59am

John Dugan, the new-ish head of OCC (Office of the Comptroller of the Currency—a federal banking regulator), isn't a big fan of "exotic mortgages."

Those with some free time can read a recent speech that Dugan delivered regarding "non-traditional mortgages." The executive summary: they have their legitimate uses, but these legitimate uses don't include helping people stretch financially to buy more house than they could afford otherwise. Here's a snippet on everyone's new favorite, the option-ARM:

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Evidence of a Southern California Housing Bubble

Submitted by Rich Toscano on November 27, 2005 - 5:45pm
Contrary to popular perception, the fundamentals underpinning Southern California's explosive real estate boom are actually quite poor. So why have home prices risen so high? Because the local housing market is in the midst of a textbook speculative bubble.
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Risks of a Serious Home Price Decline

Submitted by Rich Toscano on November 27, 2005 - 3:10pm
The probability of a serious housing downturn is much higher—and that of the oft-heralded "soft landing" much lower—than most people acknowledge.
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The Condo-Based Economy Makes the News

Submitted by Rich Toscano on November 20, 2005 - 8:35pm
The mainstream media appears to be punching in concerning one of the main themes I've been harping on so relentlessly for the past year-and-a-half: the fact that the economy is so utterly dependent on continued strength in the housing market.
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Monthly Housing Market Report: October 2005

Submitted by Rich Toscano on October 31, 2005 - 4:30pm
As expected, the median San Diego condo price is now down on a year-over-year basis. With that scary milestone we begin our Halloween episode of the Monthly Housing Report.
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Monthly Economic Report: October 2005

Submitted by Rich Toscano on October 30, 2005 - 4:39pm
The San Diego Union-Tribune today ran an article about the rising rate of mortgage defaults in San Diego. It's a good article, but—brace yourself for words you never thought you'd read on this website—their interpretation of the data is more negative than my own.

Wow, my fingers almost seized up just typing that.

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Monthly Credit Market Report: October 2005

Submitted by Rich Toscano on October 28, 2005 - 4:49pm
You may recall from last month's credit market report that I was expecting ARM rates to rise. But even I didn't think they'd head so high, so fast. Read on for a look at the chart that should (but probably doesn't) have the real estate bulls seriously concerned.
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Bernanke and the Real Estate Market

Submitted by Rich Toscano on October 24, 2005 - 4:52pm
To no one's great surprise, Ben Bernanke has been chosen as the next chairman of the Federal Reserve. What, if anything, does this mean for housing?
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Monthly Economic Report: September 2005

Submitted by Rich Toscano on October 21, 2005 - 5:24pm
Let me just be the first to admit that these monthly reports on the local economy have been less than thrilling. For better or worse, my intent with this website is to give an accurate assessment of what's going on, and if what's going on is "nothing" then there's little I can do.
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Where Are Condo Prices Declining Fastest?

Submitted by Rich Toscano on October 18, 2005 - 4:59pm
As noted in the last couple monthly housing reports, we are starting to see some significant regional divergences in condo price movements. While the countywide median condo price is still slightly positive for the year, a full 25% of all San Diego zip codes have seen year-over-year condo price declines of 5% or more. So which areas are declining, and which are still hanging on? And what do they have in common?
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The Psychology of Financial Mania

Submitted by Rich Toscano on October 10, 2005 - 5:16pm
To my amazement, no less than my former analytical nemesis—the San Diego Union-Tribune—recently published a perfectly cordial article about this very website. That the UT has gone from exclusively rehashing CAR propaganda to interviewing some bearish-on-real-estate jackass with a sporadically Victorian-themed website just goes to show how much sentiment has shifted in the past year. But while interesting, the sea change in local sentiment is not what this article is about.
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