~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…

Credit Market Report: December 2005

Submitted by Rich Toscano on December 24, 2005 - 8:15pm

The markets got all atwitter because the Fed dropped the word "accommodative" from its latest post-meeting statement. Does the change in wording imply that the rate hikes will soon be over? This question will be discussed below, along with some thoughts on fixed and adjustable mortgage rates, inflation indicators, the new federal lending guidelines, and how all of the above will affect the housing market.

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Is This the End of E-Z Credit?

Submitted by Rich Toscano on December 23, 2005 - 5:03pm

This past week, a group of federal agencies released a draft of their guidelines on non-traditional mortgage lending . Christmas came early for those of you who like to pore over 42-page regulatory manifestos; for the rest of you, highlights follow.

The issuing agencies (the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, and the National Credit Union Administration) have done a good job of covering the notable areas of risk in non-traditional lending. They begin with loan underwriting standards, addressing the following topics:

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On Supply and Demand in San Diego

Submitted by Rich Toscano on December 22, 2005 - 5:58pm

Well now they've gone and done it. The Voice of San Diego has printed the words many thought would never be spoken in this town again:

Some sellers -- albeit a small minority -- have even begun to sustain losses on their property.

The article concerns San Diego's colliding trends of fewer home sales and greater home inventory. This is nothing new to readers of Premium Content, where I cover local housing stats in depth, but the long and short of it is that supply is increasing, demand is decreasing, and some folks are starting to do the math on what that means for prices.

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As Goes Housing, So Goes the Economy

Submitted by Rich Toscano on December 17, 2005 - 12:57pm
The UT publishes another article on the economy's unhealthy dependence on housing activity. If this topic gets enough press people may finally start to question the "diverse economy" meme (though I doubt it will be widely questioned until we start losing jobs).
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The Condo-Based Economy Goes Nationwide

Submitted by Rich Toscano on December 12, 2005 - 11:22am

My friend Calculated Risk (that's his real name—his parents were hippie economists) has published a jaw-dropping and critically important graph of US economic growth with and without the effect of home equity cashouts. If you take out the effects of mortgage equity withdrawal, or "MEW," GDP growth has been practically flat over the past five years. While I've often noted that the economy is dependent on increased housing appreciation, even I am kind of amazed at the magnitude of the effect that the "home equity ATM" has had on GDP:

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Deeper Analysis of Los Angeles Housing

Submitted by Rich Toscano on December 12, 2005 - 10:40am
Mike Sheffler has published a followup to his excellent article on Los Angeles home prices. (Original article here.) This second article looks at disparities in age and income along with the effects of rent control.
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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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