~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…

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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Monthly Housing Report: September 2005

Submitted by Rich Toscano on October 2, 2005 - 5:21pm
Last month's prediction of further deterioration in the condo market has been spot on so far, and my unique instability indicators predict more trouble to come. Meanwhile, purveyors of E-Z credit are finally backing away from the ledge. I can't believe I'm actually saying this, but: do I hear hissing?
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Monthly Credit Market Report: September 2005

Submitted by Rich Toscano on September 29, 2005 - 5:30pm
Governments like a little bit of inflation. Inflation basically acts as hidden tax, allowing the government to run up a lot of debt and then sit back while that debt is inflated away. What governments avoid like the plague are increasing expectations of inflation. When the populace starts to feel that inflation is rising, business owners preemptively raise prices and consumers start bidding prices up by buying more now to avoid increased prices later. The resulting price increases reinforce the public perception that inflation is on the rise, which only encourages more price-increasing behavior, and the cycle continues.
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Myth and Reality II

Submitted by Rich Toscano on September 21, 2005 - 5:34pm
Many thanks to reader Matt for tracking down a copy of the academic research paper I discussed on Monday. The paper can be found here. I have just finished reading the entire thing, but scholarly tone notwithstanding I continue to think it's hogwash.
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San Diego Housing: Myth and Reality

Submitted by Rich Toscano on September 19, 2005 - 5:37pm
I don't usually spend time discussing media articles of the "there's no housing bubble" ilk, as I've already said my piece in the Bubble Primer series found on the top of the homepage. But there's an article making the rounds today that has been sent to me enough, and attempts to take a novel enough approach to the argument, that I thought I'd write a little something about it.
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Piggington's Mailbag: The Rising Cost of Building Materials

Submitted by Rich Toscano on September 17, 2005 - 5:39pm
Reader Christine poses an interesting question:

I work for an architect downtown--he just spoke with someone today who said that the cost of building materials is expected to triple as a result of Katrina and having to rebuild New Orleans. Since there are barely enough supplies for the US without having to rebuild, how do you think this will affect the housing market? Would housing costs go up because it is now even more difficult to create new supply?

Like I said, a good question, but the answer is no: a rise in the cost of construction materials will not have a notable influence on San Diego home prices. I say this for a couple of reasons.

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Japanese Vote "No" on U.S. Housing Bubble

Submitted by Rich Toscano on September 13, 2005 - 6:14pm
This past weekend, Japanese voters overwhelmingly endorsed prime minister Junichiro Koizumi's plan to privatize the Japanese postal system. What, you may rightly ask, does mailing a letter in Japan have to do with buying a house in San Diego? To which I answer: potentially quite a bit.

Japan Post, you see, is more than just a post office. It is a massively subsidized behemoth that, in addition to delivering mail, offers insurance and banking services to all of Japan. It is, as a matter of fact, the biggest financial institution in the world, and it controls over $3 trillion in financial assets.

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Monthly Housing Report: August 2005

Submitted by Rich Toscano on September 4, 2005 - 6:15pm
Single family homes are hanging in there, but the condo market is starting to look pretty sickly. Unless the Fed comes to the rescue yet again, San Diego real estate's long and inevitable decline may begin very soon—if it hasn't begun already.
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Monthly Economic Report: August 2005

Submitted by Rich Toscano on September 2, 2005 - 6:20pm
The San Diego job market is booming--if you're in construction. (Otherwise it's pretty mediocre). Meanwhile, a nationwide recession looms, but the local economy soldiers on...
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Piggington's Mailbag: Rates, Prices, and Unwieldy Nautical Metaphors

Submitted by Rich Toscano on August 18, 2005 - 6:23pm
Several folks have requested at one point or another that I chart the correlation between interest rates and housing prices, in order to see if rate movements are a good short-term predictor of price movements. I was sort of dubious of this idea, but being the nerd that I am I had to go ahead and graph it nonetheless.
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The Condo-Based Economy

Submitted by Rich Toscano on August 10, 2005 - 6:26pm
I have routinely argued that the inevitable slowdown in San Diego housing activity and price growth will lead to local economic hardship. This topic is discussed in some detail here and here, but the basic reasoning is as follows:
  • Flattening prices will remove the artificial "wealth effect" boost that the San Diego economy has enjoyed over the past few years.
  • Flattening prices will also remove the equity-growth safety net that has kept homeowners out of financial trouble during the same period.
  • Given the enormous number of San Diegans employed in the housing sector, a slowdown in housing activity may put a lot of people out of work.

If our friends over in the United Kingdom are any indication, I could be onto something. The UK, as you probably know, experienced a home price bubble of downright San Diego-like proportions. As this graph shows, the similarity is quite striking:

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