~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: July 2005

Submitted by Rich Toscano on July 27, 2005 - 9:42pm
There was big news in the bond market this month: China has finally relented to international pressure and revalued its currency. After over a decade of being pegged at a fixed rate to the dollar, the Chinese yuan was allowed to appreciate by 2.1% and will be pegged to an unspecified basket of currencies rather than to the dollar itself.
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Piggington's Mailbag: Why San Diego?

Submitted by Rich Toscano on July 17, 2005 - 9:50pm
Reader Jonathan writes:

I agree that the “everyone wants to live in San Diego” mentality for the recent status of the real estate market is ludicrous. However, what I believe is missing from the argument is; why San Diego? Why haven’t we seen the same speculative bubble happen all across America?

This is an interesting question. Low rates and rock-bottom underwriting standards are national phenomena; why have prices grown so much faster in San Diego than in most of the country?
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On Rates, Part II: Will They Stay This Low?

Submitted by Rich Toscano on July 16, 2005 - 9:52pm
In the first bond rate article, I discussed several factors that have helped to keep long-term yields low. The piece concluded thusly:
It's quite the virtuous cycle, for now, and bond yields will continue to remain low as long as all these factors remain in place. But how long will they remain in place?
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On Rates, Part I: Why Are They So Low?

Submitted by Rich Toscano on July 9, 2005 - 9:55pm
It is counterintuitive that US long-term interest rates have remained so low in the face of Fed rate hikes, record low household savings, record high trade and fiscal deficits, steeply rising energy and commodity prices, and unprecedented home equity-related wealth creation. This article discusses five factors that have interacted to help keep rates so low in spite of the above.
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Monthly Housing Market Report: June 2005

Submitted by Rich Toscano on June 30, 2005 - 9:58pm
While I remain as concerned as ever about the eventual fate of San Diego real estate, this past month's housing market data reinforces the messages found in the economic and credit market data: San Diego housing does not appear to be under any imminent threat of decline.
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In Search of Instability

Submitted by Rich Toscano on June 23, 2005 - 9:59pm
My extensive rambling notwithstanding, the Econo-Almanac really has one primary purpose: to determine what's going to happen to the San Diego housing market before it actually happens. With this goal in mind, I've developed two "price instability indicators" to identify declining pricing power before it actually shows up in the countywide median price figures.
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Monthly Credit Market Report: June 2005

Submitted by Rich Toscano on June 22, 2005 - 10:01pm
As I've prattled on about endlessly, generational-low interest rates are a critical element in allowing San Diego home prices to remain so high compared to incomes. One cannot, therefore, gauge the health of the real estate market without understanding the health of the credit market.

Not that it's terribly easy to do so—the greatest financial minds in the world cannot seem to agree with each other about what drives the bond markets and where yields will go. As a matter of fact, they can't even agree with themselves.

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A History of the Housing Bubble

Submitted by Rich Toscano on June 19, 2005 - 8:34pm

If San Diego home prices do not reflect fundamentals, exactly how did they get to such rarified heights, and what keeps them aloft? It's a fair question, and an important one: understanding how the bubble started will be crucial in identifying how and when the bubble ends. The purpose of this article is to provide a very brief overview of how we got here.

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Recession Is Not a Prerequisite for a Housing Downturn

Submitted by Rich Toscano on June 1, 2005 - 10:04pm
The last real estate bust in San Diego was precipitated by a local recession, as thousands of aerospace and defense industry employees lost their jobs and were forced to sell their homes. This fact appears to have engendered an oft-repeated theory that San Diego home prices cannot drop unless we experience a recession. Such a line of reasoning may be comforting, but it is deeply flawed.
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Get On the Ride

Submitted by Rich Toscano on May 21, 2005 - 10:10pm
All San Diegans should consider reading the Money Magazine article entitled Boomtown USA to get an understanding of what's happening in our city. The article concerns San Diego's multi-year housing runup in general, but in particular it spends a lot of time detailing the resulting perceptual distortions on the part of our citizenry.
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The Math Skills of Crowds

Submitted by Rich Toscano on April 21, 2005 - 10:15pm
An article in today's Economist concerning the global housing bubble contains this stunning claim:
"A recent survey of buyers in Los Angeles indicated that they expected their homes to increase in value by a whopping 22% a year over the next decade."
Let me get this straight. Real estate is, by every conceivable measure, far more expensive than it's ever been. Homes are already so incredibly expensive that most people can't buy one unless they take out a teaser-rate mortgage or they have a pile of cash from the sale of their prior home. Affordability is at an all-time low, despite the fact that interest rates are about as low as they've been since the 1950s. And from these lofty heights, homebuyers are expecting prices to rise a staggering 22% a year for the next decade?
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The Madness of Crowds

Submitted by Rich Toscano on April 18, 2005 - 10:17pm
Yesterday the UT ran a story concerning the rampant condo speculation that continues to infest our fine city. I highly recommend reading it if you haven't done so already.

The various data (e.g. the fact that 37% of 2004 condo conversion buyers were speculators) is very interesting, if not terribly surprising. The interviews, on the other hand, are just jaw-dropping, as they really hammer home the enormous amount of money being spent on the basis of threadbare and entirely emotional analysis.

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Cuckoo For Condo Gluts

Submitted by Rich Toscano on April 3, 2005 - 10:20pm
The recent San Diego Daily Transcript article about condos in Downtown San Diego contains some frightening statistics...
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Speculation Nation

Submitted by Rich Toscano on March 1, 2005 - 10:22pm
For all the ink that is being spilled about speculation on the part of real estate investors, very little attention is paid to the "stealth speculation" perpetrated by people who, anticipating big equity gains, stretch themselves to the limit to purchase their own homes. This article examines both types of speculation, as well as the ugly aftermath should the expected gains fail to materialize.
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Everybody Wants to Live in San Diego

Submitted by Rich Toscano on February 8, 2005 - 10:23pm
For the first time since the mid-90s, San Diego County experienced a net out-migration from July 2003 to July 2004. So why are home prices going up? Because this real estate market is not being driven by fundamentals... yet.
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