~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…

Intro to Credit Default Swaps

Submitted by Rich Toscano on November 3, 2006 - 12:18pm

Last week, Scott Lewis SLOP'd about the San Diego County pension system's sizable investment in D.E. Shaw, a hedge fund that is heavily involved in so-called "credit default swaps."

If you're like most people, you probably started to lose consciousness by the end of that last sentence. But stay awake if you can. Because it turns out that San Diego's fortunes are very much tied to these arcane financial instruments

Credit default swaps, or CDSs, are basically a form of insurance that lenders of money purchase in order to ensure that they will be paid back. That, at least, is the idea. Let's examine a hypothetical, certainly oversimplified, but hopefully illustrative day in the life of a CDS.

read more at voiceofsandiego.org

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Population Followup

Submitted by Rich Toscano on October 30, 2006 - 12:33pm

Some folks didn't cotton to my conclusion that the DOF population data was probably better than the Census Bureau data, so I thought I'd clarify my reasoning.

I do not pretend to know much about the ins and outs of tax returns vs. driver's license issuance or for that matter any of the other methodological differences between the two organizations' figures. Nor do I really care to take the time that would be required to dig into it (for reasons that are explained below).

I mentioned in the last article that positive job growth belied a population decline. This was, for me, the deciding factor. Let's look at those numbers:

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Population Positive

Submitted by Rich Toscano on October 28, 2006 - 11:14am

We never quite settled the issue of the dualing statistical bureaus and their respective takes on San Diego population growth. The U.S. Census Bureau, as you may recall, indicated that San Diego County was experiencing negative net migration, meaning that more people were moving out of the county than moving in, to such an extent that population growth had actually gone negative in 2005. The California Department of Finance, meanwhile, reckoned that both net migration and population growth were positive.

So why the big difference, and more importantly, who was right?

read more at voiceofsandiego.org

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September Job Data

Submitted by Rich Toscano on October 26, 2006 - 1:33pm

Employment within San Diego's "housing boom beneficiary" job sectors (construction, finance/real estate, and retail) has been effectively flat since last year. The number of people employed in this sector in September was down a razor-thin .1 percent from the prior September, according to the latest batch of Bureau of Labor Statistics data.

read more at voiceofsandiego.org

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CAR's 2007 Forecast

Submitted by Rich Toscano on October 25, 2006 - 3:28pm

Back in February, I wrote here about a California Association of Realtors' prediction that when all was said and done, the median price for California homes sold in 2006 would be $575,500. Such was their apparent confidence, I noted at the time, that they didn't even feel the need to round to the nearest $1,000. Yet the forecast turned out to be off by a bit more than that, as CAR's most recent projection for the 2006 median has fallen to $561,000.

read more at voiceofsandiego.org

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September Prices and Sales

Submitted by Rich Toscano on October 20, 2006 - 8:34am

It's time for the belated monthly sales data roundup. Let's dive right in...

Median prices were down year over year for all involved:

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Back to Work

Submitted by Rich Toscano on October 18, 2006 - 7:35pm

Hi everyone - I am back in action after a road trip with the missus up beautiful Highway 1. I need a little time to put together the most recent housing data; in the meantime there is a sneak peak at voiceofsandiego.org.

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A Wrench in the EZ-Credit Works

Submitted by Rich Toscano on October 7, 2006 - 11:24am

Last week, a consortium of federal regulatory agencies released their long awaited "Guidance on Nontraditional Mortgage Product Risks." The linked-to press release tells us exactly what they mean by "nontraditional":

These products, referred to variously as "nontraditional," "alternative," or "exotic" mortgage loans (referred to below as nontraditional mortgage loans), include "interest-only" mortgages and "payment option" adjustable-rate mortgages. These products allow borrowers to exchange lower payments during an initial period for higher payments later.

As Will Carless pointed out back in June, 70 percent of San Diego home loans in 2005 were of either the interest-only or payment-option type. So it would appear that the new regulations put some of San Diego's favorite loan products directly in the crosshairs.

Some highlights of the new guidelines follow:

read more at voiceofsandiego.org

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A Word from Our Sponsor

Submitted by Rich Toscano on October 6, 2006 - 9:31am

Some readers wanted to know more about my semi-cryptic reference to "the new gig," so I thought I'd provide a little more detail here.  Don’t worry, I'm not going to start incessantly shilling for the new business. However, I may occasionally shill for the new business. Like now, for instance.

I have joined an existing firm called Pacific Capital Associates*. The firm offers "comprehensive financial planning" -- investment management, estate planning, insurance, and the like.  They also offer real estate services and home loans, although they are firmly in the real estate bear camp and have routinely talked people out of buying. (And I’m proud to say that they have never put a single client into an Option ARM).

What I do is talk to people about their finances, make recommendations, and directly manage their investment portfolios.  This investment management is the primary focus of what I do, and I employ the same analytical approach to global investment markets -- independent, fundamentally-based, and forward-looking -- that I have taken with San Diego real estate.

I'd be happy to meet with any Econo-Almanac readers who would like to get my thoughts on their financial situations or on investing in general. It doesn't cost anything, and there will be absolutely no pressure – I may be the least salesy guy on Earth.  I simply talk to people and help them make informed financial decisions.  After that, if it is appropriate and desired, I can help implement a plan or manage investments (and it is only at this point that any cost is incurred).  If you're interested, please e-mail me at rtoscano@pcasd.com and we can set up an appointment.

While on the topic of scheduling, I am leaving town next week so the site will probably be devoid of content during that time.

Okay, we now return you to your regularly scheduled doom-mongering.

* - Pacific Capital Associates offers securities and investment advisory services through Girard Securities, NASD/SIPC

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Rates On the Decline

Submitted by Rich Toscano on October 5, 2006 - 5:17pm

After what seemed like an unstoppable rise since the beginning of the year, long-term mortgage rates have since plummeted in an equally relentless manner.

Here in San Diego, though, the majority of buyers do not use 30-year fixed rate mortgages like those depicted by the blue line in the chart. The local housing market is influenced less by fixed rates than by adjustable mortgage rates, the the decline in which has been less dramatic.

read more at voiceofsandiego.org

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September Inventory

Submitted by Rich Toscano on October 3, 2006 - 8:36pm

It definitely appears that inventory has peaked for the year:

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Double Logins

Submitted by Rich Toscano on October 3, 2006 - 9:38am

If you are finding that you have to log in multiple times, just hit refresh a couple times after the first login. It ends up that you are actually logged in, but you are seeing a cached version of the page which makes it look like you aren't logged in yet. By refreshing the page a couple times you should get a "new" version which will reflect your logged-in status.

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A Year or Two?

Submitted by Rich Toscano on September 27, 2006 - 1:49pm

People now widely acknowledge the once-blasphemous: that the housing market can slow, that home prices can decline, and that both of the above are happening here and now. But we are a cheerful people, apparently, and such admissions are often quickly followed with the disclaimer that the housing market should be back in action soon enough.

Take, for instance, the following quote from El Cajon Councilman Gary Kendrick, as appearing in a recent U-T article on El Cajon's stalled condo conversion market. Mr. Kendrick is singled out only because this is a very typical example of the many similar proclamations I've heard expressed by assorted authority figures in recent times. Says Gary:

“It's simply the market cycle that happens every few years, and right now we are in a cooling-off period and that may last a year or two,” he said. “Three years from now, people will be saying, 'I wish I bought one of those condo conversions in 2006.' ”

Well, maybe I'm singling him out a little bit because that last line is so priceless. You may wish to record it for future generations to enjoy.

read more at voiceofsandiego.org

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Is Inflation Dead?

Submitted by Rich Toscano on September 26, 2006 - 10:14am

Sorry about the radio silence this past week... I've been real busy getting the new portfolio management/financial advisory gig* off the ground**. What writing I did get a chance to do over at the voiceofsandiego.org concerned the Amaranth blowup, not housing, so I didn't link to it from here.

Now I am compelled to come out of hiding because of bond yields.

I made note a while back when the yield on the 10-year Treasury Note finally crossed the elusive 5% mark. The 10-year yield eventually rose to 5.24%, but as the below chart (courtesy of StockCharts.com) shows, it went into freefall soon thereafter.

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Expanding Homeownership?

Submitted by Rich Toscano on September 20, 2006 - 11:25am

Yesterday, Scott Lewis wrote a great piece on the logical inconsistencies of some of the the city's affordable housing efforts.

One such policy, while having escaped Scott's truculent attentions, nonetheless deserves to be highlighted as especially irrational. It is described in a recent Daily Transcript piece called "Sanders seeks action on affordable housing" (subscription required):

...the [San Diego Housing Commission] is continuing its efforts to expand homeownership through the creation of two new, first-time homebuyer programs...

Giving people money to buy houses artificially stimulates housing demand (sorry, "expands homeownership"), the effect of which is to render housing less, not more, affordable. It's effectively a government subsidy for the housing bubble and entirely the wrong way to approach the problem.

read more at voiceofsandiego.org

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