San Diego Housing Market News and Analysis
~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:
Thanks for stopping by…
Submitted by Rich Toscano on December 27, 2005 - 8:22pm
The yield curve briefly inverted today: for a moment, the yield on longer-dated bonds was actually lower than the yield on shorter-dated bonds. To be specific, the yield on the 10-year Treasury briefly dropped below that of the 2-year Treasury, before rising up to close barely above the 2-year yield.
This brief foray into yield curve inversion is getting a lot of press, and for good reason. According to economist Paul Kasriel, a yield curve inversion between the 10-year and 3-month Treasuries has preceeded every recession over the past 45 years. Over this period, there were only two periods of yield inversion that did not precede a recession, versus six that did. That's a pretty decent economic indicator, though as Kasriel notes, it's a better predictor of economic activity in general than recessions in specific.
Submitted by Rich Toscano on December 26, 2005 - 6:13pm
Adherents of the ever-popular "They're Not Making Any More Land" school of real estate valuation would be well advised to read this New York Times piece on the Japanese housing bubble and its aftermath. Unless it becomes more cost-effective to build waterborne cities in the Sea of Japan than it is to build housing developments in Temecula, Japan will remain considerably more land-constrained than Southern California. Yet neither this limited land supply nor Japan's extremely high population density (one might say that "everyone wants to live in Japan") managed to deliver the nation from a massive, 15-year housing bust that has seen home price declines of up to 50%.
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.
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:
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:
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.
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).
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:
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.
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.
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:
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.
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...
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:
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.
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.
~Active forum topics~
~SD Home Price Snapshot~
|* Investment advisory services and securities offered through Girard Securities, Inc., member FINRA and SIPC. Investment advisory services also offered through Crawford Capital Management, Inc. Pacific Capital Associates and Crawford Capital Management, Inc. are not affiliated with Girard Securities, Inc.|