jg, the OFHEO index peaked in 2004 Q3, so I wonder if we used the same data series. Also, OFHEO data is not lagging, so I don’t understand why these two series are so closely correlated. I expected median to lag OFHEO by 1 – 1.5 years.

Another factor we haven’t considered is population change. In the early to mid-90’s, as unemployment rose due to aerospace and defense cutbacks, many people left San Diego.

Building permits indicate builder optimism; builders respond to the turning market faster on the upturn, since they can just ramp up production. On the downturn, they have to finish out their phases, which can take up to a year? Building permits increased in October 96, marking the begining of builder optimism.