San Diego Housing Market News and Analysis
Articles that I have written for VoiceofSanDiego.org, a local news publication that provides continuing coverage of San Diego housing and economic issues.
Submitted by Rich Toscano on October 1, 2008 - 12:20pm
Every pundit on Earth is playing the game of picking the various bailouts apart and proposing their own improved bailout schemes. But I think that most of the conversations going on out there miss a critical point: that this bailout and the ones that will in all likelihood follow it fail to address the root cause of the problems.
That root cause, in my opinion, is that the vast majority of political leaders, regulators, and pundits zealously cling to a deeply flawed analytical framework.
To put it more simply: the people and principles that blithely led us into this mess are absolutely the wrong people and principles to lead us out of it.
Submitted by Rich Toscano on September 23, 2008 - 9:21pm
This month's employment estimates show a deterioration in the retail sector but a slight improvement in the construction sector. Other than that the region's job growth, or lack thereof, has been on a path similar to recent months. So I will simply note that overall employment fell by 5,700 jobs or .4 percent from last year and then move on to the graphs.
The first graph is the usual one displaying the number of jobs gained or lost by the housing beneficiary sectors (construction, finance/real estate, and retail), the rest of the economy, and all sectors combined on a year-over-year basis. Each month's data point represents the year-over-year change for that month (I use this technique to smooth out seasonal effects).
Submitted by Rich Toscano on September 19, 2008 - 1:59pm
Earlier in the week I jokingly suggested that the federal government was limiting itself to one financial industry bailout per day. Well, that was sure wrong.
Let's review the week so far:
Submitted by Rich Toscano on September 17, 2008 - 10:29am
I spoke too soon yesterday. After Treasury Secretary Paulson apparently refused to bail out AIG, the Federal Reserve stepped in and cut the mortgage giant a check for $85 billion in exchange for 80 percent of AIG shares. That $85 billion of taxpayer money is just a loan, we are told, but I don't quite understand the distinction between and loan and a handout when the whole trigger for this loan was that AIG is unable to pay back its other loans.
Once again, this is being covered everywhere in the MSM. Here's a good overview.
Although a cut in the Fed funds rate had become widely expected by yesterday, the Fed ended up holding rates steady. Perhaps they are trying to limit themselves to one Wall Street bailout per day.
Today is a new day, however.
Submitted by Rich Toscano on September 16, 2008 - 9:01am
My snarky comment in the prior post notwithstanding, the folks at the Treasury have to their credit not directly bailed out either Lehman or AIG. (They have stepped up the indirect bailouts, however: the Fed will now be lending more money to more people with more questionable collateral, and word is that they may also cut rates again today.)
But while they are finally turning some pigs away from the trough, the government's frantic interventions to date suggest that they will not sit idly by as things get really out of hand. We shall see.
I haven't gone into much detail on this week's drama because for the most part I'd be rehashing what's already been, uhm, hashed many times over. All the mainstream outlets are covering the issue, but for good up-to-the-minute updates and commentary I've been enjoying the coverage at the blog Naked Capitalism.
(written for voiceofsandiego.org)
Submitted by Rich Toscano on September 15, 2008 - 10:30pm
Back in early 2007 I wrote about the risks in the market for credit default swaps, a type of financial instrument that basically serves as insurance against bond default. The crux of the article was that some of the insurers in question might not be able to pay when the time came, and that would be trouble.
Almost exactly a year later, in January of this year, I wrote that the Fed's bailout of investment bank Bear Stearns may have been intended to prevent exactly that type of situation (though I noted that I'd expected the trouble to come from hedge funds, not from full-fledged investment banks).
Today, the bankruptcy of investment bank Lehman Brothers may have set some CDS market trouble into motion. As this Bloomberg article dryly notes:
It turns out that Lehman was one of the ten largest "counterparties" (credit insurers) in the default swap market, so their failure is obviously a big deal.
On the other hand, things probably won't be allowed to get too bad before the next bailout is put into place.
(written for voiceofsandiego.org)
Submitted by Rich Toscano on September 12, 2008 - 11:51am
Soon I will be putting up some thoughts from longtime FOP (Friend of Piggington) Ramsey Su, to be followed by the monthly data rodeo.
In the meantime, get your Friday data fix over at voiceofsandiego.org.
Submitted by Rich Toscano on September 8, 2008 - 7:49pm
We just witnessed yet another weekend bailout for the financial markets. The government takeover of ailing mortgage behemoths Fannie Mae and Freddie Mac was no surprise (prior editorializing can be found here and here) and has been jumped all over by the mainstream press. So I'm not really going to get into the details, as anyone interested doubtless already knows them.
However, I thought that the official nationalization of the mortgage market at least deserved a mention here at the Nerd's Eye View.
Someone asked me how this would change the housing and mortgage markets. My initial thought is that it won't. This move was intended not to cause something to happen, but to prevent something from happening. That something was the imminent bankruptcy of the two entities that account for about 80 percent of U.S. mortgage issuance.
Such an outcome would have changed the game, to be sure, but now it's not going to happen. Mortgage rates may adjust downward a bit, but from a big picture standpoint, it will be business as usual. (That is, until the new government-owned entity starts writing down mortgage principal balances for defaulted borrowers and other fun unintended-consequence-inducing activities).
Business as usual, by the way, continues to be declining home prices.
Submitted by Rich Toscano on August 21, 2008 - 2:19pm
I think it's funny that the folks at the North County Times have created a "Bottom calling" tag in their new business blog.
The titular bottom-calling in their inaugural post for the new category was made by longtime DataQuick pundit John Karevoll. In addition to opining that sales volume had already hit bottom, Karevoll said:
Karevoll was pretty circumspect -- in addition to the disclaimers above, he noted that the market is likely to "drag along the bottom for a while.”
Nonetheless, this is a fairly bold call.
Submitted by Rich Toscano on August 15, 2008 - 12:07pm
San Diego County shed jobs again in July, according to the EDD's latest estimates. As in the prior month, the problem wasn't that the housing-related sectors accelerated their decline, but rather that the non-housing sectors were unable to make up for housing's weakness as they had in the past.
Submitted by Rich Toscano on August 12, 2008 - 11:48am
While the number of homes entering the final stage of foreclosure hit another all-time record in July, the number of homes entering foreclosure actually declined.
This decrease may not be very meaningful, however.
Submitted by Rich Toscano on July 30, 2008 - 8:59am
City Attorney Mike Aguirre has filed a lawsuit against Bank of America and its new subsidiary Countrywide. The central complaint of the suit appears to be that Countrywide engaged in fraudulent practices by putting people into high-risk mortgages and that Countrywide, as Aguirre put it in a press statement, "originated loans with little or no regard for the borrowers’ financial ability to afford the loans or to sustain homeownership." The suit is intended to prevent Countrywide (now Bank of America) from initiating foreclosure on any homeowner who has a high-risk mortgage and who actually occupies the home.
The lawsuit may be well-intentioned, but it's unlikely to help San Diego and there's a fairly good chance that it will make things worse.
It's also yet another bailout attempt.
Submitted by Rich Toscano on July 25, 2008 - 9:39pm
Earlier this year I wrote about Joseph Galascione, a San Diego real estate broker who does some serious digging into the local mortgage pool to try to ascertain the prevalence of future foreclosures. Below are some conclusions from Galascione's recently released study of mortgages due to reset in the third quarter of this year. The study, incidentally, is freely available at the website of Galascione's firm, ERA® Metro Realty.
To review the premise, a resetting loan is considered to be at "high risk for foreclosure" if the borrower made a down payment of less than 20 percent and the monthly payment is expected to increase by at least $500 upon reset.
Submitted by Rich Toscano on July 14, 2008 - 3:41pm
I will begin this blog entry with an allegorical play in three acts -- starring you as the protagonist!
Submitted by Rich Toscano on July 11, 2008 - 12:42pm
Fannie Mae and Freddie Mac, collectively known as the government-sponsored enterprises or GSEs, are huge government-backed yet privately owned companies whose main purpose is to buy mortgages. They are also, according to a recent Fed governor among others, insolvent -- that's "broke" to you and me.
This story is all over the news so I'm not going to rehash it -- here's a NY Times piece for those who want more. I just wanted to note that this is a huge crossroads for the housing and mortgage finance bailout efforts about which I've written several times on these pages.
A failure of the GSEs would be huge. They either own or guarantee over $5 trillion worth of mortgages, accounting for nearly half the mortgage debt in the country. And in the days of dwindling private mortgage issuance, the GSEs provide a huge chunk of the lending that takes place. Were they to stop buying mortgages, as the Times article puts it, it "could bring much of the American housing economy to a standstill." Many think that the government would step in and take over the companies before that was allowed to happen.
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