~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…

The Job Loss Myth

Submitted by Rich Toscano on January 26, 2007 - 2:37pm

It's commonly maintained that home price declines could only take place in the face of widespread job loss. There is something to this idea, but it is not precisely correct. In truth, it is forced sellers who put downward pressure on home prices.

These are the owners who need to accept whatever price they can get for their homes. Absent forced sellers, home prices will likely hang tough because sellers won't have any good reason to accept lower bids. But when the number of people who have to sell grows too much in comparison to the number of willing buyers, prices start heading down.

It's certainly true that unemployment can increase the ranks of people who need to sell their homes, which in turn leads to price declines. Where the conventional wisdom goes wrong is assuming that unemployment is the only possible cause of forced selling.

read more at voiceofsandiego.org

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Angst in the New Era

Submitted by Rich Toscano on January 24, 2007 - 8:59pm

Anyone wondering who funds all the high-risk home loans about which I write incessantly may find a recent Financial Times piece enlightening. The FT article tells us what's on the minds of correspondents from the enigmatic world of structured finance, that seemingingly endless supplier of funding to (among others) ever more questionable home buyers.

read more at voiceofsandiego.org

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January Mortgage Rate Update

Submitted by Rich Toscano on January 19, 2007 - 5:30pm

Last month, I wrote about the decline in mortgage rates during the latter half of 2006, noting that real estate might have fared worse if not for the tailwind provided by falling rates.

read more at voiceofsandiego.org

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Next Year in Real Estate

Submitted by Rich Toscano on January 16, 2007 - 5:54pm

The new year has opened up with signs of life in the housing market and a chorus of pundits proclaiming that the worst is behind us. Could it be true? Will the residential real estate market fare better in 2007 than it did in 2006?

As I survey the scene, I am left with the distinct impression that it will not. Every indicator of housing market health seems to be in worse shape now that it was a year ago.

read more at voiceofsandiego.org

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December Housing Market Data

Submitted by Rich Toscano on January 9, 2007 - 10:17am


It was another down month as measured by the size-adjusted median price:

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November Jobs

Submitted by Rich Toscano on January 5, 2007 - 4:13pm

November registered another month of positive job growth, but troubles in the construction and real estate sectors are starting to take their toll.

read more at voiceofsandiego.org

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Too Many Condos

Submitted by Rich Toscano on January 3, 2007 - 10:57am

While we were out, the San Diego Daily Transcript ran a story (subscription required) pointing out that over 3,000 condo units are currently under construction downtown. Additionally, another 7,000 downtown units are either approved or proposed.

How many of those latter 7,000 will actually be built is open to question. But friends in the industry tell me that once a building is under construction, the odds are high that it will be finished, which implies that most of those 3,000 units in progress actually will be built to completion.

read more at voiceofsandiego.org

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Fight the Power

Submitted by Rich Toscano on January 2, 2007 - 10:40am

It's time to rise up against your oppressors and make your voice heard!

Ok, on second thought, that sounds pretty hard.

Instead, why don't you make your voice heard by casting a vote in the first annual Real Estate Blogging Awards, for which the Econo-Almanac has been nominated in the "Brain Power" category. (Thanks to user bub for posting this in the forums.)

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Lereah: Housing Has Bottomed

Submitted by Rich Toscano on December 28, 2006 - 10:03am

Well, he finally came out and said it outright:

NAR Chief Economist David Lereah said the data held "mixed news" but it broadly signaled a stronger housing sector with inventories and sales stabilizing.

"The housing contraction has bottomed," he said.

So there you have it -- with an apparent lack of any doubt or question, Lereah called the bottom on December 28, 2006. Remember this one for the history books, my friends.

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Wonders of the Industrial Age

Submitted by Rich Toscano on December 28, 2006 - 10:01am

I have installed a filter to automatically encode URLs into clickable links, so commenters will no longer have to do so manually. I am tremendously relieved to report that the filter also truncates those overly long, layout-destroying URLs we (at least those of us who use Firefox) have all come to know so well. So something like this:

...will now look like this:

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The Dumb Money

Submitted by Rich Toscano on December 20, 2006 - 8:45pm

One argument I hear a lot is that foreign demand for local real estate has grown substantially in recent years, and that such foreign demand will be supportive of prices in the future.

Unfortunately, this argument puts the cart squarely in front of the horse. Investors from other countries are well known to be the very last participants to arrive at the scene of a financial bubble. They are the last to hear about all the riches to be made, the last to buy in, and the last to realize that the party is over.

read more at voiceofsandiego.org

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Subprime Stabilizes

Submitted by Rich Toscano on December 19, 2006 - 9:44am

Let's check back in with the denizens of EZ-Ville for a look at how things are going after the early-December shakeout.

For starters, I wish to address one poster's comment to assert that I feel completely justified in having called the decline in the ABX "disorderly." The falling-off-a-cliff section of the graph represents a 25% increase in the cost of insuring subprime mortgage backed securities (from 316 basis points to 395 basis points, per this Dow Jones piece among others) in precisely one week. That doesn't seem very orderly to me.

That said, subprime CDS index price managed to stabilize after the decline and have since begun to ratchet back upwards, as the red line indicates:

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Mortgage Rate Update

Submitted by Rich Toscano on December 17, 2006 - 4:16pm

The causes of the housing market's well-documented ills, whatever those causes may be, do not appear to include interest rates.

The average rate on a 30-year fixed mortgage has declined steadily since July and now rests near levels not seen since 2005. The average 1-year adjustable-rate mortgage (ARM) rate has likewise fallen, but still rests above its early 2006 levels.

read more at voiceofsandiego.org

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"Better Buy Now"

Submitted by Rich Toscano on December 16, 2006 - 12:37pm

I don't have a lot to add to this statement by Chuck Smiar, president of the North County Association of Realtors, as quoted in the North County Times:

"I think it's sort of a false drop, if there is such a thing in real estate," Smiar said, in referring to the single-family home sector. "If anyone is going to buy, they better buy now, because things are going to turn around. We're going to start seeing a slow increase in prices."

I just wanted to get it on record for future reference.

This article originally appeared at voiceofsandiego.org.

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The Case-Shiller Index

Submitted by Rich Toscano on December 14, 2006 - 9:06am

Last week's NY Times piece on home price metrics (login required) prompted some forum discussion on the accuracy of the Case-Shiller home price indices, which I use for all my long-term price charts. It ends up that I looked into their methodology a while back and have been meaning to write about it -- so now seems like as good a time as any!

To start with, let me quote from an old voiceofsandiego.org piece as a means of reviewing the problems with the median price:

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