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:
According to the Bureau of Labor Statistics, San Diego’s labor force (which would be expected to trend in the same direction as population size) has grown every year. So if you want to believe that population increased, you have to believe that one organization, the Census Bureau, got it wrong. But if you want to believe that population decreased, you have to believe that both the DOF and the BLS got it wrong.
Not being compelled to delve into the statistical techniques and data sources involved, I’m going with the majority on this one.
The reason I don’t feel the need to investigate further is that this really doesn’t matter in the grand scheme of things. I think the issue of whether population is rising or falling is of some academic interest, and I thought it would have been especially ironic to find that it was shrinking despite the permabulls’ "housing crisis" histrionics. But when it comes to forecasting the housing bubble endgame, small changes in population size simply aren’t much of a factor.
Home prices doubled in the space of a four-year period during which population growth was fairly modest, and during which growth in the housing supply actually exceeded that of population. It is completely obvious, permabull rationalization notwithstanding, that population growth had very little to do with skyrocketing home prices. Home prices rose because there was a speculative bubble. Prices came to reflect expectations of huge future appreciation. That’s it. That speculative euphoria — and not the ponderous growth rate of San Diego’s population — was the "fundamental" that drove prices high into the sky.
Now that buyers have stopped pricing non-stop 20% annual appreciation into their rent-vs-buy calculations, prices have begun to come down. And once the population has factored in the probability of multi-year depreciation, prices will come down even more. It is this gradual shift from optimism to pessimism that spells the end of all speculative bubbles. San Diego housing is no different, and whether the population grows a bit or shrinks a bit simply does not change the post-housing bubble equation all that much.