Sunday, May 29, 2005

Consider this your Memorial Day/May Bank Holiday post, one day early.

There are many bits of evidence one can muster to identify housing bubbles. The Sunday New York Times trotted out a lot of data on purchase-to-rental price ratios to further bolster the argument that in California, Florida and parts of the Northeast, it's bubblemania.

The logic of the indicator is, of course, that if purchase and rental prices both increase at roughly the same pace, there are some actual economic fundamentals driving the inflation: population growth, job growth, income growth, whatever. Of course, the ratio can increase somewhat if the quality of the purchased housing stock rises more than the quality of the rental housing stock, but there shouldn't be a complete disconnect between the two.

Read the entire article to get a flavor for the data, but check out this chart for something to chew on. What stands out most remarkably to me is that in 2000:I, before the US asset-based economy switched from stocks to housing, the purchase price to rental price ratio across all major US housing markets (data for 54 of them are reported) was virtually the same. The national average stood at 11.6, with San Jose at the high end (14.1) and Pittsburgh at the low end (10.5). Note that this gap was not wide: San Jose was 122% of the national average and Pittsburgh was 91%.

It's quite a different story five years later. In 2005:I, the ratio for the national average is up to 17.1, with the top and bottom at an amazing distance from one another. The peak is now San Francisco at a stunning 34.1 (San Jose is a close second at 34.0); the trough is Albuquerque at 11.8 -- still above the national average from five years ago, I might add. Thus the high is now 199% of average; the low, just 69%.

Not only is the gap tremendously larger with the peaks in the stratosphere. The opposite motions of purchased versus rental home properties in a few markets has to be a harbinger of danger. Over the past five years, rental prices have actually decreased in frothy San Jose, San Francisco and Oakland, and have barely budged in New York, all while purchase prices have vaulted skyward. No wonder the affordability index of homes in the Western US has plummeted over the last year.

Current purchase-price-to-median-family-income ratios show just how wild the markets are in the most bubbly California regions:
San Diego: 9.3
San Francisco Bay area: ~8.0
Los Angeles: 8.0
And nobody relies on adjustable rate mortgages like folks in the Golden State. Even now, 50-70% (depending on the market) of all California homes are purchased with ARMs. In the Northeast it's only around one-third.

In California, the state's real estate industry may have begun sheeding jobs. The non-seasonally adjusted peak was August 2004 when 200,500 Californians worked in the sector. At last count (April 2005) that figure stood at 199,500. Y-o-y the industry is still 1.6% larger, but that is thanks to the last big burst of job growth in California real estate in the first half of 2004. The sector has been stagnant to slowly shrinking since last summer, and no wonder with the number of houses for sale actually falling.

In 2004, 8.60% of all non-farm jobs in California were in either real estate or construction, up from 7.45% in 2000. Compare that to the national figures of 6.37% and 6.15% respectively. Not only is bubblicious California more reliant on the real estate sector than is the country as a whole, but it has become much more so over the last four years than has the country as a whole. Thus any popping bubble in California won't simply cut into general consumption; it will take jobs in its wake.

The writing is on the wall. Time to study up on the 1990 California real estate crash.

UPDATE: Brad DeLong kindly links to this post and one of his commentators directed me to an old but similar story at CNN/Money which has some more juicy data. In particular, this story offers comparisons for the monthly cost of owning vs. renting in several markets. In places like Atlanta and Dallas it is actually cheaper to own than to rent. But in the frothy West it can be 51% (Los Angeles) to 69% (Bay Area) more expensive to own. With all those interest-only loans and ARMs in the West, these figures can only grow larger.


At 10:18 PM, Blogger Boca Expert said...

In the year prior to Hurricane Wilma, which ripped through south Florida in October, 2005, 64 homes had new owners at the Boca Country Club. If you're interested in windwood property, a snapshot of the present may show the Housing Bubble has already popped. Read more ...

At 12:28 AM, Anonymous Anonymous said...

Hi, Thank you for having this info on the web. I enjoyed your post. If you may have any interest in
debt consolidation student Loan consolidation
then I know where you may get your solution. For your comfort, I have enclosed the link, so if needed you can visit the site. Thanks again for your lovely blog

At 1:20 AM, Blogger mamdigs said...

this is one of the funny things
free sex pictures
free sex pics
free sex videos
free sex movies
free sex clips
free sex vids
free sex photos
free sex mpegs
free sex mpgs
free sex galleries
free sex thumbnails
free sex pix
free sex toons
free porn pictures
free porn pics
free porn videos
free porn movies
free porn clips
free porn vids
free porn photos
free porn mpegs
free porn mpgs
free porn galleries
free porn thumbnails
free porn pix
free porn toons
free adult pictures
free adult pics
free adult videos
free adult movies
free adult clips
free adult vids
free adult photos
free adult mpegs
free adult mpgs
free adult galleries
free adult thumbnails
free adult pix
free adult toons
free teen sex pictures
free teen sex pics
free teen sex videos
free teen sex movies
free teen sex clips
free teen sex vids
free teen sex photos
free teen sex mpegs
free teen sex mpgs
free teen sex galleries
free teen sex thumbnails
free teen sex pix
free teen sex toons
free asain sex pictures
free asain sex pics
free asain sex videos
free asain sex movies
free asain sex clips
free asain sex vids
free asain sex photos
free asain sex mpegs
free asain sex mpgs
free asain sex galleries
free asain sex thumbnails
free asain sex pix
free asian sex pictures
free asian sex pics
free asian sex videos
free asian sex movies
free asian sex clips
free asian sex vids
free asian sex photos
free asian sex mpegs
free asian sex mpgs
free asian sex galleries
free asian sex thumbnails
free asian sex pix
free lesbian sex pictures
free lesbian sex pics
free lesbian sex videos
free lesbian sex movies
free lesbian sex clips
free lesbian sex vids
free lesbian sex photos
free lesbian sex mpegs
free lesbian sex mpgs
free lesbian sex galleries
free lesbian sex thumbnails
free lesbian sex pix
free mature sex pictures
free mature sex pics
free mature sex videos
free mature sex movies
free mature sex clips
free mature sex vids
free mature sex photos
free mature sex mpegs
free mature sex mpgs
free mature sex galleries
free mature sex thumbnails
free mature sex pix

At 6:14 AM, Anonymous Anonymous said...

Debt Help
Debt Consolidation can help you reduce your interest burden by charging an interest rate lower than the rate on your existing loans.

At 11:27 PM, Anonymous Anonymous said...

adult halloween costume ideas
adult halloween costumes
adult halloween party ideas
american apparel
ancient egyptian clothing
ancient greek clothing
baby clothing
baby halloween costumes
bathing suits
best halloween costume
bowling shirts
bridal dresses
bridesmaids dress
bridesmaid dress
camel toes and tight pants
cheap cub scout shirts
cheap halloween costumes
cheap wedding dresses
children s clothing
childrens clothing
childrens halloween costumes
clothing optional
clothing optional galleries
clothing stores
club wear
cocktail dress
colonial clothing
costumes for teens halloween
couples halloween costumes
custom t shirts
dance wear
dog apparel
dog clothing
dog halloween costumes
easy halloween costumes
easy to make halloween costumes
egyptian clothing
evening dresses
express clothing
express clothing store
flower girl dress
formal dresses
formal prom dresses
funny halloween costumes
funny shirts
funny t shirts
gap clothing
gaucho pants
girls bathing suits
girls dresses
good ideas for halloween costumes
goth clothing
gothic clothing
halloween costume
halloween costume ideas
halloween costumes
halloween ideas
halloween masks
halloween party food
halloween party ideas
hawaiian shirts
hip hop clothing
hollister clothing
home coming dresses
homemade adult halloween costume
homemade halloween costumes
indian clothing
infant halloween costumes
intimate apparel
kids clothing
kids halloween costumes
latex clothing
leather motorcycle pants
leather pants
maternity clothing
maternity wear
medieval clothing
mini dresses
mother of the bride dresses
naughty halloween costumes
old navy clothing
oscar dresses
party dresses
plastic pants
plus size clothes
plus size clothing
plus size clothing
plus size costumes
plus size dress apparel
plus size dress apparel
plus size dresses
plus size dresses
plus size halloween costumes
plus size halloween costumes
plus size lingerie
plus size models
plus size sexy lingerie
plus size swimwear
prom dresses
punk clothing
renaissance clothing
see through shirts
see thru clothing
sexy clothing
sexy dresses
sexy halloween costume
sexy halloween costumes
sheer clothing
short tight dresses
short tight dresses
sisterhood of the traveling pants
skin tight
skin tight jeans
skin tight pants
special occasion dresses
sponge bob square pants
spongebob square pants
swim suit models
swim suits
swim wear
t shirts
tee shirts
teen clothing
teen halloween costumes
textile motorcycle pants
the sisterhood of the traveling pants
tight clothes
tight clothing
tight clothing
tight dresses
tight jeans
tight panties
tight pants
tight shirt
tight shirts
tight shorts
tight skirt
tight skirts
tight sweater
toddler halloween costumes
unique halloween costume ideas
unique halloween costumes
urban clothing
vintage clothing
vintage dresses
wedding dresses
western clothing
western wear
wet shirts
wholesale clothing
wide selection of plus size clothing
women s clothing
womens clothing


Post a Comment

<< Home