A few years ago, homes were considered investments and many people bought them expecting to enjoy rapid appreciation. Those days are gone and home buyers are rediscovering another reason to buy a home – they need somewhere to live and buying can be more affordable than renting for most, especially given recent trends in rental prices. According to a recent article in the San Diego Union-Tribune, rents in San Diego County are rising as prospective renters are facing increased competition for apartments. The rental market has become more competitive because home buying has become a more difficult process. The need for a larger down payment and tighter credit standards has excluded many from the real estate market. Others have chosen to rent because they are concerned that home prices could...

In June 2006, Mark Kiesel, a managing director at Pacific Investment Management Co. (PIMCO), said that, “Housing is the next NASDAQ bubble. It’s not just houses that will be for sale. You’re going to see financial assets for sale over time, and ultimately corporate bonds.” He spoke just one month before home prices in the US peaked according to the S&P/Case-Shiller Index of Values in 20 cities. Kiesel believed in his forecast so strongly that he followed his own advice and sold his home in 2006. Now he’s a buyer and recently bought a home in Newport Beach, CA, near the headquarters of the firm he works for. PIMCO manages more than $1.75 trillion in assets. The company has some of the brightest minds in finance on their team. Bill Gross, the company’s co-founder, is wide...

Home prices follow the economic laws of supply and demand. As supply drops the prices of homes should go up, and as prices rise the number of new homes being built should move up. Given the big drop in home prices in recent years, to see a healthy market recovery, the number of new homes should grow slowly allowing prices to stabilize. The latest news on housing starts points towards a healthier housing market. In February, home builders across the nation broke ground on 698,000 new homes (based on an annual rate). This was in lime mostly with what economists surveyed by Bloomberg News expected. Economists are typically off with their estimates because forecasting the economy is a very difficult task. That means it is possible to gain valuable insights from how wrong their estimates are. W...

While changing diapers in the middle of the night, many parents dream of the day their day baby will grow up and have a home of their own. Few parents spent those sleepless nights dreaming of having to change the batteries in a video game remote control for their adult child. But it has become more and more common for adult children to live with their parents, and retirees are often caring for their children later in life. A growing percentage of adults are living with their parents all around the world. In Italy, they are often called “mammismo” or “mamma’s boys.” According to a recent article in The Fiscal Times, 37 percent of men in Italy who are 30 years old have never lived away from home. In Japan, these young adults seem to be viewed less favorably, often called “parasit...

Recently, the University of San Diego hosted its annual round table of local economists to discuss the year ahead. In general, the experts seem to believe that there will be slow but steady economic growth in our area, largely mirroring what economists expect to see at the national level. The best news may be from Point Loma Nazarene University economist Lynn Reaser who said that she believes San Diego would probably lead both the nation and the state of California in the recovery. She believes this because of our region’s concentration in innovative fields like high-tech and biotech. Unfortunately, she thinks that the county probably will not recover all of the jobs it lost during the recession until 2015. What economists are saying about the housing market in San Diego Recovery in the ...

Nationally, economic data is sending mixed signals. Unemployment is down, inflation is up and home prices are stable. Many of these same data points are available for individual cities. The trend in San Diego is the generally the same as national trends with no clear picture of growth emerging. At the national level: Unemployment fell to 8.6 percent in November. This was the first time the number was below 9 percent since March 2011, and a decline in unemployment is good news for the economy. In San Diego: The unemployment rate fell to 9.7 percent in October (the most recent data available). It peaked at 10.8 percent in March 2010 and has been above 10 percent in 15 of the 19 months since then. As with the national rate, any good news is welcome and there is at least a hope that this is ...

The S&P/Case-Shiller Home Price Index offers insight into the real estate market. It is one of the most comprehensive gauges of market activity and has a long history. Once a month, the index is released for the twenty individual cities and a national index is provided as well. The most recent data shows that home prices in both San Diego and the nation are down, but the rate at which they are losing value is slowing. This is a possible sign of a bottom, or a possible sign of further declines ahead. Just like with the stock market, no one knows how prices will change in the future. Values of homes in the San Diego area were down 0.8 percent in September compared to values in August. Looking back a year, home prices have fallen an average of 5.4 percent since September 2010. There is a...

With a drop from their peak of nearly 60 percent, Las Vegas home prices have suffered the largest decline of the 20 cities tracked individually in the Case-Shiller Home Price Index. By comparison, the 38 percent decline in San Diego area home prices seems almost bearable. In the chart below, San Diego is shown as the blue line, while Las Vegas is in red. We can frame the Vegas experience into some more concrete examples. Over the past five years, the median sale price has fallen from $314,000 to about $113, 000. The median represents the midpoint of the sales activity. One half of home sales would be made above the median, and one half below that price point. Median prices are usually considered to be a more accurate measure of sales activity in real estate because this calculation elimin...

Fifteen years ago, the typical reverse mortgage applicant was a 75 year old woman, perhaps recently widowed. Probably facing limited financial options, she would finally turn to her home equity to fund her retirement, limiting her financial concerns. But that quintessential customer may be getting replaced. According to Peter Bell, president of the National Reverse Mortgage Lenders Association, the typical reverse mortgage applicant is closer to 62 or 63 years old and about half are married couples. Why such a dramatic shift in the average ages of reverse mortgage borrowers? This shift in reverse mortgage demographics most likely indicates that senior citizens are taking retirement planning more seriously and want to leverage all available options. Retirees are faced with a number of f...

Home construction is still near record low levels. However, this economic data series contains information on all types of home construction. In the overall number, single family homes are included along with condos and apartments. Many economists think that the economy won’t be able to recover without a significant increase in construction. There are a large number of highly skilled workers in the construction business and they tend to be paid higher than average. They have also been among the hardest hit in the recession and their recovery is painfully slow. Analysts at Wells Fargo Economic Research recently published a report that shows the recovery in construction may be underway in San Diego. Permits represent the first step in the construction process and economists closely watch t...