One of my favorite blogs is piggington.com. Rich Toscano presents Evidence of a California Housing Bubble, and Risks of a Serious Home Price Decline together in what he calls A Bubble Primer. Among his charts, the most shocking is the rate of Real Estate/Construction related jobs versus non-Real Estate/Construction related jobs. Between that and the liquidity generated by home equity withdrawals in the form of HELOCs or cash out refinancing, it is clear that much of the economy is dependent on the real estate boom.
Recently, Rich was invited to appear on Take 5, a San Diego talk show on the WB. He appeared opposite Lee Sterling, a veteran realtor and real estate attorney. Lee is more comfortable in front of the camera, but stumbles several times as he tries to rebut the data that Rich presents. For a media novice, I would say Rich did a rather good job. It's broken up into two clips. See below...
One of the things that Rich does that I really like is to define the terms that they are discussing. Lee talks about the low ratio of speculators in the San Diego market. Rich broadens the definition of speculators as home buyers who stretch into exotic loans with resets a few years out. Just like non-owner occupied real estate investors, these people are buying properties relying on the belief that prices will rise. In both cases, declining prices will doom the buyer.
Rich also challenges Lee's definition of the long term. Lee points out that Rich uses a six year time frame on his blog, but the average California house buyer owns the property for seven years. Not a big difference. Even still Rich points out that a buyer at the peak of the last California housing boom would have taken eight years to recoup the equity lost during the downturn.
The two video clips take about 15 minutes to watch. Definitely worth a look.
Thanks for finding this, interesting discussion.
Posted by: Bronco | August 25, 2006 at 08:11 AM