“Mailbag” gives insight into the comments I get from my readers — good, bad or in-between — and my thoughts about their feedback.
California housing is unaffordable. Yes? And inflation is bad. Yes?
Just don’t suggest that home prices will deflate even though depreciation creates affordability.
And adding options for house hunters — like new housing construction — well, that’s bad, too.
That’s the housing inflation logic found inside my inbox. Now I don’t everyone to agree with me. And I’ll admit my hunches aren’t always correct.
Still, I remain Pollyanna-ish about the problem-solving potential of spirited yet civil dialogue — even if a recent email started with “Dear moron” …
A reader writes: “The doom-and-gloom seems to be a continuing pattern of negativity about the housing market. Are you trying to negatively influence the housing market?”
My response: Assuming that the folks who highlight real estate risks have only sinister motivations is sadly part of the swings in homebuying psychology.
Look, falling prices are good news for house hunters who are part of my audience. And be warned: Discounting by owners and landlords may be required to jump-start this dead market.
Plus, for the record, I’ve been an Orange County homeowner since 1986. So a market crash would dent my net worth, too.
This reader continued: “Jordan Levine, the California Association of Realtors’ chief economist, says the “sky is not falling” and predicts a modest, single-digit drop in prices for 2023. So as a consumer reading one article of gloom-and-doom and the other of a negligible drop in prices, who is one to believe?”
My response: Anybody thinking about a big investment like a home should seek numerous opinions before buying.
As for a “modest single-digit drop,” we’ve already had that!
The Realtors’ California median sales price for existing single-family homes shows that August’s $839,500 was down 6.7% from the all-time high of $900,000 in May.
Only in 2008, in the heat of the last market crash, did we see a bigger May-to-August price drop in records dating to 1990.
Also, May-to-August declines are rare — only eight dips in the past 33 years. It’s prime buying season with an averaged a 2.6% price gain since 1990.
This summer’s purchasing pace also was the slowest since bubble-busting 2008, minus the pandemic era’s early lock-down days. No matter the math, it was a rough summer.
Another reader: “I had ignored what you wrote because of your political bias. Good journalists, like good academics, should acknowledge their political biases. I have six degrees in accounting and finance, 10 teaching credentials, a CPA, and 40 years of university teaching experience. I am biased, I am very conservative. You have reviewed our housing market quite well. Thank you for doing so.”
My response: I think that was a compliment. And, please remember I’m a columnist. I get paid to express my opinions.
Reader: “How is Federal Reserve Chairman Powell contributing to inflation? Powell did not pass any spending bills. Powell’s only tool is to raise interest rates. He was slow in doing this.”
My response: I can’t argue that excess government spending can be an inflation booster. But ponder some math.
Since the pandemic smacked the economy in the spring of 2020, the federal deficit has grown by roughly $7 trillion. But Powell’s Fed added fuel to the fire, too, outside of interest-rate swings.
The central bank grew its bond holding by $4.6 trillion since the coronavirus hit — including $1.3 trillion in mortgage securities. Powell and the Fed are clearly part of the economic overindulgence.
Reader: “Santa Barbara at 76% of income going towards the mortgage? It just seems mathematically impossible to live like that. Nuts.”
My response: That “affordability” ratio I covered shouldn’t be viewed as an actual benchmark of typical house-hunting finances. Rather, it’s a tool to compare purchasing pain.
So translating this math we see that seaside Santa Barbara’s housing is almost twice as difficult to afford as, say, inland Kern County where incomes run 39% of projected house payments.
Readers: “As soon as politics change, the housing market will change. By the way, so will many other markets.” And, “Housing prices: brain dead Joe is destroying our country.”
My response: Be careful what you wish for. There aren’t many easy solutions for our economic challenges.
Reader: “California does not have enough water or power to supply the people that already live here. Mr. Spreadsheet tells us we are supposed to welcome another 1,200 homes from the Irvine Co. with open arms.”
My response: My trusty spreadsheet isn’t needed to know there’s no shortage of shortages.
You have heard about the state’s housing shortfall? Shouldn’t the needs for house hunters be addressed, too?
Yes, residential water challenges are real. But what about agriculture’s chokehold on much of the state’s water supply? And technology has trimmed housing’s power needs and will do so in the coming decades.
Another reader on water supply: “Recently, the proposed water desalinization at Huntington Beach was shot down. Tertiary wastewater treatment has negative issues for a lot of people, too.”
My response: Like housing, water is a haves-vs.-haves-not discussion.
But there are too many tiny water districts with conflicting needs and finances. This surplus of self-interests makes innovation tricky.
Maybe California needs an independent water czar with unfettered authority to make the tough calls. Like a Fed chairman.
Or maybe not.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at email@example.com