Boulder, CO and Los Angeles housing prices vs starts
These 2 cities were requested. I also added color coded labels for the 2 data series. The giant fall in starts in 1989/1990 Los Angeles is curious. Was there some major legislation change then or something?
5 Comments:
There were the riots... but I think that was 1992. Perhaps the big erathquake in San Fran spooked people?
The big fall was the last housing crash in LA. The one everyone's forgotten.
I should mention - if you cut the graph at 1996, you'll see the first crash better - after a 40% run up in prices, there was a 15% drop - more if you count inflation.
At the time, it was a really big deal.
The graphs are lacking dates, btw. But I know by looking that the big falloff in LA was 1990. The reason is that LA was had a huge defense contracting business. The Berlin Wall came down in 1989. Reagan dramatically cut the defense budget and the So. Cal economy tanked in a big way with massive layoffs.
The comments about the peace dividend are correct. Los Angeles Suffered major job losses in the early 1990s causing major problems in the economy.
The picture today is very different. The Los Angeles economy is very strong and diverse based mainly on the growth of the ports of Los Angeles and Long Beach importing goods from the east.
Personally I think that the surrounding economics of Los Angeles are good. High gas prices are reducing the benefits from commuting into the city increasing the premium of metropolitan living. Demographics are favorable. And, if you look at the recent price increases with 92 or 93 as your base year prices look near their long term averages.
Of course there are problems with inventory and an inward demand shift due to tightening credit standards, but these problems will play out in suburban areas and affect supply constrained urban markets only as a secondary effect (because of the location of overbuilding and where the demand of sub prime credit is located).
At the end of the day... either 2 years of slow sales with builders taking the hit. Or the entire economy enters a recession wrapping up everything within a year.
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