Unique Research Methods for Identifying Emerging Trends:
Price Bubble Disclosure in Official Statements Starting in Early 2005
Empire Economics extends its research beyond the conventional economic and real estate statistical models by conducting primary grass-roots surveys to identify newly emerging trends that, over time, have dramatic impacts on the real estate markets.
For example, Empire Economics became aware of the formation of a housing price bubble in early 2005 due to its on-going discussions with sales representatives at new residential projects and their mortgage lenders. By compiling and analyzing their observations, Empire Economics discovered that homeowners were only able to continue to purchase homes at significantly higher prices through the use of creative financing structures.
Accordingly, Empire Economics included specific discussions of the Price Bubble in Official Statements, starting in early 2005, and continuing thereafter; some documented examples are as follows:
- CFD No. 2004-1, County of Orange (Ladera Ranch), January 19, 2005
- CFD for the Beaumont Financing Authority, County of Riverside, January 27, 2005
- AD No. 2002-01, City of Carlsbad (Poinsettia Lane East), February 2, 2005
- CFD No. 2003-1, City of Palmdale (Anaverde Public Improvements), February 4, 2005
Southern California: Housing Price Bubble - 2004-2009
The following graph represents the primary economic concepts underlying Empire Economics’ housing price model: the green line represents prices that households could afford based upon their incomes and conventional financing techniques while the orange/red lines represents actual housing prices.
- Starting in early 2003, actual housing prices began to rise above the prices that households could afford based upon their incomes and conventional financing techniques. (orange line above green line)
- After peaking in early 2007, housing prices declined at a dramatic rate, back towards the prices that households can afford. (red line declining to green line)
- Housing prices attained an equilibrium during Summer-Fall 2009, and, since then, have fluctuated within a narrow range, without establishing a trend in either direction. (lines generally similar)
- Starting in early 2003, actual housing prices began to rise above the prices that households could afford based upon their incomes and conventional financing techniques. (orange line above green line)
- After peaking in early 2007, housing prices declined at a dramatic rate, back towards the prices that households can afford. (red line declining to green line)
- Housing prices attained an equilibrium during Summer-Fall 2009, and, since then, have fluctuated within a narrow range, without establishing a trend in either direction. (lines generally similar)
