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Monday, October 09, 2006

Using The Census ACS

I noticed a question over at NJ Real Estate Report, which is a fine housing blog. There is much less screaming and ranting than the norm for housing blogs. In any case, one poster wanted to find stratified incomes by a particular county. Well, you can, and you can even find data by employment sector, etc, which is extremely helpful if you are trying to figure out where you are (for example, when you read about the Boston condo auction, a sneaking suspicion that the lower-end condos sold at a price approaching affordability develops). The Census Bureau keeps track of us all, and the 2005 ACS contains this data.

Go to the main Factfinder page. Enter the town and state or county and state and click "Go".

You will reach a page which has various categories of overall information, such as population ages, education, economics and housing characteristics. In each of these categories, there is a "Show More" button. Use that to obtain the detailed information you want. This is where it gets good.

In Orange County, CA, the total population is close to 3 miillion, average household size is 3, and average family size is 3.6. The Hispanic population is close to 1 million, and the foreign born population is closing in on 900,000. Median household income is @ 66,000; median family income is @ 74,000, per capita income is @ $31,000. About half the population is in the labor force, and @ 35% of the population has a bachelor's degree or higher. 1.187 million are non-English speakers at home. Flag 1 - at least 60% of these households are dependent on a much smaller subsegment of jobs. These include backroom, domestic service, landscaping & construction.

Median housing expense with a mortgage is $2,178 X 12 = $26,138 / 74396 = .35 median mortgageholder housing expense ratio. Of course that doesn't include other debt.... Figure .38 to .43 median DTI.

Total housing units are 1.017 million, of which 4.7% are vacant, 62% are "owner-occupied", and 38% are rentals. Click on "Show More" for housing characteristics:
Moved in 2000 or later; 499,094;+/-7,754
Moved in 1995 to 1999; 178,698; +/-6,820
Moved in 1990 to 1994; 87,543; +/-5,120
Moved in 1980 to 1989; 99,070; +/-4,922
Moved in 1970 to 1979; 65,869;+/-3,410
Moved in 1969 or earlier; 39,642; +/-2,598
More than half of all occupied housing units have been occupied for 5 years or less, which is not that odd.
Owner-occupied units with a mortgage are 470,919, and without a mortgage are 130,119. Owner costs (includes ins. taxes & mortgage) of mortgaged units as a percentage of household income:
20.0 to 24.9 percent; 68,113; +/-3,527
25.0 to 29.9 percent; 61,178; +/-4,437
30.0 to 34.9 percent; 50,001; +/-3,935
35.0 percent or more; 168,882; +/-6,456 (@ 36% of all mortgaged households!)
Traditionally, paying more than 30% of your gross income for housing costs has been considered risky. It's a sure bet that at least 50 thousand of those 35% or more households are over 40%, and at a substantial risk of losing their homes. But all is not well in the non-mortgaged households totalling 130,119 either:
10.0 to 14.9 percent; 20,479; +/-1,822
15.0 to 19.9 percent; 11,451; +/-1,518
20.0 to 24.9 percent; 7,954; +/-1,499
25.0 to 29.9 percent; 5,012; +/-1,092
30.0 to 34.9 percent; 3,077; +/-799
35.0 percent or more; 15,168; +/-2,158
There are 23,000 low income owner-occupied households carrying no mortgages which are in extreme danger of being forced out of their home. That's approximately 190,000 owner households with extremely risky levels of housing costs.
About 369,000 of all housing units were occupied by renters, and of those:
30.0 to 34.9 percent; 37,229; +/-3,233
35.0 percent or more; 157,129; +/-6,996
That's @194,000 renters in deep on housing costs, or about 52% of all renters.

These are people who would be exceedingly unlikely to be able to buy even if median house prices dropped 25%. Likely to buy would be people paying over 1,400 in rent monthly and requiring no more than 21% of their income to do it. This looks to be somewhere around 85,000 households.

Looking at employment by sector: Total persons in workforce are about 1.5 million, of which 5.4% are currently officially unemployed. Total employed are:
Private wage and salary workers; 1,139,236; +/-13,622
Government workers; 151,677; +/-7,660
Self-employed workers in own not incorporated business; 125,589;+/-5,427
Total of above - 1,416,502 (There's another category of people working but not being paid)
Marginal high income employment: Construction totals @110,000, and RE, insurance, rental & leasing are @ 156,000.
Marginal lower average income employment: Retail is @146,000, and arts, rec, ent, food services & accommodations are @119,000.

If 10% of construction jobs are lost in a downturn that's 11,000 good paying jobs. At least 10% of the RE/insurance sector will be lost, that's 15,000 decent paying jobs. Figure 5% of retail, and that's 7,000 low-paying jobs, and 10% of rec, etc, for 12,000 mixed. Total minimal job losses are 45,000 jobs, which would reduce the civilian employed population from 1,416,502 to 1,371,502. Unemployed workers were cited as 81,559, which would raise the unemployed workers category to 126,600 and the unemployment rate from 5.4% to 8.4%.

There's another derived effect, which is that the average income of the construction sector will drop at least 10-15%. This is a minimal estimate, because there are other sectors which will slide down with construction, such as relatively good-paying wholesale jobs. Think of it this way - the collapse of the granite countertop trade alone puts a bunch of supply/installation workers outdoors. Because it has been a boom time for several years for construction/RE workers, their participation as new home owners is pretty high. AC, electricians, plumbers, landscapers.... All take a hit, and while many don't lose their jobs many such businesses see a 20-25% drop in income.

New construction permits fell 56% in OC compared to a year ago. It will take about 4-6 months for this to work its way through the pipeline, but it most certainly will. When it does, you will see at least 60,000 households dropping down an income tier, and those drops will be concentrated in the tiers highlighted below:
Total households; 969,916; +/-4,402
Less than $10,000; 45,016; +/-3,233
$10,000 to $14,999; 34,180; +/-3,012
$15,000 to $24,999; 71,467; +/-4,720
$25,000 to $34,999; 83,803; +/-4,948
$35,000 to $49,999; 124,419; +/-6,518
$50,000 to $74,999; 185,235; +/-6,895
$75,000 to $99,999; 134,953; +/-6,313
$100,000 to $149,999; 159,996; +/-6,086
$150,000 to $199,999; 63,118; +/-4,025
$200,000 or more; 67,729; +/-3,930
Median household income (dollars); 65,953; +/-1,107
Mean household income (dollars); 88,648; +/-1,552
So that 85,000 potential buyers at a price drop of 25% looks to be maybe 25,000? Not even enough to suck up the foreclosures. There's still going to be money to be made in much lower than median units in relatively stable areas though, so low-cost apartment conversions can still make a profit. However these are slap a coat of paint on, cheapest light fixtures you can find, and recarpet; there is relatively little profit for construction workers in these, and very little for the home-supply businesses.

I've lived in OC since 1982.

The last housing bubble we had was in the early Nineties. When it popped circa 1995, prices dropped over 60% in two years.

Since then, Zillow graphs have shown steady increase (up to about double their 1997 lows) until two years ago (2003-2004) when they more than doubled until the peak earlier this year. Just from eyeballing those graphs, we're about 100% overpriced and primed for a drop of at least 50%.

I'm also seeing a lot of desperation/denial among homeowners and "investors" (flippers) -- like the guy in the Vons parking lot a couple months ago, yelling into his cellphone that "Everything under $1 million has got to stay stable -- IT HAS TO! IT HAS TO! IT HAS TO!". And the consensus at work that "It CAN'T drop more than 5%, max."

The Headless Unicorn Guy
Well, when I look at the numbers I can't see that it CAN stay stable.

As you point out, once it even flattens out it has to go down. There's no inherent stability in this set of prices. There's an inherent instability. It either goes up or goes down.

When everyone thinks it can't drop, it often means everyone is too terrified to contemplate a drop. Because they really all know.
PS: If you look at those numbers, the price pressures on the stuff above about 1.3 million appear much less than the stuff at median.
Hey, Headless, the preliminary numbers for the Kara homebuilding bankruptcy are $297 million owed to various supply/building companies, and $350 million in assets according to Bloomberg. Of course, they have taken a lot of deposits from would-be homebuyers, so I think those numbers are likely to be off. Also, apparently a bunch of contractors and employees haven't been paid. And the value of those assets (lands and homes) is declining rapidly. Even lumber in a warehouse has lost at least 15% of its value in the last four months.

I know for a fact that Kara owes at least $40 million to several separate banks. This is the first battleship to go down in what will be a long war.

It's gonna be epic. Supposedly the half-finished developments are already lying fallow and being stripped in some areas around Phoenix.

Those figures I did for OC, which describe the absolute minimal effects of what has already been reported, equate to a -60,000 housing unit demand in the next two years there. Of course, a bad recession would make it worse.

And Greenspan is blithering on about high future demand? I get the feeling that it's not only your acquaintances suffering from the "It can't happen" syndrome. It can. It really already has. It's just that the economic nervous system hasn't yet transmitted the signal.
Supposedly the half-finished developments are already lying fallow and being stripped in some areas around Phoenix.

Here in Anaheim, there's almost half a square mile just west of Anaheim Stadium that's been completely razed -- it's like the Norks tested their nuke there, except it only affected what was west of State College Blvd.

The new wastelands are now enclosed by construction fences announcing Luxury Condos! CONDOS! CONDOS! The current extent of construction is big holes in the ground.

I wonder how long the wasteland and those holes will be staying there after the 50-60% price drops.

The Headless Unicorn Guy

P.S. Years ago, I found I was about the only one at my shop who watched Babylon-5. Everybody else kept Witnessing! to me about Seinfeld.
A Tenant’s Guide to Renting

The first challenge every tenant faces is finding an apartment for rent that suits their individual needs. For today’s tenant, the most effective apartment search can be done using an online apartment finder. Tenants should decide what they require in an apartment or house rental before beginning their search. For example: the number of bedrooms, location or distance from public transportation and how much the tenant can afford to pay in rent, furnished or unfurnished apartment, etc. By making these important decisions first, tenants can avoid renting an apartment or house only to regret it later. Many tenants today are taking advantage of the convenience of the internet to locate apartments for rent as opposed to the traditional print publications.

Once a possible apartment or home has been found, it is the tenant's duty to thoroughly inspect the premises making a commitment in the form of a security deposit. A tenant should not rely on the landlord or the landlord's agent to tell the tenant if anything is wrong with the property. The tenant must inspect the property carefully and ask questions about it.
Inspecting the condition and functionality of the following areas/features of the apartment before committing yourself as a tenant is highly recommended.
1. Kitchen appliances in working order.
2. Water pressure strong, plumbing without leaks.
3. Electrical outlets and wiring working.
4. Walls and ceiling painted or papered without cracks
5. Ventilation or air conditioning accessible.
6. Floors, railings and bathrooms in good repair.
7. Fire escape easy to use.
8. Stairs safe and well-lighted.
9. No rodents or insects.
10. Heating system in working order.
11. If furnished, check and write down condition of all furniture.
12. Windows and doors operable and weather-tight; screens provided.
The tenant should also check the security of the building to find out if there is a dead-bolt lock, security chain, or through-the-door viewer.
BEWARE OF EXISTING DAMAGES: In order to avoid being blamed for damages that already exist in the rental unit, the cautious tenant should take every step for self-protection. Before moving in (or as soon as possible thereafter), the tenant should make a list of all existing damages and repairs that need to be made. A copy of the list should he presented to the landlord and attached to the lease This way the landlord cannot blame the tenant for damages caused by others and the tenant will know what the landlord intends to repair. If the tenant keeps good records the landlord will not be able to keep the tenant’s security deposit for damages that were actually caused by others. Taking pictures before moving in is also strongly recommended.

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