Birthrate Collapse

One statistic I have been waiting to see was what the recession did to the birthrate. Some of the lowest birthrates we had in the United States were in the Great Depression. Surprisingly this happened before the invention of the birth control pill and abortions were not nearly as common.

So I have been expecting a huge drop.

Sure enough, birthrates have dropped to the lowest levels in the past century. There were about 200, 000 less babies in 2009 than in 2007.

Quite interestingly, from the perspective of the person being born, it really would be better to be born now than in 2007. The number of positions in colleges for people born in 2009 will be the same as for those born in 2009. The same is true of entry level employment opportunities. However there are 200, 000 less people competing for these same spots. Sure the recession means your parents will be poor while you are a baby, but on the twenty year scale it is unlikely things will be bad.

Another thing to note, is that lifetime fertility rates just dropped below 2.1. Meaning that the population is theoretically in decline unless high birth rates in the future make up for it. However when you look at the actual report, you see that the total number of deaths a year is about 2.5 million. While the total number of births is 4 million. So population is increasing by 1.5 million a year. This is because our population is still skewed towards younger people.

Following my expectations

The real estate market in Riverside County appears to really have come close to hitting bottom. I anticipate that bottom means inflation adjusted 2000 prices. To get inflation adjusted 2010 dollars based on 2000 dollars this calculator claims that the conversion factor is 1.28.

According to Zillow, In September 2000, Riverside home prices were averaging 153k, and in Corona they were 204k. So if they tracked inflation, I would predict current prices would be 196k, and 261k respectively.

The actual prices Zillow gives are 207k, and 299k, down from a peak of 421k and 527k. So really, I would feel safe buying a home in Riverside county. The bubble is over... In reality, I expect that they will overshoot a little because of a combination of low expectations, strict lending requirements, and student loans limiting the willingness of buyers to enter the market. This is still a pretty safe place to put your money though.

Orange county is another matter. It probably has another 150-200k to fall. In 2000 median home prices in Orange were 290k, and in Huntington beach they were 330k. So if they tracked inflation today they would be 371k, and 422k. The actual numbers are 500k and 595k.

Here comes the rest of the fall...

I have been predicting for years that home prices would hit at least 2000 inflation adjusted price levels. Median incomes have not increased since then, while spending on health care and education have dramatically increased leaving less money for housing. I just don't see how we can support prices above 2000 levels.

For a few months though I was really starting to wonder if I was right. The government had been propping up home prices through tax credits. Today I am feeling a whole lot more confident though. Home sales have fallen to numbers that have not been seen in a decade, while the amount of time it would take to sell all of the homes on the market is the longest it has been in my lifetime. Still, I better get to saving, within five years we will have a great opportunity to buy.

Japanese Stock Market

This graph is almost scary enough to make me give up on stocks as entirely speculative. It really is remarkable just how far stocks can drop after a bubble. Twenty years later, and they still are worth a third of what they were at the peak.

Health Care Costs

During July the price of medical care fell for the first time in 35 years! Hard to say if Obama had anything at all to do with that, but a combination of the weak economy and so many people focusing attention on the dramatic increase in the cost of health care seems to have done at least something.

This is a really big deal because the cost of medical insurance has the potential of eating the entire increase in income that workers have been getting:

In reality health care costs will almost certainly level off, but if present trends continued than it really would be an issue.