Glenn Hauman: A View From Above

Here's the first note from Paul Krugman, who found Calculated Risk's comparison o "the rise in the price-rent ratio during the Los Angeles housing bubble of the late 1980s with the rise in the United States as a whole as of mid-2005; they were about the same. By the time the US bubble burst, in late 2006, the national bubble of the 2000s had inflated further than the LA bubble of the 1980s ever did.

So what happened after the LA bubble burst? Angry Bear did the calculations. House prices fell for abut 5 years, for a cumulative 20 percent decline. Since non-housing prices continued to rise, this was a 30 percent fall in real terms."



Now, what was happening in LA around that time? A lot of people point to the collapse of the defense spending boom with the end of the Cold War, but that affected defense contractors all over California. But specific to LA? The Writers Strike of 1988, which crippled production of film and TV studios for months, even after the strike ended due to the lag time in producing scripts. And remember that movie and TV production is a huge economic engine for the city, the US film industry as a whole made about $44 billion in 2004.

Now it's two decades later. The LA Housing market is even more overpriced, combined this time with the sub-prime mortgage mess. And the current strike looks to cripple the industry for months again. So if I'm reading this right, the studios are going to help cause California to implode.

I'm hoping somebody can tell me I'm wrong, but this doesn't look good. Mark? Paul? Nikki? Anybody?

Watch out below. And Merry Christmas.