Boy, that was a burly editorial in last Wednesday’s Eureka Reporter. Headlined “Professor’s depreciation theory not supported by North Coast history,” the editorial excoriated HSU Economics Professor Erick Eschker for daring to suggest that Humboldt County home prices may fall in the coming years.
Earlier in the week, the Reporter had published a story about one of Eschker’s recent publications, “It’s a National Housing Market.” In his paper, was published on the Internet as a supplement to his monthly Humboldt Economic Index, Eschker compares local housing rents to home prices, and suggests that the two were driven far out of balance during the recent housing boom. To Eschker, this suggests that there exists a bubble in the housing market, and that home prices might have to fall by up to 40 percent (in inflation-adjusted dollars) to bring them back into line with rental prices
Mention of falling home prices apparently sent a shock through the Humboldt County real estate world. On Wednesday, Larry O. Doss, president of the Humboldt Association of Realtors, took out full-page ads in both the Reporter and the Times-Standard arguing that such a precipitous drop in home value would be all but impossible; that Humboldt County real estate is as good an investment as it ever was.
And it was apparently those ads, or some other pressure from the real estate world, that stirred the Reporter editorial board to write up its own renunciation of the Eschker report. In it the Reporter denounced the professor’s work as “ridiculous,” “totally fictitious,” “full of hot water” [sic] and — most damning of all — “just a theory.”
“While we do not have any economic expertise as Eschker claims he has as the HSU Economics Department’s chairperson, we do not believe there will be an unprecedented drop in North Coast real estate values,” the Reporter wrote. The syntax was awkward, but the message was clear.
Reached at his office Tuesday, Eschker was fairly nonplussed at the stir his work had caused. He said that the rent-to-home price metric he employed to forecast a drop in prices was widely accepted throughout the field, and had been referenced by a San Francisco Federal Reserve banker earlier this week.
“This reaction is really a local version of what’s been playing out in big cities, or nationally, recently,” he said. “I suspect what’s happening is that people don’t like to hear the news about where things might be going. For me, I’m about looking at where we’ve been and making an educated guess about where things might be going. I’m not a salesperson.”
Eschker said that only one real estate professional had contacted him personally since the whole brouhaha erupted, and that professional was very supportive of his work. He said that there was no bad blood between himself and the Humboldt Association of Realtors, whose data he partly relies upon in formulating the Humboldt Economic Index. He had just received new HAR data earlier this week, he said — and it showed that after being adjusted for seasonal activity, last month was the worst month for Humboldt County home sales since 1997.
Is his work “just a theory”? Will home prices fall by exactly 40 percent? “I’ll tell you right now — I’m sure I’ll be wrong, and I’m sure no one else will get it precisely right either,” Eschker said Tuesday. But anyone who doubts his powers of prognostication might want to look in the Journal archives — Oct. 13, 2005, to be precise — for a story titled “The end of the boom?” In it, Eschker predicted that the then-hot Humboldt housing market was just about to peak. And peak it did.