Tuesday, August 15, 2006

Uhaul index-Job flow directionality

The iron is frostbitten

The “U-haul index” is supposedly an accurate indicator of job flow. What does this mean? Quite simply this, if you can rend a U-haul from city X to city Y and vice versa, which way is cheaper? The jobs are flowing in the *expensive* direction.

Now, one has to be careful in the interpretation of the results. For example, if I pick Las Vegas to Dallas we must understand that Southern California to Texas job flow will effect the results. Example: If a bunch of jobs are fleeing Los Angeles, its cheaper to have a U-haul driven by a paying customer at least part of the way and thus we might see the Dallas to Las Vegas portion of the trip subsidized by U-haul charging Los Angeles to Dallas customer an extra fee that includes the cost to ferry the U-haul from Las Vegas to Los Angeles.

But if we look at a costal start, we minimize the impact of this. However, the longer the drive we experience a greater chance of price interactions. Thus, we must look at multiple destinations and forget trips to Florida or New England from California.

So what are the U-haul costs from Redondo Beach to a variety of destinations? All prices are for the 26 foot truck on September 22nd. I picked a Saturday travel date as it will emphasize the job flow directionality via the prices (peak demand times pay the full directional penalty). Searches were performed on 8/15/2006 at just before 9pm pacific time.

90277 to Las Vegas: $638 Return: $226

90277 to Phoenix, Az: $670 Return: $131

90277 to Dallas Texas: $3,389 Return: $827

90277 to Austin Texas: $6,439 Return: $575 Yes, over 10X more expensive!

90277 to Spokane, WA: $4,845 Return:$199

What can we conclude?

1) In every instance, its cheaper to go to Redondo Beach than to leave it. This tells me that jobs are fleeing Los Angeles, big time.

2) U-hauls are pilling up in Austin Texas. Wow! Its not that far from Dallas, so the added $3k+ in costs can only be due to local dealers crying uncle. If the housing bubble dies late anywhere, I’ll bet on Austin.

3) Spokane Washington also has an odd premium. Since I did Austin early and Spokane late in my search… it wasn’t search order. So is someone hiring in Spokane? Hiring big?

4) Phoenix and Vegas have premiums, but not like other areas. Is this due to a geographical effect? (But Austin and Dallas were $3k+ apart… so that cannot explain everything…)

5) This says nothing about population growth! Nothing! Why? If someone is not affluent enough to be middle class, they don’t hire a U-haul, they just fill up their one car and go (e.g., students, illegal’s, etc.)

6) This index says nothing about the upper middle class or big corporate moves. However, I’ve participated in enough corporate moves to know that with every campus shutdown, there are those who treck out on their own. So while the U-haul index will miss the magnitude of a large corporate relocation, it won’t miss the entire effect.

Basically, Los Angles from a middle class housing and employment perspective… is going to get hammered. We’re not looking at a subtle downturn what so ever. Expect Southern California housing prices to start sliding in a manner that isn’t going to be pretty. When? Who knows. I’ve been predicting by the ides of October (10/15/2006) that “Joe sixpack” will know that housing is declining in value.

This is but one more indicator to show that the market is heading downhill for Southern California and doing so fast.

So what does this have to do with a blog about buying a house? Simple. One strikes when the iron is hot, not when its at a temperature that would make an eskimo proud. Wait before buying in Southern California. Your wait will probably extend into 2008 or even 2009, but don’t buy in 2006 and beware the falling knife 2007. For home buyers, the iron is frostbitten right now.

5 comments:

Wannabuy said...

This is the first article I've let people know about. So let's see if there are any comments...

Rob Dawg said...

I did the same thing a few months back:

http://exurbannation.blogspot.com/2006/05/real-time-migration-patterns.html

But your Spokane example is just too wild.

DannyHSDad said...

I can vouch for the numbers. We just moved from Austin,TX to 90247 first week of August. We paid $65 for a 5x8 trailer [and a truck would have been $250], one way rental. An on-line quote on 90247 to Austin is $694 for the same trailer [over 10x diff]!!!

sm_landlord said...

A young couple (schoolteacher/engineer in their late 20s) that I know moved from Culver City to Las Vegas this week. They did not even bother with UHaul. I think they're planning to buy furniture and household goods there. New jobs are in place, and I got an email with their new phone numbers today. They're renting for now, I warned them about buying anything in that market.

Another couple I know moved up here to the Marina from San Diego, also renting, and their unneeded stuff is still in a Stor-All in San Diego, bought new furniture here. Once again, no UHaul.

My observation is that younger folks are traveling light these days. Nontheless, the UHaul numbers that you quote are indicative of the trends, and the trends are appalling.

No such luck for me, if and when I bail out of here. I would need a 20' truck just for my library, never mind the furniture. I'm hoping to move only one more time, and stay there indefinitely. Hopefully to a place where the lunatics are not running the asylum as they are Santa Monica.

Wannabuy said...

sm_landlord,

I understand the need for a truck for a library. :)

Robert cote': I make no claims that the u-haul index isn't a well known way to track people. I'll have to check out your blog. :)

Neil