Wednesday, January 31, 2007

Well HOLY SHIT and Pass The Meatloaf!

This and other blogs have been some of the prime lambasters of the almost ludicriously biased media in Bend. Some are worse (CBN) than others (The Bulletin). So I and others have pretty much grown used to the river of PR Puke Sandwiches plotzed out by RE ad-junkies which flow forth so prodigiously from our media outlets.

Well hold on to your nuts (if you're holding a bag of mixed nuts), because The Bulletin put out a piece: Moving statistics point to growth - Central Oregon continues to be hot spot for Californians, which states some items that are quite incredible... for The Bulletin. Here are some excerpts:

Local agents say that, among the 200 shipments that left Central Oregon last year, there also were a significant number of people who departed within a year or so of moving here, as wage levels locally push many to pursue higher-paying jobs in bigger cities.

"We've seen a lot of California-to-Bend-to-Arizona movements," said Harold Perry, owner of City Moving & Storage Co. Inc., the local Atlas agent. "That's pretty typical. Some people come here with illusions of grandeur, and they find they can't make as much money here as they can in bigger markets."

KCW's Rodby, who lived in San Francisco before moving to Eagle Crest four years ago, said the rising housing prices in Central Oregon may push more people away from the local market.

"My brother told me that people who move here don't move away," he added. "But it has actually been quite busy (during summer 2006) with people moving away."

"We really see (a cooling real estate market) as a blessing..."

What? Cooling RE market is a BLESSING? People come here and can't make as much money as they can in the city, AND LEAVE? People are leaving Bend for Arizona? People come here with Illusions of Grandeur that are not fulfilled? WHAT!

My Lord, what's next? No 600 days of sunshine a year? No 30% increases in housing every year? We don't need 17 Crate and Barrels? No 10 billion to 1 inbound vs outbound moves? I mean, next we're going to start hearing we're just ordinary people living in an... Oh God, it's too awful to think... Ordinary Place?

A RARE kudos to the Bulletin for putting out a piece that actually includes some of the unseemly statistical underbelly of good old Bend. We've got warts! All is NOT swimmin' pools and movie stars. They do have the obligatory Puppy Dogs and Kittens Everybody Happy title, but they actually have the kahunas to PRINT that Bend is not the end-all be-all to every human throughout the Universe.

This and the Bend Bubble blog predecessor, and it's many commenters have of course put forth these ideas ad nauseum. Everyone who actually has a brain that had survived a brush with critical analysis knows full well the effects of ever-rising RE could actually be NEGATIVE. People will leave. Inflation IS NOT GOOD. A "cooling" (ie falling) RE market WILL HAVE POSITIVE EFFECTS. If you have an IQ over 75, you know this already.

I'm just shocked when our media outlets actually respect Bendites intelligence enough to print it. Good job Bulletin. Now... KEEP IT UP.

Sunday, January 28, 2007

Deschutes County is a serfdom

There's an article about used luxury goods in todays Bulletin: Designer labels on the cheap

This article has an interesting little snippet about Deschutes County income:

On the surface, Central Oregon families don't have incomes much higher than the state average. The median family income in Deschutes County was $56,510 in 2005, according to the American Community Survey, an extension of the U.S. Census Bureau. In the state, the median family income was $52,698. In the Portland area, it was $60,345. Income data for Crook and Jefferson counties was not available.

However, incomes aren't don't indicate a population's wealth because they do not include assets like stock or real estate investments.

In 2004, almost 22 percent of the personal income in Deschutes County came from dividend, interest and rent versus 18.3 percent in Oregon and 15.8 percent in the United States, according to the U.S. Department of Commerce's Bureau of Economic Analysis. That means a larger portion of income in the local area is coming from sources other than wages, suggesting Deschutes County may have greater wealth.

Interesting that 40% more of our income comes from not working than the national average. I suppose many retirees bring a decent sized stock and bond portfolio, and that accounts for some. But I'll also bet that a larger than average share is accounted for by rental income. This is becoming less a town of workers, than indentured serfs.

This stat is also the reason I think we're going to suffer a protracted downturn in real estate: there's just not the income from real wages to support it. We make less money than the rest of the country. We dissipate wealth here, far more than the rest of the country, and we earn much less by working.

I've been banging the drum for getting real employers here forever. Not dissipating tax payer dollars on filling Bachelors ski lifts. You have to constantly beg for those dollars (ie marketing), whereas productive employers produce employees that produce dollars and spend them on real infrastructure, not leisure driven wealth dissipation.

And of course, those who are running the show are actively AGAINST changing the status quo. Permanently high & ever rising capital gains are all they care about. Unfortunately this raises the misery of the masses, relegating more and more from the middle class to perma-serfs, forever indentured slaves to a too-high mortgage or rental payment.

It's easy to spot a serfdom: The incomes are inordinately low compared to the capital assets. This article shows that we have 40% higher capital to income ratio than the rest of the country. And while medevil serfs were condemned to their circumstances for most if not their entire life, we are mobile. And as long as the prospects of earning is low compared the costs of existence, we can count on population flight, talk of "unique beauty and recreation" notwithstanding. People don't care about those things when they are working 16 hours a day, or can only look forward to a 2 bed slumlord apartment as the rewards for an 8 hour day.

We need to stop focusing on artificially manipulating the UGB and other idiocy for sustaining RE prices. Nothing will stop people from fleeing poor economic circumstances, and those circumstances are coming soon. We need NEW REAL EMPLOYERS, now! We don't need Bachelor to have 140% capacity, more waiter jobs, or another art gallery. We need our incomes to be at least in the vicinity of the national averages, and we are now nowhere close.

As long as Cent OR wages remain low, we will continue to suffer from high beta, and very expensive economic swings. We will benefit inordinately at the tail end of economic booms (as we are now), and conversely we will be dragged down farther and harder during downturns. Any shopkeeper can tell you they'd rather have steady sales all year, than feast and famine cyclicality.

We're at the tail end of a boom, probably the biggest boom this place has ever (or will ever?) seen. Things are about to get bad, worse than a lot of people think or will admit. And some will blame flippers, CA refugees, and the like. But those are symptoms, not the problem. The problem is income, and the solution is Real Living Wage Employers. Higher RE will actually make the problem worse. It produces serfs, and those serfs soon realize they are in an intenable economic position, and leave. Companies realize full well that this makes for a poor location, when employees can't affords lifes basic necessities. That lesson only seems to be learned at the bottom. We need to stabilize the Cent OR economic base with steady employment that stays throughout the year AND pays real living wages. Otherwise we are doomed to repeat the boom-and-bust cycle that have characterized this area forever. We've just seen the happy side of this cycle, and instead of doing what's required to moderate this cycle, we've done everything possible to make it worse.

Five years from now, we'll all be scratching our heads wondering, "What could we have done differently to avert this disaster?"; And rest assured it will be a disaster when our workforce has fled, incomes and RE values have fallen, probably by close to half. We've squandered this RE boom, and we're about to pay the price. Will we ever learn?

Tuesday, January 23, 2007

Bend Home Inventory UP

Went to Clive Holloways inventory counter, and noticed that since a Jan 5 low of 1,720 active listings on for the Bend area, this number has slowly but surely climbed by 50 listings. This is a fairly small percentage increase, but many have been calling for inventory numbers to increase in the coming months, due to several factors.

The first and probably most important, are the huge number of Off-MLS builder listings, which are being withheld until other homes in builder neighborhoods are sold. They probably know full well that if every house on the street had a For Sale sign in front of it, they will have a much harder time selling, and it would significantly dilute their bargaining power with a blatant glut of property. Look for these properties to simply "fill in" as properties are sold, holding inventory steady.

Second, a large number of listings are simply being allowed to expire. Some were pie-in-the-sky sellers on a fishing expedition to see if someone would pay an outrageous premium to comps. This happened quite often successfully for many sellers in The Glory Years, and hence became a popular sideline with homeowners. But many listings were pulled with the hopes of cashing in during the seasonally strong Spring selling season. The problem is, EVERYONE is thinking this.

Third, plain economics are starting to reassert themselves. Unemployment has unexpectedly climbed for 2 months in a row in Deschutes, Crook, and Jefferson counties. And most of the job losses are in high paying "business and professional" jobs, and these constitute homeowners, not renters. We can only guess that many of these losses are Realtors, and RE-related, as total commission dollars have been cut in half in recent months.

And finally, our "feeder markets" have dried up. The RE Bubble cracked nationwide in 2005, and equity locusts from California have less and less $ to shovel into the Cent OR market.

I read on that December usually marks the low point for months of inventory and it starts to climb until the late Summer. Inventory simply climbs more than demand. Demand IS strong in the Spring. But everyone knows that, and lists their house. It looks like people have started to anticipate that, and are listing now. Or maybe listings are just climbing normally, and fewer people are buying. Whatever it is, after several months of falling inventory, and many in the RE business sounding the All Clear, we're starting to see inventory numbers slowly move up again.

Friday, January 19, 2007

Central Oregon Unemployment Roars Ahead

Todays Bulletin has a piece, Unemployment up; rates remain at historic lows, that details another unexpected increase in the tri-county unemployment rate. Deschutes County has roared to a 4.4% unemployment rate, up from a record low 3.5% in October. Granted, these rates are far below historical norms for the area, but both November & December rates surprised on the upside. And the losses were in "business and professional" industries, not the far lower paying leisure & hospitality area.

It might be said that Deschutes County will have more evident swings, due to our heavily tourist oriented economy, but Crook & Jefferson counties has even higher increases, both moving up .5% to 5.8% and 5.5%, respectively.

I've said many times that we are a "high beta" economy, as the economy as a whole goes, so do we but at a far greater extreme. And unemployment moving up almost one full percentage point in 2 months seems to indicate that we are headed towards the unhappy side of Central Oregons economic sine wave. And the job losses are in the home owner sector, not the renters.

Broken Top Deep Throat Tells ALL!

If you wonder what is happening in the BT saga, read the comments for the post after this one. Someone at BT has pasted much of the communications on the BT blog, which was closed last week due to high dirty-laundry quotients. Oh there's lawsuits and other juicy goodies there. This is NOT a Everybody Happy situation, believe me.

Broken Top Deep Throat, We Thank You!

Monday, January 15, 2007

"How To Get Rich Losing Millions!"

The strange tale of Broken Tops money-loser golf courses' (previous) owner, Don Bauhofer, just seems to facinate the Bend Bulletin. A new article, Home design center slated for Redmond, tells that Bauhofer plans to roll-over the proceeds into a 38,000 sf design center in Redmond:

Despite a slowing housing market, demand for residential remodeling services appears strong in Central Oregon, according to a developer who's planning a new design center in Redmond.

That's because people who were not necessarily able to sell their homes spent money on remodeling them, said Ron Lusk, a Bend developer.

Lusk and Don Bauhoufer, a Bend-based developer, plan to build the Redmond Plaza, a 38,000-square-foot design center on the west side of U.S. Highway 97 north of Odem Medo Road.

Bauhofer sold the BT golf course sometime earlier this month, a venture he said was a chronic money-loser. This was after he got 140 $50,000 deposits from "equity holders" (BT course members), and subsequently then sold the gold course to Seattle investors, who will now put hotels, condos, retail, and parking all over this stately community.

If I was Lusk, I'd watch the various details of this agreement. Bauhofer seems to come out smelling like a rose at the expense of the other party. He also seems to be able to turn money-losing ventures into bonanzas for himself.

I guess we know where the gold course proceeds are going! Yet Another Real Estate Venture. Which just goes to show, even when a market is going into the crapper, people seem to be myopic about getting into other areas. Why this guy is going into another RE-based biz now, is beyond me. Of course, turning a sows ear into a silk purse, does seem to be this guys forte.

Saturday, January 13, 2007


If you want further info on the soap opera that is Broken Top, and the sale of the golf course, you've gotten till 3PM today!

They're closing their blog at that time and making it private, so the dirty laundry doesn't bring down home values anymore! What a mess. I smell a deal put together by lawyers, so that lawyers could unilaterally make more money for... LAWYERS! They, AS USUAL, are the only winners in this thing.

Friday, January 12, 2007

Tell us where the talking llama is and we'll burn your house to the ground!

The Emperors New Groove is one of Disney's best animated movies, and one of the funnier lines is by Evil Genius, Ezma:

"Tell us where the talking llama is and we'll burn your house to the ground!"

Don't you mean "or"?

This reminds me of the situation faced by Broken Top golf membership owners, as outlined in a Bulletin article, "
Broken Top sells; residents worry". Broken Top Partners, the previous owners of the Broken Top golf course, apparently laid down an ultimatum to members:

Either come up with $50,000 a piece to buy it, including their initial buy-in fees, or he would sell marked-down memberships to nonresidents and possibly open the course to limited public play."

Apparently BTP representative attended the Ezma Community College of Ruthless Negotiation, as he no sooner reeled in 140 suckers... er uh... members on this $50K blackmai... er, uh... extorsio... er, uh... business deal, then he said that would be "enough" that he wouldn't drag in the dregs of society, and open the course to public play. But there was a caveat:

"Bauhofer's group allowed the members up to 10 years to come up with 300 total buy-in members to gain full ownership."

Nice. $15,000,000 for a business that Bauhofer admits: "the course has been a money loser for years, Bauhofer said last summer." And he did it by essentially threatening to destroy the exclusivity of the club.

If this weren't enough, BTP sold the course sometime in the last 11 days (Wow. That was a fast 10 years!) to a Seattle outfit that is going to fill every square inch of vacant land with condos, a hotel, retail everywhere, and underground parking to accomodate it all, making it one of the largest developments in Cent OR. I wonder what will happen to those $50K deposits put forth by those 140 trusting souls trying to buy the course? I'll bet they're wishing they could have gotten 11 more buyers, so there would be a majority vote for BT homeowners. Here it is from a BT homeowner:

"I've spent my whole life trying to get to a position where I could enjoy a nice, quiet lifestyle with great people in a great community, with great golf," Stolz said. "And we keep getting close. But no cigar."

This Bauhofer guy would do Ezma proud!

Sunday, January 7, 2007

Office space vacancy tightens

I am against unsustainable runups in prices. Period. They always end, and they end badly. Unsustainably high housing prices drive OUT workers, and think what you want, but all economies need worker bees. Drive out worker bees, and your left with a Queen bee or two that wonders who's going to get things done. Additionally, Bend downtown lease prices have skyrocketed to the point that many Mom-and-Pop type stores are closing. Progress marches on, and I'm all for that, but it's changing Bend in a way that I personally don't really enjoy. I like quirky little shops, and restaurants, and even cranky store owners. It gives the place some personality. If I wanted sterile, impersonal shopping, I'd move to a big city.

But if there is a runup in prices that I can vaguely support, it's in "industrial" office space and it's demand-led. The Bulletin has a piece today, "Office space vacancy tightens" that details the price increases in commercial leases. David Evans & Assoc. is moving from a space they've occupied downtown (across from the library) for 20 years, to The Old Mill. The lease rate for their current space is being jacked up to $2.75/sf. Luckily they aren't abandoning this space on pure cost reasons: they actually need more room. This is a good thing. Professional services firms typically pay a living wage (which has become damn hard in Deschutes County in the past 5 years), unlike many of the restaurants, retail and knick-knack shops downtown.

My worry, is this: It's my own opinion that Bend is "high beta"; it goes up farther and faster than many other parts of the country on the upswing, and conversely gets ravaged when things go South economically.
(And I know: "Things are different this time". They always are. But actually this time they "might" be different. I'll admit that Bend is having a economic "renaissance" unlike any it's ever had... so things might actually might be different this time.)
And Bend housing has worked its high-beta magic on the way up, and I think that we'll get smacked on the way down, hard. Harder than most of the country. But a mitigating force will be "living wage" jobs, how many are there and will they survive. If they can survive the cost explosion that is pertebating throughout this area without a commensurate payroll cut, the housing bomb I see coming could actually be far less severe.

"Living Wage" jobs is what we need more of here. Not more retail clerk jobs, not more Mt Bachelor lift assistant jobs, not more housekeeping, low-level secretarial, waitress, or any other "leisure" type jobs that pay minimum wage. We need jobs that start at $50 - 60 - 70 thousand. Longtime residents will say that's just unrealistic. And I would agree... if median home prices were $170K. But they're around $400K. And in places where medians are $400K (Boston, Chicago, San Diego...) starting pay IS $75K. It has to be for people to survive. We've got San Diego prices, and Burns pay (well, close). Something's gotta give.

My question is this: Bend housing has had its run, and is now deflating. And it's going to be hard to say how far and how hard the fall will be. Is Bend commercial space Bends ultimate high-beta real estate? Is it about to bust more spectacularly than our housing bubble? Or is it in a demand-led boom that will survive despite poor economic conditions that may be brought on by a housing bust? David Evans office manager Jim Carnahan seem to thing the latter:

And then there's the pressure to expand - a need that Carnahan doesn't see subsiding, despite the slackening in the local housing market.

"Frankly, we haven't seen any real slowdown," Carnahan said. "It's more like we hear about a slowdown, but we're all busy."

What do you think?

Friday, January 5, 2007

Absolutely Shameless Pandering To Advertisers

Anyone whose ever read the predecesor to this blog knows full well that all the mass media outlets in Central Oregon are bought and paid for by real estate interests. Their largest source of advertising revenue is almost certainly real estate related industries of all stripes. But they also have an obligation to viewers/readers to maintain some sort of editorial independence. And for the most part, they succeed in schellacking a thin (very thin) veneer of newsworthiness over their RE stories.

Except for The Cascade Business News. Their pandering to real estate industry participants is utterly shameless. To wit, their featured story for the week: A Slowdown in Local Construction? Hardly.

This piece is just ridiculous. It takes the first paragraph and bashes anyone who predicted a slowdown in Cent OR RE:

For all those who forecasted a slowdown in construction in the high desert in 2006, we ask that you simply review the impressive list of projects completed this year throughout Central Oregon and then kindly toss your crystal ball.

Three major healthcare projects, including a state-of-the-art heart center, two new schools, a community auditorium and a public library, the largest building in the history of downtown Bend and even affordable senior housing were among the 2006 projects.

I am astounded that this publication is still in existence. That Pamela Hulce Andrews is still flogging the "Good Times In Real Estate Will Last Forever In Central Oregon" story isn't the least bit surprising, but the fact that they feel they need to denigrate anyone who has predicted otherwise illustrates in excruciatingly high contrast that stories are not written at CBN, but dictated by advertisers.

And the subject matter is an insult to reader intelligence. Anyone who can fog a mirror knows that The Bubble In Bend Real Estate Is Over. This isn't a stretch, prediction, RE bashing, or anything else of the kind. It's a simple, well-known fact, acknowledged by virtually everyone in the RE industry, and certainly by anyone trying to sell a house in the last 6 months.

But CBN has taken the tack that since 2006 was a good year for commercial construction, that right now, Jan 5 2007, ALL IS WELL. I wonder if CBN understands the real estate planning cycle. It's much like the human reproduction cycle... except longer, and probably less fun. A woman giving birth today, did not engage in the activity that led to that birth YESTERDAY. It was a long time ago. Similarly, buildings completed today, or even in Jan 2006, did not materialize out of midair from decisions made earlier today. No, these decisions were made months and years ago.

Pointing at the cranes downtown, and shrieking "SEE! ALL IS WELL! Your stupid predictions of a downturn are ridiculous!" is just insulting. Those cranes have been downtown longer than much of the population has lived here. Was it 2003? 2004? My Lord, this sort of "journalism" is utterly ridiculous.