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?

7 comments:

Anonymous said...

nah,we will just have 35,000 more millionaires move here in next year, making it all keep going. Cmon don't be a party pooper!! The fun is just beginning and the pain just starting . .

Anonymous said...

Yeah, didn't you know it's a new paradigm. Real estate will never go down, and all gains are permanent.(sarcasm now over) I lived in another area in the early 90's and watched the real estate market tank. That was an area with a much more diverse economy than we have here. The thing that disturbs me is that in a time when the stock market is reaching new highs and unemployment is supposedly at almost record lows, the housing market is beginning to tank. Historically housing downturns are preceded by a recession. My guess is that the average american consumer is tapped out. I hope things don't get too ugly here, I guess only time will tell.

Anonymous said...

http://www.economist.com/world/na/displaystory.cfm?story_id=8600041

Anonymous said...

Self employed, brought my relatively high SF wages with me. I think I am not the only one. The Bend service economy cannot pay skilled labor wages. Go to dice.com and note very few computer engineering jobs in Central Oregon.

Manly said...

The Bulletin is under the impression that outside investors / retailers / opportunity-seekers are scouring The Bulletin regularly looking for a "growth opportunity." Therefore it never tires of announcing that this is a very wealthy community starving for more upscale amenities, if only some sharp-eyed businesspeople would have the foresight to bring them here.

Good eye, Paul, in spotting this bullshit. It's ridiculous, of course. If you look at the information available on the Bureau of Economic Analysis website, it says that "Bend is one of 361 Metropolitan Statistical Areas (MSAs) in the nation. Its 2004 population of 134,618 ranked 273rd in the nation." It goes on to say that in 2004 "Bend had a total personal income (TPI) of $4,018,770. This TPI ranked 258th in the United States."

It says that "Total personal income includes net earnings by place of residence; dividends, interest, and rent; and personal current transfer receipts received by the residents of Bend."

So in 2004 Bend ranked 273rd in the country among MSAs by population and 258th in the country by total personal income, which includes the much-vaunted-by-The Bulletin interest, dividend and rent income.

Now take the Napa, CA MSA. It ranked 276th in the country among MSAs by population, just behind Bend, and 206th in the country by total personal income, way ahead of Bend. And that includes the actual town of Napa, which isn't that chi-chi at all, and a lot of agricultural areas that aren't very wealthy.

Of course, there are other parts of the country where the TPI ranking is way behind the population ranking. Bend is doing better than average by this comparison. But it's not a stellar performer compared to some other areas in terms of the wealth of its residents.

IHateToBurstYourBubble said...

opportunity-seekers are scouring The Bulletin regularly looking for a "growth opportunity." Therefore it never tires of announcing that this is a very wealthy community starving for more upscale amenities, if only some sharp-eyed businesspeople would have the foresight to bring them here.

Yeah, this just irks me! WHY does every media outlet seem fixated on bringing freakin Crate and Barrel here (Avg Wage: $10/hr), but Les Schwab had to crane the City's arm behind its back to get into Juniper Ridge?

We should be banging down the door of 5-10 anchor tenant employers, BEGGING them to relocate here, and giving them every tax break in the World to do so. THAT will be the only thing that stabilizes this leisure-based economy we have, and allows high-paying industry jobs to flourish & allows people to ACTUALLY PAY FOR THE HOMES HERE.

If we keep begging SoCal weenies to ski at Bachelor for Just One More Day (yup, the runs are already past capacity many days) for the sake of somehow begging for just a bit more of their conveyor belt incomes to be spent here, we will permanently be subject to the swings of this boom-bust economy.

And if you think this recent upswing is a New Paradigm, a Bend Renaissance, or some other new-age crap... just stick around. You'll be disabused of that notion in the coming years... once you've lost your job... and your house has dropped 30-40%.

Anonymous said...

Anchor tenants can't afford to move here as their, 30k a year, 50k a year , 75k a year and even 125k a year employess can't afford the housing here. The City screwed the pooch back in the late 90's when they began sellign out to the council that was run and still run by Real Estate developers/builders/mortgage service people/title companies. The jig is up and why would a company choose to live here, its cheaper and more offerings in any of a myriad of places throughout the west or USA for that matter. Like the pacman sound at the end of the game, so goes Bend as a Business town, call it what it is, a resort and leisure town, nothing more nothing less. And with the good times comes strong RE sales and with the bad comes reality and drab work conditions and that cycle is just coming back to Bend, that is unless you bring another 35k uber millionaires here who can choose to live anywhere they like. Why Bend? Oh yeah 325 days of sun a year. How bout that 2 week inversion we are living in folks . . .Foggy RE developer types got to eats too!!