Bend - Chronolgy of a Super Bubble

I think it's been pretty well established that whatever you want to call the 2004-2006 period whether bubble or not, ALL agree that It Is Over. A few comments have noted that prices have not fallen much if at all in Bend. But you have to look at the market with an eye toward volume. Volume is what puts hamburger vs steak on the RE industry dinner plate around here. Volume is the difference between Toyota and Ferrari. The difference between Saks and Target. The Vast Middle is what gets 'er done in this country. And from what we've seen, the business of volume in Bend RE is over. We were Wal-Mart with a view a few years back, now we're Nordstrom packed wall-to-wall with the hope that our precious view won't be blotted out by the next layer of bigger & better Execu-shacks.

We get the CNN-Money annual survey of the most overvalued & undervalued housing markets, and find Bend is #1, with an "adjusted" overvaluation (adjusted given the CNN-Money median is too low) of almost 100%. If you back out "fair value", you see that CNN-Money infers that homes in Bend should have medians closer to $180,000.

How did we get here? It was several things: Vast numbers of immi-Cali-grants bringing tremendous piles of equity here. The national bubble-nomics of easy money. Tremendous marketing efforts. A speculative mindset that seems to have infested and then consumed what is our largest industry.

I began keeping a little diary in mid 1999 regarding what I thought was an insane appreciation and valuation level in the stock markets. So I thought I would look back over recent history, and chronicle some of what has happened to bring us to this point. But I thought I would do it a little different, and track some individual people, events and themes.

NORMA DUBOIS:
Less Is More - Nov 15, 2005

"On the other hand, buying a smaller house may be the only way for some to afford space in the red-hot neighborhoods near Bend's downtown and the river, Coldwell Banker Morris Real Estate broker Norma Dubois noted."

Sky's The Limit? - Jan 11, 2006

"I think we are certainly going to continue to see growth, and we'll continue to sell a lot of inventory," Coldwell Banker Morris Real Estate broker Norma DuBois said Tuesday. "The units sold will be at least what we did in '05 and probably greater, but I don't think the average price will increase like it did last year. I'm guessing we're going to go down to the 10 (percent) to 11 percent range."

"On Bend's northwest side, 236 empty lots of one acre or less sold for a median price of $245,000, DuBois said, up 54 percent."

Buyers compete for Bend condos - April 26, 2006

"Realtors opened seven luxury condos on the fifth floor of the new Franklin Crossing building at Bond Street and Franklin Avenue for "reservations" last week.

Six of the seven drew offers at the asking price before the reservation period ended last Friday, Coldwell Banker Morris Real Estate broker Norma DuBois said. Five drew multiple bids, which prompted a follow-up bidding period. The competition may bump the prices up even further."

"The reservation period was offered only to a "priority list" of potential clients who had expressed interest in the project, DuBois said.

The bids came from a mix of buyers, DuBois said, including some local people who intend to live there full time, along with others who intend to use them only as second homes, and still others who intend to rent them out."

"The Franklin Crossing building, in particular, with its ground- and second-floor retail, third- and fourth-floor offices and upstairs condos "has a penthouse feel," DuBois said. "There is a real feeling of uniqueness to it."

Apartments to Condos - July 23, 2006

"The median price of a single-family home in Bend's least-expensive quarter, the northeast, stood at $285,000 at the end of the first quarter this year, according to Bend Realtor Norma DuBois' analysis. The median in the city's priciest area, the northwest quarter, topped $477,000."

More Homes on Market in Region - August 11, 2006

"Anecdotally, Coldwell Banker-Morris broker Norma DuBois said the agents in her office have seen an uptick in prospective buyers in the last couple of weeks, while the flood of homes entering the market seems to have slowed.

Sellers will have to price their homes below the market and bring them on in pristine condition if they expect quick sales in the near future, at least until some of the excess inventory clears away, DuBois said, but she expects flattening mortgage interest rates and the area's still-strong attractions to buttress the market before the year is out.

"I think we've hit the bottom and we're on our way back up," she said."

Condo market key to penciling out projects - February 25, 2007

"But, given the high prices for downtown land and the high price of construction, their economic viability may depend on a single factor — the health of the residential condominium market.

The reason: Selling parts of a building to condo dwellers is the only way, in most cases, to offset initial building costs to the point where ground-floor retail and midfloor office leases can generate a profitable income stream.

In other words, as Bend Realtor Norma DuBois puts it, “It’s the only way you can make it pencil.”

So how is the market for urban condos — a relatively new market for Bend and Central Oregon — holding up?

Results, so far, seem to be mixed.

In Franklin Crossing at the corner of Franklin and Bond — the downtown’s first new five-story mixed-use building — buyers lined up to snap up reservations on the buildings eight top-floor condominium units last spring, despite prices that ranged over $1 million, DuBois said.

But the market changed over the summer, and so did Franklin Crossing’s fate.

Reserved buyers melted away from five of the building’s eight units by the end of 2006, DuBois said, leaving only three sold so far. The remaining five units, priced between $450,000 and $1.1 million, account for about $3.25 million in inventory at current listing prices.

Whether the pace will pick up, DuBois said, is anyone’s guess. Bend’s housing market has gone flat, along with most of the nation’s, but downtown properties here, as elsewhere, are in locations that tend to give them the ability to create markets of their own."

Bend tops home appreciation list - March 2, 2007

"Take away the spike of activity from the 2004 through mid-2006 boom, and Bend's sales activity and price growth are about in line with the trends of the past 10 years, Coldwell Banker Morris broker Norma DuBois said.

It may take a year to work off the inventory glut that was left from the boom months, DuBois estimated, but after that "I'm really optimistic. I think we're going to see a nice, steady pace. We're not going to see another spike like we did recently. If we do, I'd say it's going to be at least 10 years out."

BECKY BREEZE:

Condo-mania - October 23, 2005

"Add stainless steel appliances, wood floors and cabinets, granite countertops and buyers can expect prices in the neighborhood of $400 per square foot, Swan confirmed.

Local real estate agent Becky Breeze and her husband are building a 42-unit condominium project in the Old Mill District. Breeze already has sold most of her units. She said buyers know what they want and they don't balk at prices.

"They want to live in a custom home," Breeze said. "And they don't want to sacrifice quality. They want to be close to walking trails and the mountains. They're really mobile and they have a lot of money," she said."

In Bend, home sales slump - May 7, 2006

"Some market observers say the dip in Bend's March and April sales was just a short-term lull.

Multiple offers on homes, especially in the lower $300,000 to $500,000 range, have become common again the past 10 days as the weather has warmed and worries over rising interest rates have eased, Becky Breeze & Co. broker Becky Breeze said Thursday.

Breeze, a 17-year veteran of Central Oregon real estate sales, said she thinks the sales pace this summer will again rival the record-setting pace of 2005, stoked by buyers from more expensive, more crowded areas.

"When people sell things in California, Seattle or Portland, when they come to Bend they are always pleased with the quality of homes we are building. And they also love that our prices are still very reasonable in their minds," Breeze said."

Condo market key to penciling out projects - February 25, 2007

"A few blocks away above the Old Mill’s retail district, The Plaza, a purely residential condominium project, has moved 12 of its 42 units so far, owner and Realtor Becky Breeze said, at prices ranging from around $600,000 to nearly $2 million, although the building won’t be move-in ready until June."

THE BIG SCREW YOU:

Condo project riles neighbors - February 7, 2007

Mountain Gate:

"The developers say Mountain Gate Crossing, with its vision of 134 condos, ski chalet facades and ground-floor businesses, will be a new jewel along the road to Mount Bachelor.

But to the neighbors who live in the quiet suburban tracts next to it, other terms come to mind.

"Some projects are just wrong," River Bluff Trail resident Jeff Payne wrote to city planners last month, one of more than 90 letters of opposition the project has drawn so far.

"Not a sensible development," Brookside Loop resident Kristine Finfer huffed.

"This project is off-the-wall," Sunrise Village resident Larry Harrell chimed in. "This project is out of character with the west side of Bend and more fits the character of Redmond."

"The Mormon church, the RV Park, the combination roller hockey and ice hockey complex - none "fit the neighborhood," Evert said, until the city's codes changed enough to allow AWBG's condo plan."

"For years, housing could be built on commercially zoned land only as a conditional use - a designation that required the developer to jump through several specific hoops to gain approval, Sen-ior Planner Wendy Robinson said.

Planners removed that requirement when they rewrote the codes last year. They hoped to encourage mixed-use and planned developments with a few houses more closely mingled with shops and offices, Robinson said. But they didn't intend to open the gates for developments on commercial lands that included mostly residential condos, even though nothing in the current code specifies the amount of commercial that has to be included in a "mixed-use" development.

"It's one of those unintended consequences," Robinson said. "I don't think we anticipated anyone purchasing commercial land at commercial prices to develop residential housing on it."

From farmland to subdivision - April 7, 2007

The Measure 37 Tango:

"Aside from the neighbor-to-neighbor disputes that have flared up across the state, putting subdivisions in rural areas may cause other problems, some officials say. In Redmond's case, the city's water mains and roads are not designed to accommodate large developments outside of its limits, Public Works Director Chris Doty said.

"We're concerned with Measure 37's ramifications on city infrastructure because it basically focuses intense development in rural areas that come into the city and utilize capacity in our system," Doty said.

He added that Arnett's claim would have a relatively minor impact, but that it highlights the issue nonetheless.

Though he sees himself as an entrepreneur who has bought and sold a number of nursing homes across Central and Eastern Oregon, Arnett doesn't want to be painted as another money-hungry landowner.

Growth is all but natural, he points out: Redmond's population now is about the same as Bend's was when he first moved to the region.

"I don't want people to think, 'Oh, they're tearing up a beautiful old ranch out there in order to build more houses,'" he said."

Resort traffic has Redmond worried - March 18, 2007

The Destination Resort Shuffle:

"Redmond officials contend that people will come to their city to shop at places like Wal-Mart and Fred Meyer, since there are fewer options in Prineville. And for that extra traffic, Redmond wants money."

"By Redmond's calculations, if just Remington Ranch were located inside city limits and had to pay the city's rate for transportation system development charges that amount would total more than $860,000, assuming 300 peak rush-hour vehicle trips."

"Remington Ranch Project Manager Chris Pippin disagreed that his resort would have as much of an impact as Redmond claims.

"We are in a unique location such that our traffic basically impacts state highway facilities," Pippin said. "We basically do not touch a Crook County road or for that matter a city of Redmond road at all."

"Pippin said Remington Ranch has agreed to pay what may end up being several hundred thousand dollars to ODOT to offset some of the improvement costs. That money would go toward a Powell Butte Highway interchange and the Southwest Veterans Way-Highway 126 junction. In a letter from ODOT included in the records for Remington Ranch, the agency calculated that the resort could have to contribute a total of nearly $1 million toward those two intersections and the O'Neil Junction on the north end of Redmond. Brasada Ranch has already paid for a left-turn lane at the Powell Butte Highway and Highway 126 intersection.

But that's not enough, Doty said.

"It's a drop in the bucket as far as we're concerned," he said."

"But Brian Bergler, a spokes-man for Pahlisch Homes, the developer of Hidden Canyon, pointed out that the resort will be paying far more than anyone else has to improve roads near its future resort.

"(We) will be paying over $4 million for road mitigation improvements, and that is in a combination of (money for) ODOT, Crook County and Deschutes County," he said."

"If we go down this road, where do we stop?" Cooper asked. "Do I extract concessions from destination resorts to improve state highways in Portland?"

Apartments to condos - July 23, 2006

Get Rich, or Get Out:

"Sarah Hendriks is 20 years old and eight months pregnant.

A few weeks ago, the owners of her apartment building, the Monterey Pines in west Bend, informed her that her four-bedroom apartment will soon be converted to a condominium.

The good news is the price tag. For a little more than $300,000 - at least $177,000 less than the median price of a stand-alone home in the northwest quarter of Bend this year - Hendriks and her boyfriend could own their own home.

The bad news: They still can't afford it. So the conversion, for them, means another foray into a tight and increasingly expensive rental market to look for a new home.

"Everything in Bend - everything - is so expensive," Hendriks said Tuesday. "It just makes it hard for us young people to make a living."

That may be true, but the developers, real estate brokers and property owners who are driving one of Bend's newest property trends say they will ultimately create lower-cost ownership opportunities for middle-class home buyers, while they find a new way to turn profits for themselves in a real estate market beset by a shortage of land and expensive development costs."

Family faces two big development setbacks - May 16, 2007

Clean Up Your Act:

"And, depending on a City Council vote later this month, the family could be ordered to clean the site up while everyone waits to see how it all turns out.

For the family, the news has not been good. "I think we'll probably have a meeting and decide what to do," said Noel Eriksen, one of the four family members who make up Eriksen River Properties LLC.

"If it's going to be another year out - boy, that's gonna be tough."

"This is inexcusable on the part of the city," Eriksen said. "Inexcusable.

The neighbors, though, are just happy that the property might get cleaned up while the Eriksens figure out what to do next."

Discontent grows at Broken Top - February 15, 2007

"How I Turned a million in losses into a fortune & You Can Too!", aka The Bau-humper:

"The family trust bought the controlling interest in Broken Top Partners LLC, the club's owner, in early January from Bend developer Don Bauhofer.

Six months earlier, though, Bauhofer offered to sell the club to its members at prices ranging up to $55,000 apiece.

Claiming unending losses on the course's operations, Bauhofer and his ownership group gave the members 10 years to come up with 300 buy-ins to complete the deal. But the deal came with a deadline: 100 members had to buy in within a short time frame, or Bauhofer vowed to open the course to more public play to increase its revenues.

The members beat the deadline, coming up with more than 140 full-cost members and another handful of $5,000-apiece "social," or non-golf, equity members."

New player enters the Broken Top saga - May 24, 2007

"In a memo to some of the club's members earlier this month, which was widely distributed on Internet bulletin boards and e-mail lists, Tom Brenneke, a Portland-based member of the club's new ownership group, essentially outlined a two-pronged choice for the members: Let the owners develop part of the club with up to 500 hotel, condo and townhome units, or be ready to pay higher dues to cover the costs."

"And a group of members who filed a legal action earlier this year to uphold a membership buyout plan pitched last year by former owner Don Bauhofer has threatened to turn the legal action into a full-blown lawsuit if Brenneke's ownership group fails to respond to requests for mediation by Friday night."

"The club has suffered and continues to suffer operating losses in excess of $1 million per year," Brenneke's e-mail said. "While we work toward a solution with club members and homeowners, ownership is committed to funding the operating losses. It is critical that we arrive at a mutually agreeable solution in a timely way in order to prevent the threat of bankruptcy."

THE MONUMENTALLY STUPID:

Redmond takes first step toward water park - May 8, 2007

"The project's developers say the Redmond Waterpark Resort would create jobs, transform the city's tourism economy and provide year-round recreation."

"It would also generate a lot of fun," said Bill Schertzinger, a partner in BGJJ LLC, which is developing the project, and a Redmond-based architect."

"I don't see a downside."

There's more. Much more.

The super-bubble of Central Oregon RE has changed the character of this place in just a few short years. There is very much a Gold-Rush, screw-you attitude. The sum total of a persons value is "What Can You Do For Me?"

The RE industry, never a bastion for holding ethics in a hallowed regard, is overrun with sleaze and liars. The local media give them first, middle and last word, and never a single followup on clear lies. If anything, they get more exposure for ever increased sleaze marketing.

Every person who can possibly capitalize on the Cent OR land rush, IS or sure as hell is trying. That is largely all that's left around here. People have taken leave of their senses and their decency. A couple in Ashwood wants to turn their farm land into a resort of 5,000 homes, nevermind that Ashwood has a population of 120 people. Residents of Broken Top are being strongarmed into a deal where they are damned if they do, and damned if they don't - solely because there is a buck to be made.

Long-time residents are simply being forced to move because taking their apartment condo benefits some slimeball developer. Virtually nothing will be done to improve the property, but the price will triple. And the attitude is "Take it, or get out."

People who bought "early", are getting screwed out of parks, roads and other "promises" made by developers because they trusted them. Once the homes are sold, there is no park, no playground and no roads built to accompany the traffic.

Projects are represented as "SOLD OUT" solely for the purpose of actually bringing in suckers who can buy "the last remaining unit", despite the fact that NO units have really sold.

Laws voted in by US and land use laws are being contorted to serve the purposes of developers. Measure 37 essentially gives any longtime landowner a license to do whatever they want with their property, incluing throw up a subdiv surrounded by farms, and to hell with what it does to any of them! Destination Resorts are basically stealth subdiv's that will begin to pockmark the countryside.

There's nothing to do about it, really. It comes with the territory. I saw a quote in the movie "Blood Diamond" along the lines of, "Whenever a commodity of value is found in Africa, the locals are slaughtered in large numbers and in the most inhumane ways imaginable." While it's not that dramatic here, the commodity of value here, for the time being, is land and what will happen while it's value is extracted is probably going to horrify those who call this place home.

Here's my prediction: Many area Realtors will leave, or buy an Awbrey mansion & retire in the next few years. Once the well is dry, which is happening now, they will have made their pile and will call it quits. Destination resort builders will leave hundreds & thousands homes in half-built subdivs just sitting in the middle of nowhere. Golf courses will go to seed, man-made lakes will dry up. Same for Measure 37 claims, they'll just pockmark the land. Oregon's attempts to prevent sprawl with it's land use laws will have been upended by the relentless pursuit of moneymaking. There won't be anywhere to "get away from it all" around here anymore, because "it all" is everywhere. And it'll have all the appeal of half-assed mobile home parks.

Funny, but few people like mobile home parks scattered all over their pristine recreational acreage. They will go elsewhere, where short-sightedness wasn't allowed to run roughshod over common sense. We're allowing the gutting of our greatest asset: our natural beauty and wide open space. We're starting to "cannibalize" each other for a buck. We're throwing hundreds of millions into mindlessly stupid ideas like the Redmond water park.

This bubble has created some of the stupidest actions conceivable. We'll be paying for it for decades. What's really sad, is that we can't "undo" it. Once these ill-conceived projects get started, the first thing that happens is bulldozing of the whole site. How many thousands and THOUSANDS of acres around here are platted for the mindless building of homes that NO ONE WANTS?

I say again: The folly of what we are doing will seem almost inconceivably stupid in the decades to come. "Somebody should have put a stop to that", will be the Bend Buzz Phrase. Mark my words: $180,000 medians will sound damn reasonable in a few years when there are years of supply sitting fallow in the Central Oregon scrub. We're digging our own grave, RIGHT NOW.

Q: What Are Bend Homes Worth? A: $185,000.

We got the CNN-Money list of most overvalued & undervalued metro areas in the country, issued June 16. Bend is at the top of the list, with a stated overvaluation of 78.7%. First, if the median they used of $324,400 is accurate, we are more overvalued than that. Our median now stands at $351,900. Given the figures in the article, you can back out $181,533 as "fair value" for Bend, or 93.8% overvalued. An excerpt:

Bend took over first place from Naples, Florida, which had led the pack for several years. Price declines in Naples enabled it to slip into third place at 63.4 percent overvalued. In second place was Prescott, Arizona, at 64.6 percent.

So what is the median home worth around here? There's a myriad number of ways to arrive at fair value. Maybe the most relevant, is comparing owning to renting. I ran across an article in this regard wayyy back when the bubble was still in full force across the country. It was by Liz Pulliam Weston, called "Don't get trapped in a housing bubble". An excerpt by economist Edward Leamer:

Leamer says he can tell because homes, just like stocks, have a price-to-earnings ratio (P/E) that he believes determines their fundamental value. The earnings part of the ratio consists of the annual rent the house could command. Homebuyers can compare current P/Es with historical levels, Leamer says, to get some idea of whether houses in their cities are becoming overvalued.

I like the idea of computing the P/E the most, as it's inverse, E/P is the earnings yield for a property, and when you think of a rental home like a earning investment, it's easier to separate out all the nonsense that people sometimes associate with owning a home (I'm thinking specifically of a comment where someone stated, "I don't think Bend could imagine itself without Northwest Crossing". Woof.).

What's hard here, is that Bend does have a very wide range of rental properties. You've got your "Arson Ready" properties: Homes that benefit the entire of humanity when they "accidentally" burn to the ground. Twice. These are barely fit for human habitation. Then there are the brand new McSubdiv homes, with line upon line of cookie-cutter 1,800/sf homes. These are the meat of our market it seems. And there's the NWX whacky-shack, typically owned by a Realtor or mental patient, that bought into the $10K appreciation/mo. line of crap spewed to sell these white elephants. It's really a wide range.

And computing the P/E is a totally different exercise for each. The McArson Meth Lab rental is going to have many expenses not associated with say, a 500/sf NWX dog house rental. "McArson" (aka, "The Mic") rentals will typically have the dog-pee-soaked subfloor, load bearing 32 gallon meth drums, and Kohlers new "River of Pee" septic system, developed exclusively for for India's City of Joy whorehouses, which is basically a small ditch dug in the dirt floor that drains out in the septic field; ie front yard. The Mic is a maintenance nightmare. All this has to be factored into the "P" (Pee?) part of the P/E equation.

Contrast this to the NWX doghouse rental. At 500/sf, buyers usually had to assume second mortgages financed by the local TV station, since about half the value of these homes is advertising. I've long maintained that NWX is the most overpriced neighborhood in Bend, and it is precisely because of this: Rental income there is a small fraction of what a mortgage will run you. Homes that cost $500/sf are fetching $1.25/mo as rentals, or a 3% yearly yield.

Those two example illustrate the gamut of what the rental game is in Bend. The very high maintenance meth-laden crap shack vs the low/no maintenance 6 mortgage NWX special. I think the meth cracker box is an endangered species though: It's just going to pay for someone to "smoke cigarettes around oily rags", and let nature take it's course. Face it, these places are worth more dead than alive.

What Bend is really looking at is a mega-glut of brand new 1,800/sf McSubdiv homes. And these are what are really facing steep price cuts recently. Multi-million dollar mansion? Hell, you just have to find One Guy to buy that dog. Your platted out, 100 lot McSubdiv isn't going to sell in onesies and twosies anymore, you gotta mark 'em down to get'r done. I've seen many of these go from near $400K in Phase I, to $300K or LESS by the end. These love shacks can usually fetch somewhere between $1,100 - 1,400 depending on the time of year and such. Assuming $1,250 and $350K middle of the road estimates, this gives about a P/E of 23, or a 4.3% yield. 2 words: Not Good. 2 more words: Really Good. If you're a renter.

Pulliam's article outlines P/E ratios for a number of big and traditionally overpriced metro areas. Boston, San Diego, Frisco are in the high 20's, with Chicago in the low 20's. Bend's current P/E puts it close to Seattle. Do we really have the economic base to maintain a Seattle-style P/E? You will have to be the judge of that yourself, but my own opinion is that once the Tequila wears off, that Bend's P/E should be in the 13-15 range, and that's assuming rates stay relatively low. A P/E of 14 X $13,200 in yearly rental receipts (with NO other expense, taxes, etc) yields $184,800, remarkably close to CNN Money's estimate.

We've also heard a lot of talk about a "return to normalcy", like it's a good thing. In a way it is, we'll be cost competitive in many ways that we aren't today. I found an OFHEO Housing Price Index that showed Bends long-term, non-bubble yearly return to be about 7%. This is actually higher than I thought it'd be. The index starts way back in 1986, so it is a very large sample, but the standard deviation is also large at around 7%. All that means is that we can state with very high statistical confidence that Bend's mean yearly return is between 21% and -7%... no help there. You can maybe safely assume that Bend has had some sort of persistent long-term appreciation premium due to 1) Excessively depressed performance right before the sample period, or 2) Bend has enjoyed some sort of excessive in-bound "migration premium". during the period., or 3) There is some sort of constraint that is holding up prices during the period. Or maybe something else. Is 7% a rational appreciation rate going forward? I don't think so.

Bend has experienced 2 very high yielding periods in the past 20 years, one in the early 90's and the recent huge gains. Taking out these periods, Bends has experienced fairly ordinary gains, something closer to 4-5%. I think something around 5%, maybe 6%, is what Bend should experience over the long haul, maybe a bit over the 1% real return that Robert Schiller puts forth as the long term gain for US housing in aggregate.

Second, homes act much like bonds or other "yield" type investments. As rates decline, their price goes up. But as rates decline, the forward looking return goes DOWN. You get appreciation as rates decline, but less yield going forward. We've had our appreciation run, in spades, now I think it's all been squeezed out (and then some), and we have nothing but the poor yields to look forward to.

So, I would put forth that Bends very long term 50 year appreciation rate, from 1986 should be around 5%. Using the OFHEO data to back out an approximation of 1986 home prices (a very faulty exercise.. someone tell me if you've got better data...), we "de-compound" at 7% for 20 years, use $351,900 as our starting point, and arrive at a (very) rough starting point of $91,000 in 1986. I can't overstate how rough this number could be, I don't know what 1986 medians were. The good news: Compounding forward 50 years to the year 2036, gives a pretty rockin' median of $1.04MM. Not bad! That's up 195% from here. The bad news: It'll take 30 years or so to get there. That's only 3.67% per year yield, buying today.

Where does this metric leave us today as far as fair value? Well, compounding forward from 1986 @ 5% for 21 years gives about $250K as fair value. 4% for the period gives $207K. So the whole "return to normalcy" also yields lower prices, but not as bad as CNN-Money. This methodology is sort of a least-squares projection forward of logarithmic-adjusted data, starting in 1986. Well, close. It's just hard to take the data as given and come to mathematically solid start or end points. So this method seems less accurate than P/E's, though not totally discountable.

What about replacement cost? Hmmm... this may dictate whether new homes are being built more than anything, because I think precious few home buyers of older homes care what aggregate, timber, stone or other materials cost at the time of construction were. It seems to be something that becomes less and less relevant with time. But Bend is becoming a "new town"; our installed base of homes probably has a lower average age than it did 10 years ago. Schiller actually shows an HPI index with material cost indicies on his Irrational Exuberance website. This data is fairly interesting in it's own right, and I encourage anyone interested to download the Excel/CSV data file Schiller has made available.

Building material costs ARE relevant, but mostly in the determination of the "build or buy" arbitrage equation: Should you buy your neighbors farm, or build next door? This is one of those things that can swing wildly year to year. I think there was a time in the past few years where timber prices doubled, before falling back. I think more interesting than raw materials prices, are the wage rates in the construction industry in Cent OR. I saw on the front page of the Oregonian yesterday an article about the percentage of illegal immigrants in various industries. Cooks, landscaping, construction, and housekeeping were the top industries penetrated by illegals. Political swag aside, these are the bread & butter of Cent OR's economy. These people are the Yugo's to our whitebread Camry past. They'll do it, and they'll do it cheaper. I think from this trend alone, home prices will come down (if immigration bills stay encumbered), and Bend will become more "slum-like". Not a slam, but just true from observation. Mexicans have no qualms about living 10-15 to a home, and will to economize their earnings. Their wages & economic "limbo" pretty much force this on them. I think Cent OR's percentage of Hispanics and other ethnic groups will increase, and they will start to become the "middle class". And call me crazy, but there could be a pernicious little trend of turning today's new McSubdiv homes to McArson Meth shacks over the years.

Maybe this is a little too political for figuring out "Fair Value" around here, but strong Hispanic immigration, especially the illegal variety, can have nothing but depressive effects of wage rates. Boss Hog certainly benefits, since he'll have Chico manning the stoves, weed whackers, nail guns, and the like instead of Johnny Whitebread. This will lead to a gutting of the middle class, and something like a vast servant class (Morlocks) serving a tiny elite group (Eloi). This seems to be the trend countrywide and Worldwide in fact. This country seems to be morphing into a culture that fewer and fewer are able to economically adapt to, and extract some semblance of what many think of as a "normal life". We're looking at the first generation of 30-somethings with lower standards of living than their fathers. Whitey ain't competitive, and I don't know if you've looked around recently, but there's a hell of a lot of us in Bend. Demographics seem to favor lower prices.

Finally, there's the "Bend is different, and people WANT to live here." There were some disparaging comments about no one wants to live in Wichita or some such on the last thread. Well, first Wichita isn't a real fair comparison, just like Fargo isn't. It's the Midwest, and it's different. This whole attitude presumes that geography and outdoor activities are All That Matters. Bull Poopy. They're a nice plus, but they are secondary to the business of living. Assuming Bend is a destination for all because it's a destination for you simply tells us they speaker is so blindly selfish, they can't see beyond their own nose. If I could double my earnings in Wichita, and cut my home price to the median ($99,100!), I'd be there in a heartbeat. I'd sacrifice some sort of quality of life today, to save like crazy and retire early tomorrow. This is yet another nail in the coffin of Bend home appreciation. People will not become indentured slaves to a lifestyle that requires 90 hour workweeks.

In conclusion, the yield of Bend rentals is the most appropriate measure of valuation, as it measures the "comp" of rent vs buy. It shows a fair value of around $180K. Other less measures of value, but nonetheless indicative of possible future trends also seem negative. Future supply in the guise of chameleon-like destination resorts bode terribly for the future. I think backward-looking ROI computations will on marginal ("half-assed") large scale projects (Redmond Water Park, The Shire, The Plaza, Angus Acres, Work-Live condos, "Expensive" office space) will act as nothing but massive depressants on our market for many years. We're building enough supply today for the next 20 years. Bend housing will be a mini-S&L crisis. We'll become a town largely comprised of Hispanics and there will be a certain Mexicanization of Bend, which is well under way. There are opportunities there, but they'll probably be capitalized on by Hispanics.

On the upside, Bend is a great place to enjoy the outdoors... if you can afford to. The weather is nice, the mountains & diverse geography, and all are terribly fun. But there's less and less "fun" time for the median person living here, and so this aspect of Bend becomes less & less important.

The Bottom Line: Bends Fair Value Median is $185,000.

This is kinder than CNN-Moneys implied fair value of $181, 533, but not much. The obvious bad news is it's a 47% haircut from todays prices. Some think we'll see such a nominal decline in short order. I do not. Housing prices have traditionally adjusted very slowly, and much in the way of "losses" in falling markets have been in prices treading water for years (decades), not really falling much. I think we'll see a combination: prices falling slightly, then rising slightly, then falling again... for probably 20 years or more. I think the target date for todays prices being equal to "fair market value" is about 11 years from now. There may be some particularly terrible intervening price plunges that'll give someone abnormally good returns in the meantime, but they probably won't be for sometime, 10 years minimum.

Not to beat a dead horse, but if you're planning on living in Bend for the long haul: Rent, and Invest The Difference. Cater to the extremely rich or Mexicans. Own landscaping, hotels, restaurants, don't work there. Or do what really makes sense:

LEAVE.

Duncan McGeary - Genius For Mayor

Well, before you get started Bend-Bilbo-Bust-Baggins... I DO like Duncan. He does one thing you and I and almost everyone else in the Bend RE-bashing blogosphere does not do: He does NOT post anonymously.

The guy's got rocks.

OK, I have whomped on the Bulletin and many others about their almost complete lack of editorial standards, the blatant misstatements of fact by local Realtors and the 100% pass they've received, and one hell of a lot of other pretty unpopular opinionating. Alas, I have done it behind a think veil of anonymity, like a quivering puddle of spineless goo that I am. But there is strength in numbers, and I am at least redeemed, in part, in that so does almost everyone else. Face it: RE interests have their tentacles in almost everything around here, and giving them a nice public thumping will have deleterious effects on just about any business person or employee.

Not Duncan. The guy makes comments that are probably not popular with Bends landed set about the state of the Bend RE market. Now he's taken a fair amount of abuse for being mealy-mouthed, "Flander-ish" and other such nonsense. OK, the difference between him & his accusers is that he takes personal accountability for his statements, and you & I do not. He has to LIVE WITH WHAT HE IS SAYING. He has to pay his rent, after saying he thinks his rent is too high! He has to run his business. People can walk in his store & ask him about what he's saying. Neither I nor anyone else I know of is subject to similar scrutiny.

OK, so you can whomp on him all day long, but your anonymous rants don't have any repercussions on your life or business, his do. He HAS TO watch what he says, it impacts his life. Your comments & mine do not. I do not agree with everything Duncan says, but I at least have the clarity of mind to know, that given the nature of his posts & the impact they have on his business:

The Guy's Got Rocks.

OK, so what's with this Duncan, Genius For Mayor stuff? Well, I should say that I personally don't know Duncan, have been in his shop rarely, and really don't even understand the nature of his product offering, that nevertheless Duncan is the kind of guy I would LOVE to have in some sort of local P/T political office.

Would I agree with him 100% of the time? Almost certainly not. I'll bet right here and now that he's Democrat. I consider myself Republican and would vote thusly, were the entire Republican party not populated by turds. I'd vote Dem, but the turds over there are larger & more numerous. Hell, my guy last time around would have been Sharpton! You have to admit... it'd been a hell of a 4 years!

Anywho, I wouldn't want Duncan (or anyone) in office who parrots my political leanings, but someone who knows what the hell is going on. I'm not sure how to best characterize someone like this, but the best I can think of is "Tinkerer", and "Do It Yourselfer".

Before I go on about that, I should say that Duncan, his business, and his views on just about anything would hold ZERO interest for me if his blog had turned into a self-serving, self-ingratiating marketing instrument for his business. You think about downtown Bend business owners, and the nature of this town and it would be extremely easy to fall into this trap. I would say there is a 95% chance that a businessperson starting a similar blog in Duncans place would go this way. Woof, dead boring. Had Duncan gone this route, I would have lost interest in about 2 seconds. Or less.

But he didn't. He went the authentic route. The high credibility route. It would have been DAMN EASY to get into glad-handing self-congratulatory crap. But he didn't. THIS is something MANY people in this town can learn from. People are tired of bullshit. Realtors: you want some credibility? Hang it out there, warts and all. Stop saying that everything is peaches & cream. You'll have more credibility, faster than you will EVER have by LYING to The Bulletin about how well you aced The Creating Perceived Shortages Community College course last year. Beware: People can spot bullshit in all it's forms 5,000,000 miles away, and you will be ridiculed till the cows come home. Then the cows will ridicule you.

OK gentle reader, I ask you to go to & read Duncans blog. He runs a "comic book" store, and you might think, "Hell, that doesn't apply to me!". Think again. I actually read Duncans blog & find much that applies to almost any business, and especially Bends local economy, specifically the RE market.

He's a tinkerer. You can tell. His store is like a little laboratory. And I can tell you that as a business person, I do the same thing. Try X, see what happens, try Y, see what happens, learn little rules of thumb, spot strange little correlating trends, walk by storefronts, watch the other guy, pump him for info mercilessly, REPEAT. I can tell you this: Duncan doesn't go home, and "turn off". It's always going, his mind is just churning through every little thing. He's in some small way tormented by it. It's kind of staked out a little fort in his head, and it goes to Astoria or where ever, and it makes him go into tinkering mode even when he's on vacation. It makes him worry about B&N. He's a tinkerer, and his business is like Flubber. I'm also a tinkerer, but unfortunately my stomach is like Flubber.

I also KNOW this, he watches every little thing in his store, and gets nervous about success, failure, and all things in between. What about todays Big Sellers? Could be a store crushing fad (sound like anything?) of tomorrow. What about cash-flush competitors, should he double up on (graphic novels|comics|etc) that they are cashing in on? I read Duncan's comments on how he stocks inventory & monitors sales, and it takes me back to my school-girl days teaching Finance. It's basic portfolio management. The ONLY FREE RIDE in investing is diversification. Hold too much of one thing, or group of things, and they will sooner or later take you out. Applies to comic book stores, stocks, industries, or just about anything.

Duncan is about the only store of his kind left in Bend. Why? Did he sneakily outfox them? Lower costs? Inside deals with The Man? Alas, I think not. He invested better. When others saw a winner, they doubled down, and doubled down again. Duncan probably doubled down once or twice, but at some point probably had to make payroll (& rent) out of his own pocket, and swore "Never Again!". One sector comprising 80-90% of sales can be a killer when the trend goes "Pogs" on you.

Another thing I can just about bet is a dead-lock, is that Duncan has probably never hired a high-priced marketing firm to shamelessly flog his business. "Behind the times", "Out of touch", you say. Get jiggy, Duncan! How about that Unifi web app start-up I read about a few days ago... they are starting up a little medical web app business, and when you read on, you see the founders have almost ZERO direct knowledge of the technology that will essentially BE that business. They hired that work out to some local tech outfit. They are purely a marketing front-end.

I would bet this is not Duncan's bag. He does his own marketing, if any is to be done (probably not, that's what his location is for). He does his own (financial) books (maybe). He's pretty damn connected with each & every little thing. It's part of the tinkering thing. It's hard, if not impossible for him to not at least try to become acquainted with every piece & part of his business. You can tell. Read his blog. Personally I think his blog is a marketing master stroke. Ahead of the curve, executed well, authentic, credible, wide ranging, insightful & interesting. I read it everyday.

And I'm sure that Duncan may object to this lovefest, and say, "You've got it all wrong! I don't know what the hells going on half the time!" Well, that is far more often the mark of intelligence than smug know-it-alls. I don't trust know-it-alls, and man is this place overrun with them. I trust someone who is curious, admits they don't know the answer, investigates to the best of their ability, assimilates their findings with past knowledge, and humbly and with some dash of uncertainty, tells me what they "think" is going on, with healthy dashes of self-skepticism. Boorish know-it-alls are almost always wrong. They are usually far more concerned with their own self-image than the truth.

OK, so Duncan's the greatest guy in history, big whoop. Well, I'm hoping that the point of my blog is to inform & educate people primarily. Some think it's about bashing the hell out of Bend RE, which frankly I could give a damn about, and that's IF it were even possible, which I doubt. And a blog by a guy running a comic book store, may not seem a good source for political insight, much less real estate insight, but look again. Duncan OUTLASTED a lot of "trend-followers" who jumped on the latest FAD. When others concentrated, he DIVERSIFIED. He gets NERVOUS when ONE SECTOR takes on TOO MUCH IMPORTANCE. He watches his COSTS, and watches THE OTHER GUY. His first concern isn't cashing in on TODAYS BIG THING, it's NOT GETTING CARRIED OUT tomorrow. He probably doesn't delegate LEARNING about his business to SOMEONE ELSE.

Any of that sound applicable to a certain Bend industry? Could our beloved City Counsilors learn a thing or two about this? There is much to learn, and the best sources are usually in the nooks & crannies you least expect. So I nominate Duncan McGeary for Mayor. Or City Counsilor. Or something. Just get someone in there that thinks, investigates, and has some common sense, and doesn't delegate out Their Job. Not someone who basically sees public service as a stepping stone for backdoor deals for their business or becoming part of the Old Boy Network.

Want Lower Quality of Life? Choose Bend Oregon!

David Fosters analysis for for May is out, and it is the source for some strange and sometimes contradictory conclusions about where Bend and the RE market here, are heading.

The Real Story is inventory. David's own count of homes in Bend hit a new record, 1,511, versus the old mark of 1,454 set in Aug 2006. I think everyone knew new records would be broken from the probably slightly flawed, but timely figures from Realtor.com. These figures went up day by day, and were finally reflected in Davids' data with inventory jumping from last months level of 1,373, and up 86% from last year at this time. And a fact of novel interest also came to pass this past month: Given Realtor.com's inventory figures and listing averages, Bend pushed into the billion dollar area of homes for sale.

So the question asked last Fall has been answered: Everyone knew everyone else would be listing this Spring. If we all knew that we all knew this, would listings be held back? The answer is clearly, "No". Personally, I began to buy into the "We're ALL discretionary sellers" idea: No one REALLY needed to sell, but were still fishing for the occasional Bucket-Box moron from California to pay 50-100% over comps. And when EVERYONE knew full well the folly of this, that many would decide not to entertain their Gold Rush dreams. Not true. I don't think the "Bend is 100% Discretionary Sellers" philosophy is one bit true.

So there is clearly an inventory overhand in Bend. But, it is Spring/Summer, and the buying ALWAYS picks up in May, right? Wrong. While April to May 2006 sales jumped from 188 to 244, or up 30%, April to May for 2007 was a distinct downer, dropping from 147 to 121, or down 18%. All this combined to push months of inventory to 12.5 months, a new record. May 2006 was at 3.33 months, and the previous record was last October at 11.8 months. Record levels of months of inventory are SUPPOSED to happen in the last quarter, not at the beginning of Bends' Big Summer Push. Over a year of inventory in May? Don't let anyone tell you that isn't Really Bad News for the Summer.

Finally, we get to price, and on this front there was good news for sellers, at least on the face of things. Preliminary figures from Doug Farmer showed unexpectedly large jumps in averages during May to $485K, up from $424K last month, or +14%. I can tell you that flew in the face of what I expected which was slightly lower prices, and slightly higher volume. And that $484K is a hairs breath from the all-time record for Dougs' data of $491K set last June.

And then Davids data came out, and the average increased at a fairly significant pace, although because it is YTD form, it's not nearly as break-neck an increase as Dougs. Averages went from $408K to $427K, a very sharp increase given that 4/5ths of the data set remain unchanged. Increasing averages 4.6% for the month means that May data had to do quite a bit of pulling to get that increase.

I was pretty confounded by this, to tell the truth. Far fewer sales at higher prices. Given what I knew was a pretty good uptick in inventory, I figured there would have to be pressure on sellers to lower price. And if they did lower price, I thought it was reasonable that we would see something similar to the 30% increase in unit volume over April. Maybe a little lower, but surely May would be higher, right?

Nope. But, yes... sort of. See, if you look at Davids data closely, you see medians going from $349,250 last month to $351,900, a jump of only 0.75%. It is hard to get medians to move given "outlying" data, in a nominal bell-curve distribution. So medians really didn't move much, which indicates that there may have been some high priced deals go through in May. The answer came from "The Wizard" over on BendBB:

"The big reason for the rise in median and average, is that there were 11 homes sold in May in the 1M - 3M range."

I am fairly sure that The Wizard is a Realtor, as (s)he provides quite a bit of data to BendBB that can only come from MLS. I also wrote a short example showing that just a few (even 1!) large scale purchase can significantly skew monthly results:

" I wrote on another thread that there are 2 Pinelyn park homes @$4.5MM/ea. And if you sell 30 homes @ $333,333, and just one $4.5MM property, it pushes the AVG up to $468K, up 40%. Even ONE big transaction can really impact monthly results."

So here is May explained: Months of Inventory is at almost catastrophic levels, over a year. This is, without a doubt, The Single Most Important Data Point In Bend Real Estate. Absolute levels of homes for sale is totally useless, without knowing how many are being absorbed in any given time period. What if someone tells you that some anonymous town has 10,000 homes for sale. Is that a glut? A shortage? Who knows, until you know how many sales are happening per month to absorb that number. If there are 4,000 sales/mo., it's a shortage, if it's 800/mo., it's a huge glut. This statistic is applicable across almost ALL real estate markets.

We're going to hear about how well prices held up in May. This is to some extent, true. But there were relatively small number of high-priced closes that skewed averages much higher. Medians on the other hand, barely budged. I'm not sure how much 11 individual transactions should be counted toward gauging the health of Bends housing market... they DID occur, they skewed results, and maybe as Tim said, the high-end might be firming up a little after many moribund months.

So how to characterize this market? May, unfortunately, did little to give a completely unambiguous descriptor. Volume was, without a doubt, a disaster. Realtors ARE suffering, dollar volume is down 30% (Dougs data) from May 2006. From the professional perspective of what the vast Bend RE machine is grossing, this market is collapsing. You'll hear the term "normalizing", but this is a matter of perspective. If you buy a stock at $10, it rushes up to $200, and then falls back to $75, it's called "normalizing". If you bought at $200, it is collapsing. Yet another illustration of this industries sense of Indigenous Amnesia towards Bends' Current Residents and it's Grass Is Always Greener perspective on Inbound Migrants. If you already bought & lost at the Bend RE game, to hell with you, we'll backdate the options (ie homes) until everything is all blistering growth and Rose Colored Goggles. It's called normalizing.

And a comment from Bend Econo-Rocket:

The current generation of 20-30-something Bendites (who grew up in Bend) is different from the previous ones because they are at their career-building years in the height of the Bend boom.
Previously, you had the choice of going into the mills or the woods, or some other trade, or leaving to go to college and then either staying away or trying to find gainful employment in Bend with a degree. The top-dog positions of big landowner or big millowner or big newspaper publisher or whatever were sinecures handed down within families.


But if you graduated from a Bend high school in, say, 1995, you could make more money staying in Bend and working in construction / development / RE sales than you could going off to college getting a degree and coming back. I don't want to think of what happens to a lot of these folks as things slow down in those businesses.


Bend is one of those USA towns where you cannot complete a full life cycle of childhood-school-college-career. It loses people to attrition normally (it barely increased in population from the '50s through the '70s) so this inflow of outsiders isn't just for RE, it's for the town's viability, period.


I think that is one thing that has changed here in the past 10 years or so. People used to LEAVE Bend to live, because it was economically untenable to stay here for many, especially if you aspired to something beyond blue-collar labor. But now, people are COMING here to live... and WORK.

I've talked ad nauseum about who I think will win the epic battle between old-school, indigenous low productivity Bend Boss Hog dominated industries, and our current Escalade driving, 160IQ, tanned and wonderful immigrants. Let's say, I think they'll be leaving at some point, tail planted firmly between legs.

And we hear nothing except the wonders of Bend from Outdoor-Lifestyle magazines of every stripe, something flogged endlessly in the Bulletin. But all this demand has sparked something that even the Powers That Be are finding unpleasant: INFLATION. Scan BEM's old archives, and I wrote that the onslaught of general price inflation in Central OR was an inevitable result of RE inflation. It's simple: Real estate is a basic input to virtually all businesses, like a phone, or utilities. And if you picture the gross revenue of a business as a pie graph, all these costs take up some percent of sales. Real estate is usually quite a large chunk, and I'd bet that if some of the income statements for downtown businesses I've seen are representative, it's somewhere around 20-30%.

Sometimes this is a tolerable percentage, especially if location is acting as a marketing "proxy". You may not have to advertise at all if your location is good enough. But sometimes it's not, witness the large number of retail outlets closing in Bend since steep price hikes were instituted, largely in reaction to inflated prices paid in the past 2-3 years for downtown commercial buildings. The pie-graph is being taken over by RE costs for many downtown.

What is the result? In a strangely ironic twist, one downtown Japanese restaurant, Kuishinbo Kitchen is closing, while deep a significantly higher-priced Japanese restaurant is opening. This is indicative of something I think will happen all over Bend: Outlets offering lower-moderate priced items will be shuttered and replaced by "amenity-laden" outlets offering similar, but far higher priced goods. In other words: INFLATION.

And inflation without any accompanying wage inflation means one thing: LOWER STANDARDS OF LIVING. And according to a recent Bulletin article, "Food, health, housing drive Bend costs up", there has been staggering increases in the price of groceries (+20%), and home prices (+19%) in Bend in the past year. The overall cost of living in Bend increased 9% in the past year. If this happened nationwide, let's just say it would be interpreted as an economic catastrophe. NINE PERCENT INFLATION! Last time that happened was in the 70's, and the subsequent recession was the worst since The Great Depression.

"So what!", you say. "I bought pre-bubble, I'm doing just fine, thanks. I make great money, and am basically immune to any downturn around here. All this bubble talk doesn't affect me!" If you are one of these lucky few, good for you. But an ever-larger majority are coming here to live & work, and the labor treadmill is tilting up just a bit each month... and we're not getting anything extra for our efforts. No more 40 hour weeks like 5 years ago, we need to work 55 hours just to stay even. Have to work just a little longer for that Sushi, because the old cheaper sushi place is gone, because her rent went up, because her building got sold for many, many millions and the buyer must pay his bills...

Pretty soon people will have to face a choice: Work ever more hours just to keep their nose above water... or downsize. Laminate, not marble. Cheap carpet, not wood. 2,200sf, not 3,000. McDonalds, not Merenda. Fuqua, not Renaissance. Hyundai, not Honda. Work, not hiking, biking, or anything else. Inflation lowers your enjoyment of life. Not abstractly, but in real terms. And Bend is lowering its residents enjoyment of life by about 10%/year, at least those coming here and trying to live & work.

Maybe soon, many Bendites will think, "Des Moines, not Bend". I know I am.

And a comment (from Wikipedia) on a town we're all familiar with:

This historic character of the city has been challenged in recent decades by skyrocketing property values and the proliferation of second homes, increasingly shutting low- and middle-income workers out of the city and creating a large pool of commuters from nearby bedroom communities ... At the same time, in stark contrast to its historic character, the city has emerged into international fame as a glitzy playground of the wealthy and famous. The downtown has been largely transformed into an upscale shopping district that includes high-end restaurants, salons, and boutiques. The booming real estate market has forced the city to struggle between permitting growth and restricting it. The city today remains a mix of high-end luxury homes and condos intermixed with legacy residences and mobile home parks populated by an old guard of... residents struggling to maintain the unique character of the city.... is the destination of choice for tourists from all over the world.

Bend, right? Perfect description. But no, this is Aspen. "So... we really CAN be the Next Aspen, right? Hell, we practically sound exactly like it right now!" Well, maybe, if we're willing to make a little tiny sacrifice, that sacrifice being YOU. Read a little further, and you see that Aspens population in 2006 was 5,804. Bend was 75,290. We're going to need to cull the ranks a bit, shucking off 12 people for each one we keep. "Well, why can't we be Jackson, WY?" We could, but 9 of your friends & co-workers will need to go. How about Whistler, BC? Kiss 8 friends bye-bye.

I've maintained that we will not be the Next Aspen, probably to the chagrin of Bends Powers That Be. We're Way Too Big. But it could happen. It happened to Aspen. You see in 1890 the Sherman Silver Purchase Act was passed which doubled the US Government purchases of silver. By 1893, Aspen had boomed to 12,000 residents, mostly silver miners. Unfortunately for Aspen, Grover Cleveland repealed the act, and Aspen began a long, slow, grinding descent, until in 1930 it was a mere skeleton of its former self, with only 705 residents.

So next time someone asks you, "Can Bend be the Next Aspen?", answer in an ever ebullient and positive tone: "YES WE CAN! There's only one thing standing in our way... YOU!"

Now.... GET OUT.

Bend Realtors Threaten Brazilian Rainforests!

I was out yesterday, and basically cruised the Westside, and was stunned by the number of Open Houses. Everywhere. They were EVERYWHERE. Unbelievable. The number of trees that had to be sacrificed to produce all the Open House signs. Wow. The Eastside is a veritable graveyard. I'm not sure how the actual activity was, but there was much hope given the volume of signs.

Funny story, there's a model home on the Eastside complete with perma-Open House Realtor. This guy seems to show up everyday, surrounded by dead empty lots, and sleep. One day last week, I saw kids running through this model home, the Realtor had just sort of left it Open. He was gone for hours.

Doug Farmers data came out, and contrary to what the massive increase in inventory seems to indicate would happen -- lower prices -- prices were apparently higher. Volume was crushed however. 146 sales. I can only think some aggressive pricing on the Westside unstuck sales, and there were just more high-end closes than normal. The ranks of middle and lower class buyers was thinned considerably. There is a harrowing 14.69 months of inventory though. That is just death. Buyers and sellers are NOT buying or selling. They are staring at each other. No one makes money staring.

A reader posted the recent Bulletin article, "Bend Home Appreciation Rate Drops" on the previous comments. We dropped from No. 1 to No. 10. on a YoY basis.

Bend had the lowest quarterly appreciation from fourth quarter 2006 of all top 20 cities, which leads local brokers to suspect Bend will be out of the top 20 by the third quarter, which ends Sept. 30.

If you look back to Q4 2006, we also had quite low appreciation at the end of last year. Almost all the appreciation we have right now was done in Q2 - Q3 2006. Despite an apparent May surge in pricing, I still firmly believe that Q2 might begin a negative YoY appreciation rate in Bend home prices, but Q3 will be a virtual dead lock. We will be down YoY when Q3 is done.

The region is still trying to find its balance, Berger said, adding that he doesn't think Bend's appreciation will fall into the negatives, as is occurring in many once-hot California markets.

I'll say right now... Berger is Dead Wrong here. Another weird Berger-ism:

Conversely, "sellers feel, rightfully so, that they've been beat up pretty darn hard," Berger said. "And they're not ready to come down."

What? Beat Up? Beat up from what? The horrors of making more on their home than anywhere in the country over the past 5 years? Yeah... it must be awful. Bend homes are UP over 100% for the past 5 years. If that's "beat up", I wonder what the hell these people will do when prices are actually down in 5 years time.

There is also a pretty good article in the Sunday paper, "Planned projects focus on west side", about Redmonds expanding UGB. Quick quotes:

• Redmond's urban growth boundary expansion will increase the city's housing base and drive prices down
• developers are cautious about the number of years it will take to sell the lots
• Some projects will fall by the wayside, Crosby said.
• Median home prices in Redmond, meanwhile, have slipped to $255,500. By comparison, Bend's median is $372,075, according to the MLS.
• Affordable land supply is key to Redmond's future growth, said Bruce Kemp, president of Compass Commercial
• The completion of the city's urban growth boundary expansion process, approved by the state in December, will give Redmond a higher percentage of growth during the next 10 years than Bend, Kemp said.
• Upon expected buildout within 10 years, the mix of new homes could bring between 14,000 and 17,500 people, he said.
• Eventually, more affordable housing prices will attract more companies, said Bud Prince, manager of Redmond Economic Development. The number of speculators and investors who sought to buy a piece of property, then resell it for a profit, have slowed to a trickle at his office, he said.
• "That's a good thing, really," Prince said. "Because they drove the prices up for the end user."

So "Affordable land" is key to Redmonds growth? What about Bend? Sometimes I get the feeling that what is "good" for Redmond, is not exactly what our fine Bend RE experts want to happen in Bend.

Medians in Bend are $372,075? I looked, and could not find this figure on MLS Q1 report, nor David Fosters monthly report. And from the context of the article, it could be May. This would be the first median figure I've seen for May.

And it's the first time I remember a developer (Andy Crosby) going forward with a very large development, admitting that some projects will "fall by the wayside". Of course this is a basic admission that these things do not make economic sense anymore and won't get built. Of course Crosby's 1,400 home project isn't one of these poorly conceived black holes. He's smarter than those other guys... who are smarter than him... who is smarter than them... and so forth.

And I'm just curious what real estate speculators are doing at Bud Princes, the manager of Redmond Economic Developments, office? It flat out states that the flow of speculators has "slowed to a trickle" at his office, a fact that I'm sure he is very distraught over. Does anyone know if this guy is moonlighting as a Realtor? If so, I'm just relieved that we have officials responsible for Central Oregon economic development wining and dining real estate speculators when the market dictates.

And it's getting rather hard to hold back the bile when I read how happy Realtors are that walk-in speculator traffic has "slowed to a trickle". Oh, I'm quite sure that despite heroic efforts to hold the office door closed a year or so ago, these poor people were overwhelmed by the sheer force of will of these speculators to buy.

"I can't sell you 6 homes for that amount of money, it's TOO MUCH! I have an obligation to the tired, poor, and downtrodden. Oh no, don't hold a gun to my head! Oh no! I am being forced to engage in another real estate transaction! Please, listen! This is a financially irresponsible transaction because you don't have any income to make the payments, and it will artificially inflate prices for the rank-and-file, who I so dearly love! Please! Please, don't shoot! Just make the commission check out to cash and GO!"

Yes, Bend area Realtors are a selfless lot, who are finally able recover from the horrors of collecting huge commission checks from those bloodthirsty predators. My heart goes out to them.

Ah well. It's been a slow week, and I am basically waiting for David Fosters data to give a more complete picture of what happened in May. One thing seems clear, it was dead slow. May was actually slower than April, something I thought might happen, but I didn't really expect. May is NEVER slower than April. NEVER. 14.69 months of inventory vs just over 4 months in May 2006. And thus starts the Summer Selling Season In Bend.

Or should I say, The Summer Staring Season.