The Bulletin's article (Home sales continue decline) about the second quarter came out, and you can see right away that they are scraping the bottom of the barrel to find their "Resident Optimists" on the Central Oregon RE market. They turned to Darrin Kelleher, a Bend developer and "self-described optimist". Kelleher says he thinks,
"the region will shake off its excess inventory by spring 2009, opening the gates again - the gates, not the floodgates - to new growth."
On the other hand, the market numbers are bad enough right now that even an optimistic developer has to concede that the pessimists might be right about a longer downturn.
The first statement should immediately induce some sort of gin & catatonic coma, as it is the familiar refrain of Annie and such. This dreaded inventory will clear out Tomorrow. We will return to bubble days of yore Tomorrow. OK, the Sun WILL COME OUT TOMORROW, DAMMIT.I think there is some sort of subliminal encoded message that throws the average Bendite into a catatonic fit when this mantra is uttered in any form. Last year we heard that this Summer would be the time the horrors of inventorious glutonomious would be cleared out. The crux of my last frothy-mouthed rant was that We Are Here... and so is the inventory, in spades. With a vengeance.
Just a friendly reminder: We've heard this before, and by God, we'll hear it again. We WILL wipe out that massive inventory glut... TOMORROW. Uh huh. Despite the fact that we continue to be "discovered":
In Central Oregon, in-migration apparently continues. United Van Lines brought 290 new clients to Deschutes County alone in the first five months of this year, according to figures reported by Economic Development for Central Oregon. The bulk came from California, Arizona, Washington state and Texas. Only 155 moved out in United's trucks.
So all the tenets of "Paradise Bend" are still here and getting discovered, BUT inventory continues ever higher ANYWAY:
an inventory level that could take 10.9 months to sell if the average monthly sales rates of the first six months of 2007 continue to hold.
Maybe I've pounded this idea into the ground, but: Bend as Paradise is still being realized by some, as RE pro's said it would, BUT inventory has STILL exploded, nevertheless. I'm starting to wonder if we will even have an "echo" of the inventory respite that we had this past Winter. "The Sun will come out tomorrow?". I don't think so. I wonder if the high inventory of today, will be the even higher inventory of this Winter?
Take a closer look at The Bulletin's resident "optimist": Ah yes, from last April 2006, when no pain was unbearable for the sake of building yet another subdiv. From Bulletin article, "Behind the boom":
Darrin Kelleher, the developer who will subdivide new lots at Juniper Hills, said he would support some kind of government-mandated monetary transfer between park owners and their evicted tenants because the cost could be factored into the price of any land deal. But the economics that are driving developers to buy parks likely won’t subside as long as developable Bend land is as scarce as it is, he said, and the parks that have been bought for closure likely won’t be the last.
“You’ve got to feel for these people,” Kelleher said. “We bought the piece because it came up for sale. It’s not one of our proud moments.”
Ah yes, Kelleher is one of the mobile-home busters:
There was Dan Hayward, a computer technician, and his wife, Rebekah, carrying the youngest of their five children, 8-month-old Brooke.
They have two weeks to stay in their double-wide mobile home before they’re evicted from the land to make way for new housing.
There was Patty Allen, a home health care worker. She and her disabled boyfriend and her 14-year-old grandson have a little longer — a bit less than a year — before their home faces the same fate.
Kelleher bought Juniper Hills mobile home park, and promptly blasted it's residents out the exits, before:...the handful of remaining residents, including the Haywards, have until May 1 to get out. In its place, work will start this summer on a new subdivision with 161 new $300,000 to $700,000 homes.
Hmmm... good luck selling those $700K monsters. I'm sure he'll have plenty of takers given the fact that FAR MORE desirable McMansions on the Westside are busting to the unpleasant side $600K en masse. Eastside homes at $700K? He'll have better luck selling them on the site of an Indian graveyard... in Burns.
After introducing Kelleher as their New Resident Optimist, there is a short snippet about us lowly sorts:
even an optimistic developer has to concede that the pessimists might be right about a longer downturn.
Ya hear that BEM, BendBB, BendBust? We... might be right! Cripes... it's like being brought a decapitated corpse, and the doctor says:
"I may have overstated the chances of recovery for the patient.."
I think that may be the full extent of the recognition of pessimists on Bend RE can expect. We "might be right". Wow. Thanks. The entire thesis of Bend RE experiencing a permanent mega-boom hasn't come to pass, and we "might be right". Wow, I'm overwhelmed. Also real nice is the fact that Kelleher is an "optimist". Bill Valentine was a "contrarian". But the lowly "pessimist" must remain a disembodied ghost, a phantom, an apparition. Why? Hmmmm... my guess, is the Ghost is afraid of drive-by's, unprompted firings, dropped accounts, and the like.
So WHAT will save Bend RE now?
Fueled largely by immigrants and their native-born children, the number of American households is expected to grow by 12.6 million by 2015, according to the Harvard study - about 2 million households more than the nation added between 1995 and 2005.
Well, there you go BendBust... you're beloved illegal immigrants are going to bring their vast horde of wealth, get landscaping , cook, housekeeping and other jobs of stature, and prop Bend RE right up.
So Cali-spankers are not being held up as our Saviors, but by God we can count on the influx of "immigrants" to save us, and:
That, combined with an "enormous growth in household wealth" over the last 20 years, "will help propel residential spending to new heights, the study concluded. But the nation's housing markets will continue to be dogged by price weakness and sluggish sales as long as affordability remains an issue and until current inventory levels, fueled by the speculative frenzy of 2004 to early 2006, dissipate. When that will occur, the Harvard study did not guess.
So, they don't know WHEN it'll happen, but the money we've made since 1987 will, at some point, be funneled into homes, and by God, then we'll be OK.
OK, can I get a job like that? Writing reports with conclusions like:
"Hey, like money we've made in the past 20 years will find it's way into home purchases, at some point."
Woof. Went out on a ledge with that.
So here are our messiah's:
1) Mobile home busting developers
2) Illegal immigrants arriving in their pimped out Escalades, working as housekeepers
3) Money we made in 1987
Now, we also get the first peek at a developer, Brooks, actually "rejecting" this thesis (Why, one can only wonder. Seems solid.):
Kirk Schueler, president of Central Oregon's largest developer, Brooks Resources Corp., said he and the Brooks board of directors don't expect local housing prices and sales to stabilize, at this point, possibly until 2009. Brooks opted to pull the plug on a high-end riverfront townhome project in Bend earlier this year, partly because the company expects weakness to continue in that market for at least another year, Schueler said.
"I'd say it's going to be a good buyers' market for most of the next six to 12 months," Schueler said. "From July 2008 to July 2009, the market will get back to predictability."
Funny, that Schueler is basically saying, "We ain't buying anymore, and it won't be good for a year... but next year... THE SUN WILL COME OUT..."Seems that subliminal mantra is hard to beat, even once you've decided things have gone into the crapper. From "Riverfront project aborted" (subscription req'd), we found that Brooks bagged their plans for riverside condos and sold the project to Portland developers who have not figured out that Bend has gone to hell. From Duncans awesome blog:
Brooks Resources backs out of a project to build million dollar townhouses on riverfront project. This is the first really clear sign I've seen that some developers are having second thoughts. That it is Brooks Resources, a local group with long ties to the community and presumably closer in touch with Bend's economic realities, makes it even more significant. (As is pawning it off on a Portland developer....)
Now aside from the 26-42% drop in sales in the area, there was some "decent" news:
Wages in Deschutes County rose 5.8 percent from 2005 through 2006, according to the Oregon Employment Department, reaching an average of $16.02 per hour, or $33,329 a year per wage earner.
In Bend, the median price of single-family homes without acreage sold in the first six months of the year stood at $349,250, or 1.54 percent above the first six months of 2006, according to the Central Oregon Multiple Listing Service.
So, in some measure things improved a little: Wages outpaced home prices a little. Of course, in the context of what's happened over the past 5 years, we're WAY behind. Folks arriving in Bend today will find their dollars go nowhere in the housing market here. But then you can see that much of that tiny gain was illusory:
Throughout the country, the price of food rose 3.9 percent in April
I don't know about you, but food & gas and various other types of inflation have replaced home-price inflation. I suppose we should have seen it coming: I've written about the insidious creep of price inflation that would result from skyrocketing local RE price jumps. The rest of the U.S. had a 18 month headstart on Bend, so I suppose we are seeing a smaller scale version of what will happen here in the future: Price inflation on every front. As a short aside, here's a small snippet of what exactly hyperinflation does to economies:
Before World War I Germany was a prosperous country, with a gold-backed currency, expanding industry, and world leadership in optics, chemicals, and machinery. The German Mark, the British shilling, the French franc, and the Italian lira all had about equal value, and all were exchanged four or five to the dollar. That was in 1914. In 1923, at the most fevered moment of the German hyperinflation, the exchange rate between the dollar and the Mark was one trillion Marks to one dollar, and a wheelbarrow full of money would not even buy a newspaper. Most Germans were taken by surprise by the financial tornado.
"My father was a lawyer," says Walter Levy, an internationally known German-born oil consultant in New York, "and he had taken out an insurance policy in 1903, and every month he had made the payments faithfully. It was a 20-year policy, and when it came due, he cashed it in and bought a single loaf of bread." The Berlin publisher Leopold Ullstein wrote that an American visitor tipped their cook one dollar. The family convened, and it was decided that a trust fund should be set up in a Berlin bank with the cook as beneficiary, the bank to administer and invest the dollar.
We don't have it so bad... from Wikipedia, to get a real good hyperinflation going usually takes a nice little genocidal conflagration:
- Germany in the early 1920s when the rate of inflation hit 3.25 × 106 percent per month (prices double every 49 hours)
- Greece during its occupation by German troops (1941-1944) with 8.55 × 109 percent per month (prices double every 28 hours).
- The most severe known incident of inflation was in Hungary after the end of World War II at 4.19 × 1016 percent per month (prices double every 15 hours).
- More recently, Yugoslavia suffered 5 × 1015 percent inflation per month (prices double every 16 hours) between 1 October 1993 and 24 January 1994.
This fine young woman has found that instead of going out & buying firewood, it's quicker & cheaper to burn her pile of money.
Pretty soon we'll all be doing our Crocodile Dundee impressions:
"That? That ain't no inflation! THIS. This here is INFLATION!"
I wonder what will happen to the Bend economic base once our hyper-inflated housing asset base ultimately deflates, and it will deflate.
I guess I don't want to dwell on this point now for too long, as the disastrous effects of excess inflation could make a post or two on their own.
But have no illusions, the Economics of Paradise are about to get Real Ugly. We borrowed our way to a short-lived prosperity, and the loans are coming due.
If you want to buy something cheap, start looking at SUV's, Porsche's, snowmobiles, and other toys. People are going to start selling this stuff to make their monthly payments. I don't know if anyone else has noticed, but I'm seeing a hell of a lot of upscale cars sitting on dusty corner lots For Sale.
Ah well. Maybe it's the 90 degree dehydration talkin', but Paul-doh starting to get a hint-O pensive introspection about Bend RE. I mean, it's mid-July, and the the Summer selling season is winding down... stuff going under contract today will close in Sept-Oct, which is pretty dang slow. So this is it. We had our Last Hurrah, Hail Mary, Swing For The Fences window of opportunity, and it is a Big Ass Bust. It Is Over.
It's sort of depressing. I'm seeing For Sale & For Rent signs that ain't coming down. The Bend Community College of Creating Perceived Shortages isn't exactly filling rooms. Look no farther than todays Bulletin piece on Q2 housing: Not a peep from Bill Berger, Becky "Price Is No Object" Breeze or Norma "What time is it? 2PM! I've Sold Out Franklin Crossing for the 7th time today!" DuBois, three pump-N-dump standard bearers (well, not so much Bill). No, we have been relegated down to bottom of the barrel scrape-age Mobile-Home Buster to get our Good News.
BEM ultimately shut down his blog when it seemed He Had Fought The Good Fight & Won, and while I'm not even thinking about that, there was one comment this past week about "stop flogging the bust" (Duh, we KNOW!) and talk about the ramifications on the broader economy. This might be something I delve into a bit more.
But, that doesn't mean BendBB doesn't owe me that Parilla burrito when Bend prices come in negative in Q3 for the first time in years, and hit the $200's for in-town residential medians by December.
"That? That ain't no inflation! THIS. This here is INFLATION!"
I wonder what will happen to the Bend economic base once our hyper-inflated housing asset base ultimately deflates, and it will deflate.
I guess I don't want to dwell on this point now for too long, as the disastrous effects of excess inflation could make a post or two on their own.
But have no illusions, the Economics of Paradise are about to get Real Ugly. We borrowed our way to a short-lived prosperity, and the loans are coming due.
If you want to buy something cheap, start looking at SUV's, Porsche's, snowmobiles, and other toys. People are going to start selling this stuff to make their monthly payments. I don't know if anyone else has noticed, but I'm seeing a hell of a lot of upscale cars sitting on dusty corner lots For Sale.
Ah well. Maybe it's the 90 degree dehydration talkin', but Paul-doh starting to get a hint-O pensive introspection about Bend RE. I mean, it's mid-July, and the the Summer selling season is winding down... stuff going under contract today will close in Sept-Oct, which is pretty dang slow. So this is it. We had our Last Hurrah, Hail Mary, Swing For The Fences window of opportunity, and it is a Big Ass Bust. It Is Over.
It's sort of depressing. I'm seeing For Sale & For Rent signs that ain't coming down. The Bend Community College of Creating Perceived Shortages isn't exactly filling rooms. Look no farther than todays Bulletin piece on Q2 housing: Not a peep from Bill Berger, Becky "Price Is No Object" Breeze or Norma "What time is it? 2PM! I've Sold Out Franklin Crossing for the 7th time today!" DuBois, three pump-N-dump standard bearers (well, not so much Bill). No, we have been relegated down to bottom of the barrel scrape-age Mobile-Home Buster to get our Good News.
BEM ultimately shut down his blog when it seemed He Had Fought The Good Fight & Won, and while I'm not even thinking about that, there was one comment this past week about "stop flogging the bust" (Duh, we KNOW!) and talk about the ramifications on the broader economy. This might be something I delve into a bit more.
But, that doesn't mean BendBB doesn't owe me that Parilla burrito when Bend prices come in negative in Q3 for the first time in years, and hit the $200's for in-town residential medians by December.
90 comments:
IHTBYB,
Could you please explain exactly what might trigger your hyper-inflation model? What bellwether's might there be?
The last serious inflation the US saw was late 70's.
While we're experiencing inflation right now, my feeling is that its because the US dollar is dropping like a rock. That said for most people fixing that simple problem is just a point of buying Euro's.
What in particular to you think will cause hyper-inflation? Your example in Germany happened after a failed war.
The assumption is hyper-inflation cannot happen because the bond market will raise interest rates when inflation heat's up, which will slow things down.
The theory is the bond market has a 'good-steward' governor.
Pointed out below this only actually happens when there are good-stewards running the bond biz. Most recently in Sub-Prime meltdown the CDO & CMO's have been written with 'AAA', when they were actually 'bbb', and they even had the S&P-Moody's stamp.
Thus its a fact that our bond market is NOT run by good stewards recently, nor is there any evidence that good stewards are now running the show today. Ergo there is a very good chance that an excess of cheap money could continue to flood the country and cause HI.
Normally the 'AAA' stamp means low interest, and 'bbb' means high interest, aka "JUNK-BOND". The fact that 100's of billion of dollars have been written at 'AAA' that should have been 'bbb' shows that the so called 'good stewards' have in effect been printing money at cheap interest rates, which is exactly what can cause hyper-inflation.
The only bellwether I can think of is LBO's ( leverage buy-outs ), now that moody and s&p have been forced to start doing their job, the lbo's are supposed to come to a grinding halt. If they continue then thats a good sign that bond market is still being ran by folks that are NOT good-stewards ( bond vigilantes ).
A positive sign would be the Fed doesn't want hyper-inflation would be raising interest rates.
***
Hyperinflation and the Bond Markets Interest-Rates US Bonds
Jul 12, 2007 - 02:12 PM
By: David_Shvartsman
Here's one for all you economic philosophers and "bond market vigilante"-types. The question I'm currently turning over in my mind is this: can the U.S. experience hyperinflation, or will the possibility of such an extreme inflationary spiral be held in check by the bond markets?
The current thinking on the possibility of the United States experiencing hyperinflation seems to be split between those who say it can (and likely will at some point in the future), and those who feel it cannot, for precisely the reason stated above.
I spent part of the weekend reading some of Richard Russell's recent remarks , and part of his June 20 newsletter dealt with this very topic.
Russell is of the opinion that, as far as hyperinflation goes, "it can't happen here" because of the size and depth of our present-day bond market and money markets.
He also feels that if inflation were to really heat up, the bond market would "start to crumble" and things would generally start to fall apart. Interest rates would go higher, the stock market would collapse, and business would begin to fall apart. This in turn would cause inflation to disappear as all manner of assets begin to deflate, or so the story goes.
While I hold Richard Russell and his writing in the highest regard, I must say that I have to wonder about his reasoning on this issue. I am just not sure that I would agree with it.
I am still struggling with the answer to these issues, but something about this argument strikes me as rationalization. So we have a very powerful and well-developed bond market. Does that mean that it would survive the final stages of a rapidly escalating inflationary cycle or keep such a cycle at bay?
The theory of the bond market vigilantes holds that bond traders will sense inflation and mitigate its effects by pushing interest rates higher, thereby keeping central banks and governments relatively honest .
The main problem with the theory of the bond vigilantes these days is that no one can seem to find them . Whether they've been overrun by non-traditional forces or have simply disappeared has been a recurrent theme for discussion in recent years.
I've heard some very insightful arguments concerning the bond vigilantes and their eventual return, but I've yet to read of their ability to stop an impending hyperinflation in its tracks.
Also, if the government were to issue bonds in excess of the amount people were willing or able to lend, they could simply monetize the debt by selling their bonds to the central bank, who, in turn, would print the money needed to pay for them.
Creating money out of thin air is, of course, an inflationary exercise. Taking this method to its extreme would provide the impetus for a hyperinflationary episode.
So far I've seen nothing to suggest that bond investors, or anyone outside of governments or money-controlling agencies, have the power to overcome an over-issuance of money and credit, or an impending hyperinflation.
In the meantime, if anyone can tell me (in plain English) why the bond markets have the power to stop a U.S. hyperinflation in its tracks, I'd be interested to hear the explanation.
Good post covering a ridiculous article.
Still, I'm seeing more and more Pendings. I wouldn't be surprised if our friends the Realtors finally make some money here as the summer wraps up.
I think it'll be a LONG winter, though.
--TT
>>What in particular to you think will cause hyper-inflation? Your example in Germany happened after a failed war.
Hmm.
Um. Actually, this post is about inflation, and hyper-inflation is in there for illustrative purposes.
And hype-inflation typically involves sovereign nations that CAN PRINT MONEY in unending amounts. Bend is neither.
Geez... give me a little "artistic license"...
What about "genocidal conflagration" do you not understand!!!!
Actually, little mini-bubbles within the context of larger economies happen when there exists some hyper-inflated bubble-product.
When sovereign nations "print" the bubble product, it devalues... massively. Our bubble-product was homes, and we "printed" them...
They will devalue.
I think "bubble" inflation within a smaller context, just busts. There is no ability to print money to pay debts, so the lenders get killed. The bubble-product devalues... ashes to ashes, and so on.
To repeat:
to get a real good hyperinflation going usually takes a nice little genocidal conflagration:
Look at Japan: they had themselves a nice little property bubble of a few trillion dollars... but they DID NOT owe it to another nation.
Post WWII Germany, on the other hand, owed tons to us & others & promptly started printing money.
We are more like Japan than Germany. We'll just implode.
Not directed at you TT or Bend Bust...
I'm just saying... I do not think we're headed for a trillion homes per dollar or anything similar.
Just saying... inflation seems good for producers... until they realize they are consumers as well.
Home inflation was GREAT for Realtors... till now. Inflation always hurts everyone.
Oy. I need some beer.
Geez... give me a little "artistic license"...
We really do read your posts, just that when you went from the BULL to hyper-space you lost me, and I thought there might be something missing.
Like the second post says, if interest rates are kept low, and the bond market keeps rating junk-bonds as 'AAA' and using them for LBO's. Then there will be hyper-inflation. We can only wait to see, given the incompetence to date and complete lack of oversight of our financial system it doesn't look good. Lastly, on a historic basis the only way to pay for the $2 Trillion dollar war will be inflation, e.g. to make the debt to the Chinese cost us less real wealth in the future.
Yes, the 'investors' as you called 'lenders' are going to get hosed on the sub-prime debacle. It's going to be real hard to get pension money to finance the MTG biz for a long-long time.
Perhaps if we want to be cute what we should be calling the Bend-Bubble process is HYPO-INFLATION, like hypo-thermia.
The Bend RE market will implode, and will enjoy hypo-inflation, people will be leaving 'deeds of trust' as tips to waiters.
>>Inflation always hurts everyone.
Well. Not always. If you bought a house with an 18% rate when inflation was high (as my parents did) and then wage inflation gallops along for awhile, then your fixed house payment becomes meaningless against your increasing wages.
Then, when rates come down, you refi and you got your house for cheap.
Of course, that trick rarely works. But I saw it happen with my own eyes. :-)
--TT
Darrin Kelleher. Pre-boom he was the manager of the Bend branch of Arrow Rentals over by the railroad overpass off Franklin. Kind of a harmless, if deluded guy. Cheesy as hell, with a weakness for "big boys' toys.'" Long-time semi-WT Bend roots. Got into development at the beginning of the boom with - HIS MOTHER - who has connex on the inside with Bend city building department.
I don't know if he has his own money now, but typically as a "developer" what he would do is come in with his OPM investor-backers, buy a fairly large piece of land (mobile home park, Orion Greens golf course), have it re-platted and utilities brought up to the lots, and then sell lots to builders. When things were really booming his city connections were key, although now the city building and planning departments are so slow they probably send people out door-to-door seeing if anyone wants to build anything.
One good thing you can say about Kelleher is he's not an out-of-area fat-cat. I think he probably did feel bad about the mobile home park - hell, he probably had relatives in there. And he really is an optimist, for what it's worth, the way most totally cheesy people are.
But anyway, I don't even know how you can call what Darrin Kelleher does "development," although maybe technically it qualifies.
Of course, that trick rarely works. But I saw it happen with my own eyes. :-)
*
Being a little older than you, I saw it also, but I saw something a little different I saw houses in So-Cali sell new in 1972 for $15k, and then move to $250k by 1980, then to $450k in 1990. Then back to $350k in 1992, then to $600k most recently. For the very few that stayed put on their 8% loan of $15k for thirty years, yes they did good. Sadly most people didn't stay put, they moved, flipped, and paid.
I don't think the interest on the $15k was that important. In the day your parents paid the BIG interest it was on TINY little principles. You could fill a tank of gas @ 25cents a gallon for less than $5.
There is a BIG difference on of 5% vs 7% on $500k. The 200 basis point difference is $10k.
What I'm saying is that what happened from 1970 to 1980 wasn't so much 'interest' as it was everyone became rich, at least those that bought before 1972.
The same thing happened in Oregon, in PDX all the houses in today's SUPER-HOT inner-southeast were going for $50k or less fifteen years ago. ( Today $500k ) I remember in the 70's you could buy anywhere out on the coast for under $10k all day long.
What I'm trying to say is 10% or 12% MTG on a $10k note is NO big deal. But 10% of $500k is a big deal, thus a jump of 5% to 10% is pain beyond explanation.
Let's take folks with ARM's that bought in BEND @ $500k, every 1% is $5k, and there will be many hikes to come. There's going to be big pain.
Debt is debt, its generally never been a good idea to be in debt. Some might say that if you can borrow at 5% in a 10% inflationary environment this is a good thing, but that is just gambling. Banks aren't stupid, generally they want 2-5% over inflation in most times. Yes, if you have a bunch of debt right now at 5%, and if inflation went to 20% and you didn't buy anything. Note everything else is also going to go up 20%, there really is NO safe place to be, except a historical safe haven. Even gold while good during a crisis is not a safe bet in a long inflationary period. Gold does best during short crisis and hysteria.
People who play the debt game and try to beat the banks usually get hosed. Look what's happened in Japan right now, everybody and there mother borrows at 1/2% and buys US T-bills ( 5% ), but the problem is the dollar is dropping like a rock, thus all of a sudden those 'Japanese investors' don't look so smart.
he really is an optimist, for what it's worth, the way most totally cheesy people are.
( Cheesy and optimist. Today we learned that optimists were good positive people, now we're told they're cheesy, to be honest I really don't know what a cheesy person is-is ?? I think of cheesy as an ugly person in a kmart suit selling fake watches? Are these really what optimists look like?? )
But anyway, I don't even know how you can call what Darrin Kelleher does "development," although maybe technically it qualifies.
( People that I have known over the years that have made the best money are the ones that buy raw land, and have it platted, and sewers, elect, water brought in, and sell the lots to builders. There's low risk, and you don't get stuck with a house, no maintenance. Like you said, if you have an IN with permits then you don't have to fight, hell you don't even have to wait in line. Generally with building there is lots of risk, and your lucky to make 15%. Raw land developers can make a fortune. Look at Juniper Ridge, city paid $1 for 1500 acres, which works out to be .006cent/acre, and sell the 5,000 sqft lots for $200k, or $1.6M/acre. That's real money, and thats a real return. Ergo pay NO attention to builders, watch the developers, the guys turning raw land into lots. )
Bank of the Cascades quarterly report out.
BOTC's non-performing assets were $9.4 million at June 30, 2007, compared to $7.7 million for prior quarter and $3.0 million at year-end 2006.
So an increase in non-performing assets at a rate significantly over 300% in just 6 months.
FED says keep things the same, thus if the LBO's guys keep burning through billions and billions of junk-bonds rated 'AAA', there is still a damn good chance of hyper-inflation.
***
Bernanke Says Inflation a Worry, But Fed Still Expects Moderation
By Brian Blackstone
July 18, 2007
WASHINGTON -- A cautious Federal Reserve Chairman Ben Bernanke warned Wednesday that recent improvement in underlying inflation may prove temporary, though he repeated the Fed's longstanding view that those pressures should moderate in coming months.
Economic growth should pick up despite the continued housing drag, Mr. Bernanke added in testimony before Congress, and against that backdrop inflation has remained the "predominant" policy risk, he said, suggesting that the likeliest scenario remains a lengthy continuation of the Fed's year-long pause in interest rates.
"Overall, the U.S. economy appears likely to expand at a moderate pace over the second half of 2007
Agree on the loan amounts. The real problem now is affordability. People are reaching to buy houses that banks and S&Ls never would have let them buy before. This lets sellers jack up prices to crazy extents. When my parents bought, YOU HAD TO HAVE A DECENT DOWN PAYMENT. Once you could buy with no money down, there was nothing to stop arbitrary price increases.
Wages and rents have absolutely NOT kept up with housing. We've stretched the rubber band as far as it will go, an there will be a snap back.
Ouch.
--TT
Hola Gringos,
On the subject of 'mexicans' [ The Bulletin "Immigrants Will Save Central Oregon" ] one interesting stat, and this is very important, that year to date wiring of money 'home' to Medico is down 25%.
In addition the dollar is falling like a rock, 'real inflation', as the dollar is buying less and less, and we're an import nation.
The mexicans are getting double hosed, the construction wage for gringos has dropped from $45/hr to $15/hr, and mexicans wage slightly up from $7/hr to $10/hr. Now with NO work for anyone the gringos will go down, which means less money for the mexicans. Convergence will be under $10/hr for both, e.g. if you want to work, and the Gringo will have to work as hard as a Latino, this is going to be very interesting.
My personal guess is that our best day of Mexicans ( the great brown hope of central oregon ) was during the boom years.
Yes, there are millions of Mexicans in Cali, and yes they're breeding little 'legals', but UNLESS our City of Bend invests in Spanish Cartoon Channels in LA, I don't think we'll get them.
Don't laugh at the SCC suggestion, if the good City of Bend can spend taxpayer money getting Outside Magazine to rate us #1, then certainly its a good use taxpayer money to fund PR in LA so that second generation bambinos know that bend is exceptional. Think of Bend as "Tijuana with a view".
'DVA' will do the PR, and get the normal 15% marketing fee, they're based out of Hollywood, they may get us a deal.
adios, pedro
Today's news on the Bear Stearns Hedge Funds:
They are worthless. One is down 95% and the other is down 100%. Ah, the wonders of leverage.
--TT
When my parents bought, YOU HAD TO HAVE A DOWN PAYMENT.
*
During the early 1970 in so-cali, the tract boom began, similar little boxes on small lots were very cheap.
20% of $15k is $3,000, that was when folks made $6,000/yr. In those days the interest was 5% up to 22% ( 70's window ). Oh, ya and the median income for a Bendite is $40k ( wiki ).
Now we have $500k with zero down, ARM, no-interest, reverse-equity, stated-income, good credit not required.
An estimated $20 Trillion of MTG related CDO's of churned during the past five years, it made a lot of commission for a lot people, the same people that primarily donate to Hillary Clinton. We're talking 100's of Billions in Commission.
It's going to be very hard politically. That said the money all came from granny's retirement fund. It's going to take 1/2 year for granny to find out she got screwed, then she'll be looking for some new place to park what money she has left.
Let's see first it was DOT-CON, then sub-prime bond, ... Right now folks getting out of Bonds and back into the stock-market. I expect to see a new DOT-CON like scam soon.
There is simply too much retirement money floating around with NO where to go.
'84 Lumber'
This is a very good story. My prediction is that while the new-home will collapse. Those tens of 1,000's of shit tract homes are going to be falling apart and need fixing. These folks will be in Redmond, and serve Madras, Priny, ... This is going to hurt Home-Depot and Lowes BIG-TIME. The tone of the article is negative, but the fact is they folks are making a good move, they certainly have the cash to weather 2-3 slow years, but they'll certainly nab 90% of the materials biz North of Bend. Why in the hell would anyone even drive to North Bend??
84 Lumber slated to open in October
By Jeff McDonald / The Bulletin
Published: July 18. 2007 5:00AM PST
REDMOND - Two years after 84 Lumber Co. announced it would open a showroom, office space and warehouse at an old lumberyard east of town, the $3.9 billion construction-materials provider has targeted early October as its opening date.
Based in Eighty Four, Pa., the company provides construction materials and services mostly to residential contractors and has more than 475 locations, including 24 component manufacturing facilities, according to its Web site, www.84lumber.com.
The company delayed its Redmond opening to determine whether the old Ponderosa Mouldings building could be salvaged, said Tom Gilbert, manager of the new facility. The building has sat vacant on the 10-acre lumberyard site since Ponderosa Mouldings ceased operations in 2003.
The company chose Redmond in 2005 for the 95,000-square-foot building's location near a rail spur on 10 acres off East Antler Avenue, for the building's potential to be remodeled and for Central Oregon's fast growth, Gilbert said.
Renovations will cost $2.5 million to $3 million, he said.
Unlike The Home Depot and Lowe's, which sell most of their lumber products to do-it-yourselfers, 84 Lumber does most of its business through professional contractors, often bringing materials to the job site, said Robyn Hall, company spokeswoman.
"When we take a look at markets we're going into, we look for significant growth in the housing industry," Hall said. "The company felt that Central Oregon was an area that in the next several years would be developing."
The Home Depot and Lowe's are planning stores in Redmond and currently operate in north Bend.
The entrance of 84 Lumber into Central Oregon's tightening housing market will spark competition among the companies providing builders with supplies, including Hillsboro-based Parr Lumber and Bend-based Miller Lumber, both of which have Redmond locations.
"If I were 84 Lumber, I would delay my entry into the market," said Nate Bond, director of sales for Parr Lumber in Hillsboro. "The market had been very strong, but (building) permits are way down, and I'm not sure how long it's going to last."
Miller Lumber representatives could not be reached for comment.
Hall said the company is not basing its opening on the current housing market but on long-term growth projections.
"Even though certain areas of the country are in a downturn, others continue to plug along. That's where we open new locations," Hall said.
The company typically selects a location that has 3,000 new housing starts within a 25-mile radius in the course of a year, Hall said.
From July 2006 through June 2007, 2,324 new single-family housing permits were filed in Jefferson, Crook and Deschutes counties, said Don Patton, owner of Redmond-based Cascade Central Business Consultants. Patton believes the number, down 48.5 percent from the same period a year earlier, will dip further in the coming year.
"Nobody knows what the current Central Oregon housing market is or what it should be," Patton said. "I've got to believe that we will establish a niche and keep on going, but we're not going to see a boom like we had in 2005-2006 for a long time."
Parr Lumber has the benefit of several locations throughout Central Oregon, including Prineville, Madras, Redmond and Bend, Patton said, while 84 Lumber will have its one location.
"Sure, people are going to be checking them out to see if it's a better mousetrap," Patton said. "If it's not, they go back. But you might have a challenge (as a customer) getting your product (in Redmond) if you live in Warm Springs."
It's rolling bubbles. It's hard for me to believe anything comes after housing (except pain and a horrible reality vortex), since that's the biggest asset class of all.
--TT
I think the upshot of little local "inflations" like we're having, is commerce & all else goes to hell. Little local inflations mean that Bend becomes uncompetitive (note the Bend business exodus); it's like pouring molasses in an engine. We are morphing toward a purely local economy, t-shirts, knick-knacks, etc. No one will build/relocate their "real" business where they have to pay their workers twice what they would anywhere else, cuz they need to pay outrageous amounts for a home. In a way, businesses in Bend are "buying" the homes here... and they cannot afford them.
I mean there was a bubble nationwide, but Bend was the white-hot center. We went from "off the list" of overvalued MSA's, to #1. All those other top 10 markets have been on there or close, forever.
Maybe we are just joining the Top 20 ranks and will stay there. I don't think so though... it'll require INCOME, which we do not have. We're too big for anything else to work. And I think that it is actually worse than unemployment stats say: Employment stats do not count independent sub's, which this place is full of.
Any link on that Bear Stearns implosion?
"Nobody knows what the current Central Oregon housing market is or what it should be," Patton said. "I've got to believe that we will establish a niche and keep on going, but we're not going to see a boom like we had in 2005-2006 for a long time."
Holy shit, today they're quoting people who talk like they fucking know what they're talking about?
Is Patton an optimist or a pessimist? My guess he's a realist. Let's see how long it takes the BULL to learn how to use that word.
Like we knew, July 2007 would be the month of education. Time to get the masses adjusted to the idea that the Bend-Bubble is over, and NOT coming back.
Day two of semi-realism and NO realtors to be seen.
If Bend is 'Tijuana with a View', What does that make Redmond? How's that Water-Slide?
I mean there was a bubble nationwide, but Bend was the white-hot center. We went from "off the list" of overvalued MSA's, to #1. All those other top 10 markets have been on there or close, forever.
**
Look at our sister in Over-Value Prescott, same as Bend. An 1-1/2 hour drive from Phoenix ( we're 3hr from pdx ), a place to retiree like Bend. A pretty little place.
Not a fucking job to be found except bars and restaurants. A place that people in Phoenix go to party on the weekend to cool off. Bend is the place people in Portland go to, to get out of the rain.
Naples, and other Florida hot-spots forever, but our sister Prescott, is the same as Bend, a shitty little desert town, that has been around forever. Know for sleazy bars, and cowboys. Then Realtors started marketing it....
Bend is exceptional, it is Aspen, who needs a job. Let's all live in Redmond, and work in Redmond, and then drive to Bend to play. This is how its done in Aspen, only Billionaires can afford to buy in Aspen, the work-force doesn't live there, and neither do millionaires.
What you sow so shall you reap, I hope the people running Bend City Council are happy. I hope they're happy we're #1, I hope the PR firm of DVA is happy. I hope UBS is happy. I hope that everyone loses their financial ass.
The next play to look for is when folks Redmond start buying bargains in Bend.
It's hard for me to believe anything comes after housing (except pain and a horrible reality vortex), since that's the biggest asset class of all.
--TT
***
Reference check, in 1983 stuff that had been selling for $80k, fell to $30k, then by 1986 it was back to $120k, and today the ask is $450k.
This is not the end of the world, folks that aren't bleeding and that can just watch and keep their job for 3-5 years will be fine.
Folks that paid TOP prices in the last five years, that is another story, it will take a long time to get back there.
This is ALL quite slow and orderly, note that we're already into our first year, and the BULL is Just now telling people its game over, in the next few months it will be the topic of the town, and a lot of people will move-on.
There is a SHIT-LOAD of inventory in Central-Oregon, and with the loss of new construction there will be less employment. RE & MTG are completely down.
There really are a lot of retiree's that want to move to Central-Oregon, and once the medians fall below $200k, they'll start buying the bargains. That will be 2009. Bargains can be had now, there were bargains in February.
People need a place to live, we handed out OPM for free, and home-ownership went from 60% to 70%, now its going to go back below 60% for a long time, like your rubber band analogy. That said, the baby boom is over, and grandpa is looking for a hobby-farm so he can grade rocks on his John-Deere 790.
There is NO end of the world, easy money is over, we'll fall very low, and then come back up to stabilization, which will be near 4X of income. The day of mcMansions is over, GAS heat is supposed to go 10X in the next ten years now that we have passed peak-oil. Nobody will be able to afford to heat a home for 1,000sq-ft.
There will be no more cali dot-con millionaires,
No end of the world, so what if a little home in Bend falls from $500k to $200k, that only effects those that paid top-price during the last five years. It's called the greater-fool theory, and the greatest fool bought in May 2006.
It's human nature not to brag about being stupid, most people will just leave.
It's a very good thing that this will be a slow process.
Great read...
Does anyone think that the central oregon RE bust is the beginning of the complete economic implosion of this area (similar to what happened after the timber crash)?
We are seeing an increased rate of inflation here in CO as costs of nearly all goods (durable and non-durable) increase and wages not keeping pace...
I would assume that many CO residents have a high income to debt ratio (higher than the national average). If this assumption is true, we are going to see an increase in migration out if CO and create an economic vacuum.
I think some people forget that you don't 'make money' on RE until you sell and if RE prices decrease below purchase price, well then you know. I guess you can take out a second, third or equity loan to get by but then your compounding the situation...
As an astute observer to local economies (I am no expert), RE is just one small variable to the overall financial health of an area. I propose that jobs/wages are the single most important factor to local economic stability.
Just my $.02 - because that's all I have right now; after my mortgage payment, taxes, insurance, utilities, etc...
Does anyone think that the central oregon RE bust is the beginning of the complete economic implosion of this area (similar to what happened after the timber crash)?
2 answers:
1) Yes
2) HELL YES!
I think this is the BIGGEST STORY in Cent OR history. EVER. We're in inning 1 of a mind-numbing decline that will just decimate this place economically. But it really won't make The News because it's a slow-moving, rather uneventful story, and it's Economic in nature... both Bad Fodder for the news outlets. No excitement. One decent wildfire near Bend will get more play than this Ever will.
I think there will be large-scale bankruptcies just like the Bad Old Days -- Big builders, banks, even a municipality or two. Big companies are shutting down like clockwork, and either quitting or moving. Agreed, that wages are issue One, and wages are fleeing.
This is what happens when you double down on red for the 10th time in a row: You lose, eventually. We concentrated when we should have diversified. Now we're going to pay, and probably be the center of an implosion that gets national attention, ultimately.
But it'll be a few years.
Regarding Bear-Stearns { follows below } what happened is that yesterday BS sent out a letter to grand-ma with a mea-culpa, "sorry granny, your money is GONE".
The big boys had know about this since xmas, all played out on the market. We here of course have known about the bend-bubble being over, and just yesterday the BULL tells' folks. Like I have said for months July07 will be the month of bad news.
There is no news, the news is that NOW granny has been formally told. The good news is that MOST pensions weren't allowed to have more than 10% invested, and thus most people should see NO more than a 10% loss on their retirement, that said you just lost two years of gain.
****
Bear Stearns' credit hedge funds almost wiped out
Leveraged fund worth nothing; 'very little value' left in larger fund, letter says
By Alistair Barr, MarketWatch
Last Update: 12:32 PM ET Jul 18, 2007
SAN FRANCISCO (MarketWatch) -- Two Bear Stearns Cos. hedge funds that made big bets in the subprime mortgage market are worth virtually nothing, according to a letter the investment bank sent to clients.
The High-Grade Structured Credit Strategies Enhanced Leveraged Fund is worth nothing, while there is "very little value" left for investors in the larger, less leveraged High-Grade Structured Credit Strategies Fund, based on estimates at the end of June, the letter said, a of which was obtained by MarketWatch. The High-Grade fund is down 91% so far this year through June, a person familiar with the situation said.
Shares of Bear Stearns (BSC :
The Bear Stearns Companies Inc
The shares have dropped more than 15% so far this year.
"In light of these returns, we will seek an orderly wind-down of the funds over time," the company said in the letter.
'This could force a wide variety of other holders of subprime mortgage securities and CDOs to meaningfully revalue their holdings.'
— Dick Bove, Punk Ziegel & Co.
The High-Grade fund had roughly $1 billion in assets under management at one time and the Enhanced Leverage fund had about $600 million. Through leverage, they controlled more than $10 billion in mortgage-related securities and other credit derivatives.
They ran into trouble earlier this year amid rising delinquencies on loans granted to less creditworthy homebuyers. Bear Stearns pumped $1.6 billion into the High-Grade Structured Credit fund on June 26 but didn't touch the more leveraged one. See full story.
The losses partly reflect "unprecedented" declines in the valuations of several securities with top AAA and AA credit ratings, Bear Stearns noted in its letter. About $1.4 billion of the $1.6 billion that the company committed to the one fund remains, and the bank said it believes there are enough assets in the fund to support its current borrowing.
The crisis has dented the reputation of Bear Stearns, which has been known for its expertise in the mortgage market.
The problems have also roiled the subprime market and may have triggered big losses and big gains at other hedge funds, depending on which side of the trade managers were on.
"This could force a wide variety of other holders of subprime mortgage securities and CDOs to meaningfully revalue their holdings," said Punk Ziegel & Co. analyst Dick Bove.
"That would cause significant declines in book value and stock prices," he said in an interview.
CDO is short for collateralized debt obligation, which is a bit like a mutual fund. CDOs have been among the biggest buyers of riskier parts of subprime mortgage-backed securities. They have also been among the fastest-growing debt instruments in recent years and are widely held by banks, brokerage firms, hedge funds and insurers, Bove said.
Triggering margin calls
Bear Stearns' hedge-fund problems, combined with rising subprime mortgage delinquencies, have already triggered margin calls in the mortgage-backed securities and CDO markets.
Margin calls occur when lenders ask traders for more cash or securities to back positions that have lost value. Traders sometimes have to sell holdings to raise cash if they can't come up with the extra money from elsewhere.
If such sales occur in illiquid asset-backed securities markets at a big discount, that can force other traders with similar holdings to re-price their portfolios, possibly triggering more margin calls.
Concern about such a chain reaction was sparked in late June, when Merrill Lynch and other lenders to the troubled Bear Stearns hedge funds tried to sell collateral they had seized after margin calls.
One cent bid
The 91% loss suffered by Bear's larger High-Grade Structured Credit Fund may be bigger than some investors had been expecting, judging by recent activity on Hedgebay, a secondary market for hedge-fund stakes.
A few weeks ago, activity on the Hedgebay market suggested investors were willing to buy a stake in the High-Grade Structured Credit Fund for roughly 50 cents on the dollar, according to a person familiar with the market.
That dropped to 20 cents on the dollar more recently.
Late Tuesday, one investor was offering one cent on the dollar for the High-Grade Structured Credit Fund, the person said.
As an astute observer to local economies (I am no expert), RE is just one small variable to the overall financial health of an area.
This is generically true. But look around, this place is built on RE. Even the economic recovery of the US since the last recession had something like 10X the "normal" proportion of RE expansion (50% vs 5%). Cent OR was probably closer to 110% of all growth in the past 10 years has been due to building. We'd be smaller w/o the hyper-RE bubble we've had.
Watch for the multiplier effect of easy money, building, and all that to unwind throughout the local economy here. It will be an incredible disaster.
That's right. You KNOW that Bear Stearns has known that these things were dead meat for months.
They trickled out info along the way to prep us for today.
The people that know how these guys communicate knew these things were dead when Bear Stearns mentioned a bailout.
The people that don't want to hear bad news just plugged their ears and ignored it.
Today it's official, and now you can watch the habitually late-to-the-party and late-to-leave investors jam the exit gates.
--TT
Read the below carefully, 50 cents on the dollar, 20 cents on the dollar, and somebody offered a whopping 1 cent on the dollar.
This is the high-grade shit 'AA'. What is now going to happen is NOBODY is going to loan money to the MTG market, there will be no money, all offers MUST be cash. Houses will simply not sell. Banks don't want houses, nobody wants them. What are they worth? ONE CENT ON A DOLLAR.
Hopefully things keep slow, hopefully. It is clear if you have to flip or refi, your fucked. If you want to buy, then you better get a good deal so it will appraise, and you better have 50% down. Your credit must be perfect. By definition I have just knocked out 95% of all buyers.
*
High-Grade Structured Credit Fund for roughly 50 cents on the dollar, according to a person familiar with the market.
That dropped to 20 cents on the dollar more recently.
Late Tuesday, one investor was offering one cent on the dollar for the High-Grade Structured Credit Fund, the person said.
Today it's official, and now you can watch the habitually late-to-the-party and late-to-leave investors jam the exit gates.
--TT
*
I love you cynical broker, but yes, this is why I have read the Wall Street Journal everyday for the past 30+ years. If you want to know what's going on, don't wait for the BULL or the Oregonian.
The big boyz communicate in code months in advance so they can all unload the sheeet.
Months ago if your BOND simply said 'Bend' you couldn't do the deal, now if you BOND says MTG, you cannot do the deal
All the WASH-MU, and little mtg-banks in the NW, have been giving out loans and selling them to the CDO market, now nobody wants them. Nobody even knows what to do with a MTG now.
For months the big boys have been selling their dogs to the public, which is how this bear-stearns fund got created.
I have been predicting this for six months, what happens when you cannot get money anymore? What happens when you can only buy&sell RE for cash??? We'll soon know.
As long as people are slow and rational and don't over-react we'll be fine.
That said our WHOLE dubya biz has all been about denial. It's ok to kill a few million arabs who cares, but now shit is coming home. I sincerely, do want an orderly process, I don't want well armed granny's running through the streets of Prineville.
It's a damn good time to have two years of food stocked at home.
It's not like the public didn't have the OPPORTUNITY to hear that this stuff was going to zero. There were plenty of smart people on CNBC, in the WSJ, in the Economist, in the FT saying it. But the trick is that any time anyone says something, there's someone else saying the opposite. If you wanted to believe everything was going to be fine, you could hear that and just frown at the bear who said it was all shit.
My favorite through all this has been Shiller (not Schiller, though he's fun too). People are always trying to get him to commit to a prediction in interviews, but he just will not do it. He lays out the dangers and WILL NOT say they will happen. But that should be enough. When he says that everything is all distorted and wrong, you should take that to heart and draw your own conclusions.
--TT
I also thought the 84 Lumber article was sort of funny: When they are talking about their business in a vacuum, well then things are slow... but looking up. When noobs are on the way, well then, all of a sudden the market is in the crapper with damn near no chance of rebounding in the foreseeable future.
Maybe we'll hear The Truth if some big franchised RE broker talks about rolling into town.
It's not like the public didn't have the OPPORTUNITY to hear that this stuff was going to zero. - TT
*
I really think its the greedy-granny's here that are the problem, this is why I'm glad that so far there is no promise to 'bail them out'. Yes, the public knew, but everyone wanted 10% without risk. So the MTG broker calls granny down in Florida and say's "Granny want to make 10% risk free on a high-value bond, yup as good as treasury", Granny went for it! Whose fault is it really?
There is NO such thing as a free lunch. Granny was getting better than prime, everybody made commission, ya S&P had it 'AAA', and it should have been 'bb', now everybody will sue everybody so the lawyer biz will be great.
I don't own a TV nor watch, only read. Given that ALL TV is only about advertising, and NOT pissing off those that butter your bread. TV has never been nor will ever be a source of information.
I agree the public found what they wanted to hear, but in general TV is biased towards "I feel good, lets go shopping", I think I'll buy some 'AAA' junk-bonds today.
The Fed is 'thinking' about doing something about sub-prime .. now that the beast is dead.
The way this story is written you think congress had been beating the fed with for the past five years. You can seen that politicians are starting to get granny calls to do 'something'.
The nothing new hear, but the real story is July-07 will be the month everybody was told that easy MTG money is NO longer available.
*
July 18, 2007, 2:18PM
Fed Plans to Tighten Mortgage Rules
By ALAN ZIBEL AP Business Writer
© 2007 The Associated Press
WASHINGTON — Federal Reserve Chairman Ben Bernanke told lawmakers Wednesday that the central bank plans to propose new consumer protection rules this year to crack down on mortgage-lending abuses.
Under pressure from Congress to combat problems in the market for subprime loans given to people with spotty credit, Bernanke highlighted the Fed's efforts to tighten protections in the troubled home loan market in a midyear economic report to Congress.
So-called subprime mortgages, targeted to people with tarnished credit who are considered greater risks, have experienced a surge of defaults in recent months.
Bernanke told the House Financial Services Committee that the Fed is examining new rules in several areas including restrictions on so-called "liar loans" that do not require proof of a borrower's income, limitations on financial penalties for borrowers who make early payments and a mandate that some lenders require set-aside payments for borrowers' property taxes and homeowners' insurance.
"The recent rapid expansion of the subprime market was clearly accompanied by deterioration in underwriting standards and, in some cases, by abusive lending practices and outright fraud," Bernanke said. "In addition, some households took on mortgage obligations they could not meet, perhaps in some cases because they did not fully understand the terms."
Sheila Bair, chairman of the Federal Deposit Insurance Corp. praised Bernanke's comments, saying that mortgage lending rules should apply to all lenders and not just federally regulated banks. A uniform set of rules, she said, would relieve pressure on banks forced to compete with lenders outside federal regulation.
On Tuesday, the Fed and other federal and state regulators said they would start a pilot program to examine about 12 lenders outside federal regulation to make sure they comply with consumer protection laws.
Only about a quarter of subprime loans in 2005, the most recent year available, were made by federally regulated banks, according to the Fed. The rest were made by state-licensed lenders and subsidiaries of federally regulated banks that operate with limited federal regulation.
I also thought the 84 Lumber article was sort of funny: When they are talking about their business in a vacuum, well then things are slow... but looking up
*
Yes, todays 'twist' from the BULL seems to be the boom is over, and we have hit bottom, and now its only up.
Where are the Realtors? Did they all leave Bend? Where is Mrs Breeze? Where is the City? Are they still going to be using taxpayer money to build more affordable condos??
'84 Lumber' is going to be great, Lowes & Home-Depot at the North of end of town are going to get hosed. Perhaps one of the two will go to the South end of town for Sunriver and LA-pine folk.
Maybe there will be slightly less north-south traffic between Redmond & Bend, once Redmond gets its own super-hardware store.
Hows that water-slide??
William Smith Properties to get $26 MIllion CDO-MUNI Bond. COCC expansion. Taxpayers will get debt, William Smith Properties gets to survive the recession. Why now pray tell?
****
COCC picks Bill Smith to develop property
July 17, 2007 09:40 PM
From KTVZ.COM news sources
The Central Oregon Community College Board accepted a recommendation Tuesday night to appoint William Smith Properties as the "preferred master developer" for about 45 acres along Shevlin Park Road and Mt. Washington Drive.
The selection of the firm best known for creating the Old Mill District followed interviews with three interested developers who responded to a request for qualifications.
College Vice President Jim Jones noted this firm's experience with similar and larger projects, the quality of its consulting team, its extensive experience in Central Oregon, the quality of the work and the flexibility it shared on how it will work with the college.
The next step will be for the college to issue a non-binding letter of intent to lease the land to William Smith Properties and move toward establishing a development agreement, coming back to the board within 180 days.
Earlier in the meeting, John Overbay, a board member for the past eight years from Sunriver, was elected chair of the COCC board for the 2007-08 year and Ron Foerster of Bend was elected vice chair. Charley Miller, owner of Miller Lumber, was sworn in as a new board member, following his election in May.
The board also approved contracts for all employee groups (faculty, ABE instructors, classified employees and administrators). While each contract is different, salary increases average about 4 percent.
The board also received a report on summer enrollment, which currently stands at 8 percent up in headcount and more than a 10 percent increase in FTE. President James Middleton noted that this represents about a $50,000 increase in income.
n May, the board voted to freeze tuition for the upcoming year at the current rate, hoping it would result in an increase in enrollment. A $2 per credit tuition increase, originally planned, would have netted approximately $200,000 in additional revenue, so this enrollment spike has already covered a quarter of that amount.
Middleton also discussed the college's fiscal picture, following the recently concluded legislative session. He noted that COCC is in much better shape than had been anticipated prior to the session, but that the college's state income will decline over the next few years and the result will be that COCC will eventually receive less than 10 percent of its operating income from the state while other community colleges will see a much larger percentage.
Middleton also noted that COCC's in-district tuition is right at the state average for community colleges, coming in at $63 per credit while the state average is $63.60. However, when tuition and fees are combined, COCC is near the low end, ranking 13th out of the 17 colleges.
For out-of-state students, COCC ranks ninth, but for out-of-district students, COCC charges the highest tuition in Oregon, which he noted as appropriate, as it receives the smallest amount of its budget from the state.
College Vice President Jim Jones gave an update on the plans for new and renovated facilities for science and allied health programs. Initial estimates put the cost of the building and renovations at approximately $26 million. The state has recently allocated $5.8 million toward the project.
The plan would be to seek voter approval of a bond measure to fund the remainder of the facility, plus money for other projects. Jones said the college will soon be issuing a request for proposals for an architect to work with faculty in the areas and the project management team.
Acting on a recommendation from a college committee, the Board approved naming one of the Oregon Rooms, part of the three-room suite area at the front of the second floor of the Barber Library, in honor of long-time instructional leader Bart Queary.
Queary came to COCC in 1979 and served first as division chair, then dean of the college and, from 1989 through his retirement in 2002, as vice president of instruction. He helped guide the development of 35 new degree and certificate programs and hired and mentored every member of the faculty.
Queary also was one of the early proponents of upper division offerings at COCC and, along with President Fred Boyle and faculty member Ward Tonsfeldt, co-wrote the study called "Upper Division and Graduate Education: Alternatives in Central Oregon." The paper eventually led to the creation of the Central Oregon Consortium for Higher Education (COCHE) which evolved into the University Center and, eventually, into the branch campus of Oregon State University.
During the 1980s, he was one of two chairs of the statewide legislative committee that developed the Associate of Arts Oregon Transfer (AAOT) degree, providing formal articulation between community colleges and public universities in Oregon. Among his other accomplishments while at COCC, he helped plan the development of the Pinckney Center for the Performing Arts, which was built when he oversaw that fine arts department; the major remodel of the college's science labs; and the building of the new library, both while he served as instructional vice president.
I love it things are going to shit, and those MOST responsible for building shit get a parachute and bail and get a soft landing before the passengers even know the plane is going down. $26M CDO-MUNI debt, that should hold over the Old Mill for 3-5 years???
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William Smith Properties Inc
www.theoldmill.com
15 SW Colorado Ave # 1
Bend, OR 97702
(541) 382-6691
For months the prediction had been how will the Condo Whores keep the good ship lolly-pop afloat??
Now we know the Old Mill "William Smith Properties" has lined up a security blanket only a cynical kleptocrat could love. $26M MUNI-CDO-BOND debt the only kind of debt that you can get anymore ( post subprime ), to just keep building, planning, spending, and living high at the public trough.
Rather than just move on and find a new home, build shit, we have to keep these people afloat so they can be around in 3-5 years to expand the Old Mill.
It just doesn't make sense, or maybe it does? If you can't beat them join them.
From Duncans awesome blog:
Brooks Resources backs out of a project to build million dollar townhouses on riverfront project.
Why didn't Brooks get the COCC $26M?? Perhaps they know the CDO MUNI DEBT BOND will never pass vote?
I think the 'eye' should read ALL the detail on the subject of closing downtown that Duncan has written. Like putting a large fridge in front of his business so nobody even knows he's there, ...
That said ALL have been forewarned about posting and using your proper name.
At least they didn't quote "cali-bagger", ...
A Classic Rant
Written by The EYE
Friday, 13 July 2007
At least one downtown Bend merchant isn’t happy about closing the streets for things like the Cascade Cycling Classic and the Bend Summer Festival – and he’s not shy about it.
Pegasus Books owner Duncan McGeary writes on his blog, Best Minimum Wage Job a Middle-Aged Guy Ever Had: “What numbskull decided it was a good idea to close the streets downtown at 1:00” on Friday for the Twilight Criterium portion of the cycling classic? “Somebody please tell me how a bunch of bikers whizzing around in front of my store are supposed to help my business?”
“The tail of promotion is wagging the dog of business,” McGeary went on. “I was asking John, my next door jewelry neighbor, if after 3 years he still thinks all the street closures are a good idea. ‘Well, they definitely don't help on the days they take place, but they bring people downtown.’
“I give up. Does anyone have any proof that is true? We know for a certain fact that blocking customers from your store isn't good for business on the day they do it. We are supposed to take it on faith alone that it's good for business in the future? …
“The streets of downtown Bend in July and August would be full of shoppers without getting in their way – because the shops themselves would attract them. Not the wine-tasting, cheese-eating, folk-singing, clown-suited outsiders who we invite to distract our customers and steal our business.”
Personally, The EYE thinks Mr. McGeary’s outrage is a little over the top. But we’d be interested to hear what other merchants – and people who patronize the various street festivals, etc. – have to say. Have at it, folks.
One other comment on the "Eye" { The Source } report on duncans blog. They do have a link, and there is some good material on the subject. Including follow-ups.
The normal tone of the "Eye" is generally such, and they couldn't even say what they think and certainly 'duncan' isn't an advertiser.
It's very important that they have included the link, a few people that didn't know about these issues, well now know. I personally think that Duncan will get quite a few atta-boys, especially if people take the time to read the whole story about street closure.
The Source cannot come out and support the material, but by posting Duncan's link, they're certainly putting the material in everyones face.
The debate has begun.
It's unlikely Dunc will get much of a sympathetic ear from the Source for too long. The Source -- or rather, the events company owned by Source owner Aaron Switzer -- is behind the Bite of Bend, Winterfest, and a handful of other street-closing events.
The Source -- or rather, the events company owned by Source owner Aaron Switzer -- is behind the Bite of Bend, Winterfest, and a handful of other street-closing events.
Thanks for the reference, but at least Duncan now has the issue on the table.
How does it feel to be right? Damn good.
"preferred master developer"
What is it with this town, why is that every little toy town project has a "preferred master developer" ???
Every time I see this phrase I think preferred masturbator.
Does this make "Aaron Switzer" the Peferred Events Coordinator? or the preferred Event Master Coordinator?
Who make this shit up? I have never seen a town bestow such silly titles.
We live in interesting times, a line has been drawn in the sand, on the one side Mayor Duncan, on the other Aaron Switzer. The winner controls the streets of downtown Bend.
Oooh -- gee. Paul Doh!pe found a picture of a pour pouting fraulein (circa 1926?) burning her Deutschemarks... Must be -- da-dah-da-DAAA! -- JUST LIKE BEND!
Gosh, why not run another NASDAQ graf? I mean it must be -- da-dah-da-DAAA! -- JUST LIKE BEND!
Jesus, you are pathetic. Don't you do ANY original research for these screeds?
Kelleher flipped his mobile home park months ago.
Bend lots are still going for $199k this year -- down a whopping 5.6 percent from first 6m's of 2006.
Your idea of basic research is some lame search of The Bulletin's website articles? That's the best you can do? The same pub you go out of your way to dis in every post?
If their data and analysis is so fucked, WHERE'S YOURS? Is there any point in reading your tripe, or are you just some frustrated, and not particularly talented, asshole banging on a keyboard and hoping that someone mistakes you for a journalist? Or an oracle? Or an economist? Or something other than just another angry white guy with a couple thousand axes to grind and no job to distract you from doing it?
simply innocent questions. Inquiring minds want to know where our bullshit is coming from.
I don't know but that last post's attitude makes me wonder if some one isn't losing their ass in RE or construction or something somehow related to all the insanity of late.
Oooh -- gee. Paul Doh!pe found a picture of a pour pouting fraulein (circa 1926?) burning her Deutschemarks..
**
Our resident Nazi just hates this picture. The moron insult session has returned. Sanity didn't last long. What three days?
Time for three days of adolescent insult.
The following is a response to Nazi-Moron. Note, what's most interesting about his repetitive posts is they're time invariant, he can keep posting the same shit anywhere, any day, and it would always fit.
Jesus, you are pathetic. Don't you do ANY original research for these screeds?
{ It's always the same argument, find a new one. }
Kelleher flipped his mobile home park months ago.
{ Yes, but Kelleher was in the news this week, and its important for us all to refresh everyone with who is who. Why do you even bother reading this site, given that you know everything? }
Bend lots are still going for $199k this year -- down a whopping 5.6 percent from first 6m's of 2006.
{ Lots in Bend had an ask of $300k a year ago, and I just one on craigs-list yesterday in town for $320k. There not sell of course, my personal opinion is there not selling for $199k either. Almost all lots are bought on SPEC, and the fact is in order to make money you have to sell the home for $500k, and they're not selling. Thus the lots are sitting. }
In final summary, the main premise here is wait until next year, thats when hysteria will be in the streets. Folks were just told two days ago by the BULL that the game was over. Real Estate had told us for the past year that summer would bring the good times back. Now were told the future is NOT good. This all takes time.
The same pub you go out of your way to dis in every post? - NaziMoron
**
This is a one PUB town. Dissing another pub[lication] is not an option in a small desert shit-hole like Bend. We do frequently 'dis' the Source and the Oregonian. That said the 'BULL' makes the most inane statements, and is thus creates the best material for critics.
Yes, its always easy to be a critic, especially an anonymous critic. When the 'BULL' talks shit, we'll make a public statement to that fact. If you cannot handle it, then create your own blog-site, and support their position.
Regarding 'original material' which is a re-curring theme. It's important to ONLY quote public sources and public information. Anything else can get you in trouble in a litigious hood like Bend.
If you want people to pull 'original material' out of their ass, then create your own blogsite and create that material and post it.
Councilors also with city staff's new direction to seek more public input before finalizing a new sewer master plan that critics claim has been a rubber-stamp of ... Juniper Ridge
This is quite interesting, buried DEEP in this little fluff piece on global-warming is fixed by Bend. Is a statement of fact that City Council will NO longer rubber-stamp Boss-Hog Projects.
The whole plan of Juniper-Ridge was that ALL the infrastructure was going to be be paid by passing the general cost to the water-sewer bill of general Bend. A 2-10 fold increase over five years.
In the past when the City has made promises they lasted about 2-3 months, lets see how long this promise lasts.
Bend councilors adopt climate-protection pact
July 18, 2007 10:43 PM
Bend Councilor Jim Clinton (L) questions city Public Works planner Mike Magee (R) about sewer master plan
Bend Councilor Jim Clinton (L) questions city Public Works planner Mike Magee (R) about sewer master plan
Join 620 other U.S. cities in unanimous vote
By Barney Lerten, KTVZ.COM
Bend city councilors voted unanimously Wednesday night to adopt the U.S. Mayors' Climate Protection Agreement, though not without one councilors' misgivings about the included, controversial claims about global warming and man's role in it.
But even Councilor Bill Friedman went along in the end with the proposal from Mayor Bruce Abernethy, since he, too was in favor of the list of a dozen local environmentally friendly action items, once one got beyond all the "whereas" clauses in the resolution, such as one pointing out "well-documented impacts of climate disruption."
"This is something we need to be supporting," said Councilor Peter Gramlich. "This is a no-brainer for me."
Colleague Jim Clinton said he's supported the mayor's signature on the agreement "for a long time," due to the "emphasis on things we can do in our own community to make a difference in our own lives."
The decision was applauded by Cylvia Hayes of 3E Strategies, a local sustainable and renewable energy advocacy group, and Mike Riley of reSource, which advocates for recycling, reuse and less use of packaging. They are two of the groups that have been behind the local Energy Independence Month activities that wrapped up Wednesday, and said Bend becomes the 621st U.S. city to adopt the resolution.
The list of items to reduce "global warming pollution" range from adopting and enforcing land-use policies that reduce sprawl to promoting transportation options, making energy efficiency a priority and increasing the average fuel efficiency of municipal fleet vehicles.
Hayes repeated what she's said many times in recent years, that "Central Oregon has such an amazing opportunity," with a "diversity of renewable energy resources unparalleled in any geographic area. I believe we have an opportunity to create a model for the nation and the world."
Coincidentally, councilors decided to steer clear of another hot-button national issue, rejecting a request by local foes of the Bush administration and the war in Iraq for the city to sponsor some sort of town hall meeting on the topic, including a call for impeachment of the president and vice president. They said that's something citizens can and should tackle on their own, without formal city involvement.
Among other issues, councilors also agreed with city staff's new direction to seek more public input before finalizing a new sewer master plan that critics claim has been a rubber-stamp of city priorities that focus growth on the city's Juniper Ridge mixed-use development.
They also sent back for tweaking a proposed sewer "reimbursement district" for a new development, under a new ordinance, to make clear other existing residents of the area don't have to share in the cost until and unless they put an extra demand on that sewer system. Clinton again espoused his view that current city water and sewer rates fail to encourage conservation due to their flat-rate nature.
Among other issues, councilors also agreed with city staff's new direction to seek more public input before finalizing a new sewer master plan that critics claim has been a rubber-stamp of city priorities that focus growth on the city's Juniper Ridge mixed-use development.
How about a generic promise to squander NO public money without a debate, advance notice of meeting, no secret documents. Open meeting law is enforced.
Reading this it sounds like 'rubber-stamping' is only going to be applied one time to shit flowing out of Juniper-Ridge.
Coincidentally, councilors decided to steer clear of another hot-button national issue, rejecting a request by local foes of the Bush administration and the war in Iraq for the city to sponsor some sort of town hall meeting on the topic, including a call for impeachment of the president and vice president. They said that's something citizens can and should tackle on their own, without formal city involvement.
Cowardly cunts, having a public meeting by a bunch of hippies at the tower movie house wouldn't even show up in the news.
It's critical for the electable to ALL vote up or down on DUBYA so everyone can clearly see in Bend who is a pathetic Nazi sympathizer and who isn't anything else is BULLSHIT ( BUSH-SHIT in some circles ).
The fact is Bend is a conservative shit-hole. The good ship lolly-pop has condo's to sell, we can't be political we might offend some right-winger during Bend Nazi-Days.
"Hey Adolf I read in the paper that Bend doesn't support the war on Arab's", "I'm not going to buy a condo now in Bend", "I thought Bend was a Nazi paradise".
Then again the council might vote for DUBYA across the board, think what that would do for condo sales, when the post-Iraq war trials start we can hide all the war-mongers like Argentina did after WWII.
I really wish this town would NOT make tourism and Public-Relations its NUMBER one mission. Most residents of Bend are not obsessed with Tourism.
Carving a new sewer line for the neighborhood required blasting and chipping through as much as 23 feet of solid rock to get to the nearest main line on Reed Market Road, Kelleher said, but he's hoping the uniqueness of the subdivision will be its main selling point, despite the slow Bend real estate market.
High-end custom home builders have indicated some interest in the big lots, Coldwell Banker/Morris Real Estate broker Norma DuBois said, but, for the most part, not until they sell some of the homes they have already built and get cleared by their lenders to buy more land. Second-home buyers are another likely market, said Kelleher's father, Don Kelleher, who's also a Coldwell Banker broker.
"Truly, things are not selling in Bend right now," Darrin Kelleher said after a Wednesday afternoon barbecue for 130 brokers and builders to kick off the subdivision's sales. "So if this sells, then what do you call it - a tribute to a different kind of product."
The median price on residential lots in Bend slipped 5.46 percent to $199,000 in the first six months of this year, compared with the same period in 2006, according to the Central Oregon Multiple Listing Service. Only 80 lots sold in the first half of this year, down 38.9 percent from the same period last year.
This is from todays piece on Orion Green, the chop-N-blow done by Darrin Kelleher. Some interesting "between the lines" tidbits:
DuBois essentially admits that Bend builders are encumbered by bank loans to the extent they can No Longer Build until they start moving homes... which they implicitly admit is not happening. Implicit there is also an admission that builders have no intention of lessening their pace of building. -- "We'd buy & build, if we could."
Kelleher's strange statement about what he is selling, Is Not Selling. BUT, that has not stopped him from hallucinating that He's Got A Unique Product. Huh. Really? Crappy half acre lots carved out of a golf course surrounded by rundown McMansions from the earl 80's?
And what the heck is a "tribute to a different kind of product"? Is it lots that actually sell?
Just funny that this sentiment is echoed throughout Cent OR:
"Yup, the market is DEAD MEAT... but My Project Is Different. It's composed of dirt & sewer lines & stuff, in a Totally Unique Location, which you basically cannot get at any price, anywhere else."
Jesus, you are pathetic. Don't you do ANY original research for these screeds?
Ummm... just as an aside to your rant. I HAVE received calls from the Cent OR MLS with lawyers on conference call regarding the possibility that I was kyping their data. Alas, I was not.
MLS has a hammerlock on regional data required for much "original research", which they piddle out to the Bulletin on occasion.
They WILL NOT give it out to just anyone that asks. The wonders of a closed monopoly.
And I figured there was little chance that Kelleher was still in a project from last year.
Ya know, not every single move by every developer is known to me. I know, amazing.
That's why I encourage comments by readers. Thanks for that tidbit.
Bend builders are encumbered by bank loans to the extent they can No Longer Build until they start moving homes... which they implicitly admit is not happening. Implicit there is also an admission that builders have no intention of lessening their pace of building.
*
These folks are bleeding to death. The banks have NO intention of lending anymore money.
The MTG-CDO junk-bond MTG biz is Gone.
Sure builders build, just like squirrels crack nuts, but when the nuts are gone they move on. What will our builders do when they can no longer pay for the bleed? Note you can't borrow money anymore to fund the bleed. You can't borrow money anymore to build.
How much? How long?
Sell those lots Kelleher, you'll need the cash to pay your monthly burn. If we had an auction today there might be a bid? 50 cents on the dollar? Do I hear 20 cents? Over there I see a bid for 1 cent on the dollar. SOLD!
Remember just a few years ago this was ALL worthless desert land we even called it the "Badlands".
What did it cost? $1 for 1500 acres, 0.006 cents an acre! How much does Kelleher want? $1.6M/acre ( $200k/lot ). One cent on the dollar would put this shit at $2k/lot, which would be a damn good price, if you could fetch it. Thus $16k/acre would be the 1 cent on a dollar, and not a PENNY more.
Historically its was $100/acre to the common rock farmer, and 0.06 cents/acre when the county sold to the city.
How much does Kelleher want? $1.6M/acre ( $200k/lot ). One cent on the dollar would put this shit at $2k/lot, which would be a damn good price, if you could fetch it. Thus $16k/acre would be the 1 cent on a dollar.
Blowing deep rock and removal probably costs $10k/foot at a penny on the dollar for ASK, I'm not sure that this development will cover excavation fee's.
23 feet is most likely a conservative figure, it might make more sense to own a Bend Excavation company that is where the money is.
Don't know if anyone has noticed, but inventory has not gone up hardly at all in the past 2 weeks or so.
David Foster has Bend res at 1,589 on June 30, and it is at 1,617 today.
Doug F had all Bend res at 2,314 on June 30, and it's at 2,322 today.
Realtor.com actually has a reduction to 2,599 today, after going above 2,600 for the first half of the month. This may be one of their DB vacuum jobs, clearing out expired/dead/sold listings.
Inventory does seem to be rising barely, but that is a change from the monotonic large increases that have been a daily occurrence for months now. I guess we'll soon see if these are listings expiring, or actually selling.
What did it cost? $1 for 1500 acres, 0.006 cents an acre! How much does Kelleher want? $1.6M/acre ( $200k/lot ). One cent on the dollar would put this shit at $2k/lot, which would be a damn good price, if you could fetch it. Thus $16k/acre would be the 1 cent on a dollar, and not a PENNY more.
This illustrative of the trough to peak extremes Bend has experienced. 20 years ago, bare land in Cent OR was actually seen as a liability -- you had to pay taxes on a worthless piece of scrub. A cash-burner, that's all it was.
Now it's all Gold Mine. A license to print money.
I don't think it's either, it's somewhere in the middle. But that's WAY lower than where we are today. Down 50% - real terms.
I have to give that Kelleher credit: He's come up with some interesting ways to turn crap into cash. Mobile home parks, golf courses? Well, he's thinking out of the box, I'll give him that.
These folks are bleeding to death. The banks have NO intention of lending anymore money.
Well, banks and builders have this symbiotic relationship: Both rely on the building cycle to make $. I DO think banks will lessen their "builder float", and will bring in the spec element of Build It And They Will Come.
Instead of build as much as possible, it'll be Build One & Sell It... then we'll talk about your next loan. Banks gotta lend, builders gotta build, it'll just be throttled WAY back, closer to a Zero Inventories mindset.
I'm seeing a lot of sale pending signs, and some are actually making it through the process and new people are moving in. I think this is a result of some sellers finally "getting it" or being forced to "get it" and some anxious buyers pulling the trigger now when they see the first weakness of sellers.
I'm still going to hold out for a better deal.
--TT
I'm seeing a lot of sale pending signs, and some are actually making it through the process and new people are moving in.
I think improved activity will be the stuff of lower prices, just as persistently high prices will kill volume. I think a few Realtors are starting to "get it". Like Pavlov's dogs, they've dropped double digit %, and got a commission reward. I think they'll figure out that we're on the extreme high side of the sales Laffer curve, and that maximal volume is neither at too high or too low a price.
Right now, it's still too high though. I think w/ medians in the $200's, volume would go dramatically higher...
Bend councilors adopt climate-protection pact
July 18, 2007 10:43 PM
Bend Councilor Jim Clinton (L) questions city Public Works planner Mike Magee (R) about sewer master plan
Bend Councilor Jim Clinton (L) questions city Public Works planner Mike Magee (R) about sewer master plan
Join 620 other U.S. cities in unanimous vote
By Barney Lerten, KTVZ.COM
Bend city councilors voted unanimously Wednesday night to adopt the U.S. Mayors' Climate Protection Agreement, though not without one councilors' misgivings about the included, controversial claims about global warming and man's role in it.
But even Councilor Bill Friedman went along in the end with the proposal from Mayor Bruce Abernethy, since he, too was in favor of the list of a dozen local environmentally friendly action items, once one got beyond all the "whereas" clauses in the resolution, such as one pointing out "well-documented impacts of climate disruption."
"This is something we need to be supporting," said Councilor Peter Gramlich. "This is a no-brainer for me."
Colleague Jim Clinton said he's supported the mayor's signature on the agreement "for a long time," due to the "emphasis on things we can do in our own community to make a difference in our own lives."
The decision was applauded by Cylvia Hayes of 3E Strategies, a local sustainable and renewable energy advocacy group, and Mike Riley of reSource, which advocates for recycling, reuse and less use of packaging. They are two of the groups that have been behind the local Energy Independence Month activities that wrapped up Wednesday, and said Bend becomes the 621st U.S. city to adopt the resolution.
The list of items to reduce "global warming pollution" range from adopting and enforcing land-use policies that reduce sprawl to promoting transportation options, making energy efficiency a priority and increasing the average fuel efficiency of municipal fleet vehicles.
Hayes repeated what she's said many times in recent years, that "Central Oregon has such an amazing opportunity," with a "diversity of renewable energy resources unparalleled in any geographic area. I believe we have an opportunity to create a model for the nation and the world."
Coincidentally, councilors decided to steer clear of another hot-button national issue, rejecting a request by local foes of the Bush administration and the war in Iraq for the city to sponsor some sort of town hall meeting on the topic, including a call for impeachment of the president and vice president. They said that's something citizens can and should tackle on their own, without formal city involvement.
Among other issues, councilors also agreed with city staff's new direction to seek more public input before finalizing a new sewer master plan that critics claim has been a rubber-stamp of city priorities that focus growth on the city's Juniper Ridge mixed-use development.
They also sent back for tweaking a proposed sewer "reimbursement district" for a new development, under a new ordinance, to make clear other existing residents of the area don't have to share in the cost until and unless they put an extra demand on that sewer system. Clinton again espoused his view that current city water and sewer rates fail to encourage conservation due to their flat-rate nature.
COCC picks Bill Smith to develop property
July 19, 2007
From KTVZ.COM news sources
The Central Oregon Community College Board accepted a recommendation Tuesday night to appoint William Smith Properties as the "preferred master developer" for about 45 acres along Shevlin Park Road and Mt. Washington Drive.
The selection of the firm best known for creating the Old Mill District followed interviews with three interested developers who responded to a request for qualifications.
College Vice President Jim Jones noted this firm's experience with similar and larger projects, the quality of its consulting team, its extensive experience in Central Oregon, the quality of the work and the flexibility it shared on how it will work with the college.
The next step will be for the college to issue a non-binding letter of intent to lease the land to William Smith Properties and move toward establishing a development agreement, coming back to the board within 180 days.
Earlier in the meeting, John Overbay, a board member for the past eight years from Sunriver, was elected chair of the COCC board for the 2007-08 year and Ron Foerster of Bend was elected vice chair. Charley Miller, owner of Miller Lumber, was sworn in as a new board member, following his election in May.
The board also approved contracts for all employee groups (faculty, ABE instructors, classified employees and administrators). While each contract is different, salary increases average about 4 percent.
The board also received a report on summer enrollment, which currently stands at 8 percent up in headcount and more than a 10 percent increase in FTE. President James Middleton noted that this represents about a $50,000 increase in income.
n May, the board voted to freeze tuition for the upcoming year at the current rate, hoping it would result in an increase in enrollment. A $2 per credit tuition increase, originally planned, would have netted approximately $200,000 in additional revenue, so this enrollment spike has already covered a quarter of that amount.
Middleton also discussed the college's fiscal picture, following the recently concluded legislative session. He noted that COCC is in much better shape than had been anticipated prior to the session, but that the college's state income will decline over the next few years and the result will be that COCC will eventually receive less than 10 percent of its operating income from the state while other community colleges will see a much larger percentage.
Middleton also noted that COCC's in-district tuition is right at the state average for community colleges, coming in at $63 per credit while the state average is $63.60. However, when tuition and fees are combined, COCC is near the low end, ranking 13th out of the 17 colleges.
For out-of-state students, COCC ranks ninth, but for out-of-district students, COCC charges the highest tuition in Oregon, which he noted as appropriate, as it receives the smallest amount of its budget from the state.
College Vice President Jim Jones gave an update on the plans for new and renovated facilities for science and allied health programs. Initial estimates put the cost of the building and renovations at approximately $26 million. The state has recently allocated $5.8 million toward the project.
The plan would be to seek voter approval of a bond measure to fund the remainder of the facility, plus money for other projects. Jones said the college will soon be issuing a request for proposals for an architect to work with faculty in the areas and the project management team.
Acting on a recommendation from a college committee, the Board approved naming one of the Oregon Rooms, part of the three-room suite area at the front of the second floor of the Barber Library, in honor of long-time instructional leader Bart Queary.
Queary came to COCC in 1979 and served first as division chair, then dean of the college and, from 1989 through his retirement in 2002, as vice president of instruction. He helped guide the development of 35 new degree and certificate programs and hired and mentored every member of the faculty.
Queary also was one of the early proponents of upper division offerings at COCC and, along with President Fred Boyle and faculty member Ward Tonsfeldt, co-wrote the study called "Upper Division and Graduate Education: Alternatives in Central Oregon." The paper eventually led to the creation of the Central Oregon Consortium for Higher Education (COCHE) which evolved into the University Center and, eventually, into the branch campus of Oregon State University.
During the 1980s, he was one of two chairs of the statewide legislative committee that developed the Associate of Arts Oregon Transfer (AAOT) degree, providing formal articulation between community colleges and public universities in Oregon. Among his other accomplishments while at COCC, he helped plan the development of the Pinckney Center for the Performing Arts, which was built when he oversaw that fine arts department; the major remodel of the college's science labs; and the building of the new library, both while he served as instructional vice president.
Banks gotta lend, builders gotta build, it'll just be throttled WAY back, closer to a Zero Inventories mindset.
Banks haven't loaned MTG money for a long time, they buy & sell loans to Wall Street.
Builder's have to build, but they do so on credit.
There will NOT be zero inventory's for a long time.
A huge amount of home's will be coming back to the bank during the next 1-2 years. Banks don't want any more exposure to real estate.
'The first sign of this is that poor people cannot pay their mortgages. The next step will be rich corporations not being able to pay for the leveraged debt that they have created.'
— Dick Bove, Punk Ziegel & Co
The shit is starting to hit the fan. Sell, the word is Sell Brokerage Funds.
Bove says sell top brokers Hedge-fund meltdown at Bear Stearns seen as 'systemic' problem
By Greg Morcroft, MarketWatch
Jul 19, 2007
NEW YORK (MarketWatch) -- An analyst at Punk Ziegel & Co. downgraded Wednesday the five leading U.S. brokerage firms, lowering their ratings to sell, and said the apparent meltdown of two hedge funds run by Bear Stearns Cos. is likely an industry-wide problem.
"I do not view this as a Bear Stearns problem, but a systemic one," Dick Bove said. "This opens investors to sizable losses which, at this moment, simply cannot be calculated."
'The first sign of this is that poor people cannot pay their mortgages. The next step will be rich corporations not being able to pay for the leveraged debt that they have created.'
"My favorite stock has been Citigroup, but even this issue is vulnerable if the financial shock I see coming happens. Investors should continue to hold the universal bank stocks and buy them at later points. The brokers should be sold at once," Bove wrote clients.
Shares of Citi fell 2.6%, while J.P. Morgan Chase dropped 3.1%. The latter reported quarterly financial results before the bell.
Bank of America's shares fell 1.7%.
Chart of BSC
Hedge-fund spillover said to threaten corporations
On Tuesday, two people briefed by the investment bank said a Bear Stearns hedge fund that made leveraged bets in the subprime mortgage market is worth nearly nothing.
Investors have been waiting for Bear Stearns to update them on the status of the High-Grade Structured Credit Enhanced Leveraged Fund and on a larger, less leveraged fund called the High-Grade Structured Credit Fund. See full story.
The Wall Street Journal reported on Tuesday that the High-Grade Structured Credit Fund is worth roughly 9% of its value at the end of April. Read a Bear Stearns letter to investors.
"For the past six months, I have been writing that this could happen and that the systemic protections against such a development have been removed by the marketplace," Bove said.
On Tuesday, Bove reiterated an argument he has made before about a fundamental problem -- namely, that the rate of debt in the financial system is growing faster than the economy. That creates a problem of the economy not being able to produce the money sufficient to pay off the collective debt, he says.
"The first sign of this is that poor people cannot pay their mortgages. The next step will be rich corporations not being able to pay for the leveraged debt that they have created," he said.
According to Bove's calculations, the economy has grown at a 1.8% rate in real terms over the last 12 months, while the nominal economy has grown 4.6%.
Meanwhile, he said that during that same period the estimated money supply is up more than 13%, the asset-backed securities market has grown at least 18% and brokerage company debt jumped 26%.
"This could force a wide variety of other holders of subprime mortgage securities and CDOs to meaningfully revalue their holdings," Bove said in an interview Tuesday. "That would cause significant declines in book value and stock prices."
CDO is short for collateralized debt obligation, which is a bit like a mutual fund. CDOs have been among the biggest buyers of riskier parts of subprime mortgage-backed securities.
Moreover, CDOs have been among the fastest-growing debt instruments in recent years and are widely held by banks, brokerage firms, hedge funds and insurers, Bove said.
CDO volume has grown 500%, Bove said in his Wednesday research note.
"The free markets are going to force a revaluation of the unique instruments," he said. "While revaluation happens there will be some turmoil. Funds will be withdrawn from the markets and the prices of the stocks of the companies in question will fall." End of Story
In times of panic, money returns to its rightful owners. Let’s not have any delusions as to who that might be.
Tranche Warfare
Who will be left holding the bag as subprime mortgages go bad?
By Dave Mulcahey
July 19, 2007
The greatest boom in property values since record-keeping began has produced a population more in debt, and with less equity, than before it all got going.
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Now that the real estate bubble seems poised to go the way of its dot-com predecessor, a new narrative has taken hold in the business press. Where once reporters breathlessly touted double-digit, year-on-year gains in home prices, they now warn darkly of the “meltdown” underway in the class of exotic mortgages that added so much punch to the party.
After months of dismal reports for the real estate industry—declining sales, rising inventories, softening prices, rising foreclosure rates—the news took a sharp turn for the worse in late June, when the investment bank Bear Stearns shut down two hedge funds whose holdings were laden with securities backed by subprime mortgages.
Suddenly, finance pundits and insiders were speculating about just how far the damage of bad subprime loans would spread. Could it be “contained”? Were more hedge funds on the verge of implosion? Was the debacle about to touch off a system-wide credit crunch?
Meanwhile, a bemused public was wondering what the rarefied world of hedge funds had to do a bunch of poor suckers who had bought more house than they could afford. How many of these loans could there be—and how many defaults—that a Wall Street powerhouse like Bear Stearns was taking it on the chops? And what’s the story behind all these subprime loans, anyway? Whose idea was all that funky lending?
The insiders’ questions have yet to be answered. But for financial naifs, the Bear Stearns imbroglio was highly instructive. It briefly pulled back the curtain to reveal the machinations behind the mountain of mortgage debt the American peasantry has piled up during the great housing bubble. Subprime lending in the United States rose from $35 billion annually in 1994 to $625 billion in 2005. A shocking proportion of this financing was extended on the flimsiest pretenses of due diligence by lenders, and carried terms and conditions sure to ruin a large number of borrowers. According to Fannie Mae, between $1.1 and $2.2 trillion in adjustable-rate mortgages will reset to higher rates in 2007. Another $1.4 to $2.4 trillion will reset in 2008—half of it subprime and another quarter less than prime. It’s difficult to see how that will end well. Yet for a while, the bubble seemed like some millennial, never-ending win-win scenario.
By now it should be apparent to most Americans that we’re beyond the George Bailey model of mortgage lending, in which banks and other mortgage lenders hold on to the loans they write. Most mortgage paper nowadays is instantly sold, and the buyers are the big Wall Street investment banks, which repackage it as mortgage-backed securities and various “structured finance” products (such as the gizmo that got Bear Stearns into trouble, the “collateralized debt obligation” or CDO). The point of “securitizing” home loans is easy enough to understand: It takes an illiquid obligation—Joe Doaks’ mortgage—and, by pooling it with similar debt, transforms it into a fungible, liquid security that can be rated for creditworthiness and sold to institutional investors.
Many institutional investors, such as pension funds, mutual funds, insurance companies and so forth, are restricted from buying debt unless it’s investment-grade—that is, debt with a rating of BBB or better (the rating expresses default risk, not value). And here is where the genius of structured-finance products like CDOs comes into play. These securities can pool quite unsavory debt—subprime mortgages, for example—and repackage it in ways so that at least some of it will be suitable for the more choosy investors mentioned above.
They do this by dividing the pool into segments, called tranches. The senior tranche might carry the highest rating (AAA), while the “mezzanine” tranche carries AA to BBB. The lowest segment, the so-called equity tranche, is typically unrated. Again, the entire pool might be made up of shaky loans — downright dodgy ones, in fact — but the senior tranche may still merit the AAA rating because it always claims priority of payment. It gets the first dollar of cash flow, while the lowest tranche takes the first dollar of loss. Because most borrowers—even subprime ones—pay their mortgages, money managers can buy AAA tranches with a relative degree of confidence.
Theoretically, that is. But more about that in a moment.
The other great thing about CDOs was that they typically carried higher yields than similarly rated bonds and other securities. Investors, not surprisingly, developed quite an appetite for them—so much so that mortgage brokers could not write mortgage loans fast enough. Future historians inquiring into the strange phenomenon of the stated-income (or “liar”) loan should begin by looking here.
But what about the risk? Didn’t anybody think about the risk?
In a word, no. Chalk it up to the bubble sweet spot—excellent economic conditions, plus cheap and plentiful credit. Under classic bubble conditions, so-called “risk premium”—i.e., the return investors expect for putting their capital at risk—tends to dwindle. Investments can’t seem to go wrong, money’s easy to borrow, confidence is high, so investors willingly take on more risk in their portfolios for less reward.
But with CDOs, a great deal of risk appears to have been hidden from view. For example, questions have been raised about the accuracy of their ratings. Moody’s, Standard and Poor’s and the other agencies that traditionally have made their money charging debt issuers a fee for rating their bonds, decided a few years ago to—how to put it?—change their business model. They started to work much more closely with the Wall Street firms in creating these wonderful new securities, to the point where they were for all intents and purposes part of an underwriting team. They were paid accordingly. Net income at Moody’s, to cite one example, increased from $159 million in 2000 to $705 million in 2006, according to Fortune, thanks largely to their forays into structured finance.
Things get pretty murky from an ethical standpoint when a credit-rating company has such an obvious financial interest in the creditworthiness of the securities it’s rating. That conflict of interest came into high relief as the Bear Stearns crisis unwound. “Standard & Poor’s, Moody’s Investors Service and Fitch Ratings are masking burgeoning losses in the market for subprime mortgage bonds by failing to cut the credit ratings on about $200 billion of securities backed by home loans,” reported Bloomberg shortly after bad hedge trades got one of the Bear funds in trouble,
As was widely reported, creditors of the Bear Stearns High-Grade Structured Credit Fund seized $800 million of the fund’s collateral and began auctioning it off. But Bear management pledged $3.2 billion of the firm’s capital to stop the auction when it became clear that those securities were likely to sell at a hefty discount. In other words, a fire sale on AAA-rated, subprime-backed CDOs was not going to be good for business going forward, as the securities ratings would certainly come under suspcision.
“Downgrades by S&P, Moody’s and Fitch,” Bloomberg explained, “would force hundreds of investors to sell holdings, roiling the $800 billion market for securities backed by subprime mortgages and $1 trillion of collateralized debt obligations, the fastest growing part of the financial markets.” CDO business would dry up, possibly causing mortgage lending to contract, creating more havoc in the housing market. The virtuous circle that created the bubble might then be reversed, leading to more defaults and still lower real estate prices.
If subprime-backed securities do indeed “melt down,” who will be covered in goo? Right now, that’s anybody’s guess. Some speculate that hedge funds are hugely freighted with toxic subprime waste, and that a rolling implosion is in the offing. Others point out that any pain will be spread generally throughout the financial sector, including to insurance companies, pension funds, even boring old mutual funds. A credit crunch is possible, which in turn raises the specter of recession (or, for those who argue a recession has already started, tight credit could deepen its severity). At that point, consequences for consumer spending, for the stock market and for the dollar would be anybody’s guess.
On the other hand, holders of subprime debt may just muddle through. CDOs, for example, are not very liquid, nor is it easy to assess their risk. But those who can afford to hold onto them—at least the higher-rated tranches—could emerge almost whole. The lesson of this recent brush with mortality is that we now live in a world where liquidity can go away. All that stupid money can vaporize, and we won’t even know what caused it.
Hopefully, the unfortunate events at Bear Stearns will add a new wrinkle to the journalistic morality tale about subprime lending. For months we’ve been treated to all manner of scoundrels and fools. Greedy, dissembling lenders preying on the ignorance of poor homeowners. Greedy, dissembling borrowers who tried to ride the boom for too long. Feckless suckers who can’t look out for their own good. Choose your favorite narrative—they’re all true!
But now it may be time to examine how the promise of the bubble turned into its opposite. The greatest boom in property values since record-keeping began has produced a population more in debt, and with less equity, than before it all got going. Alan Greenspan and other puffers of the late bubble hasten to point out that the mortgage industry’s liberality with subprime borrowers extended the American dream to a class of people who otherwise would have been shut out. That’s true enough, anecdotally. It has also converted a huge amount of unsecured household debt into secured debt—not a good place to be if the family finances go pear-shaped.
The bubble has driven people in desperation to chase spiraling home prices with stagnant wages. And those lucky enough—or foolish enough—to have stretched their finances to the breaking point now face the real possibility of being trapped in an upside-down mortgage.
Maybe the American middle class faces an indefinite future of being strapped, waiting for inflation to ease their burden. That’s a best-case scenario, and it’s not very good. I’m not so sanguine. A reckoning is on its way. And there’s an old saw on Wall Street that, in times of panic, money returns to its rightful owners. Let’s not have any delusions as to who that might be.
For months we’ve been treated to all manner of scoundrels and fools. Greedy, dissembling lenders preying on the ignorance of poor homeowners. Greedy, dissembling borrowers who tried to ride the boom for too long. Feckless suckers who can’t look out for their own good. Choose your favorite narrative—they’re all true!
But now it may be time to examine how the promise of the bubble turned into its opposite. The greatest boom in property values since record-keeping began has produced a population more in debt, and with less equity, than before it all got going.
Luke, everything is going to plan. The peons are being blamed for stupidity.
Overnight the Bend Real Estate crowd was transformed from rich hero's to paupers.
Let's repeat this statement ...
The greatest boom in property values since record-keeping began has produced a population more in debt, and with less equity, than before it all got going.
The more we build the poorer we get, the more we build the less equity we have. The building boom is a road to poverty.
I've asked this before.
When we went from 61% home ownership to 69% home ownership, how many of those borderline buyers really should have bought? I bet a lot of them are wishing they had rented the whole time.
It sounds bad, it looks bad, It's NOT BAD, I repeat ...
It's Bad when they're tell us its not bad, You Know It's BAD.
Area jobless rates up, but 'it's not bad' Back to still-strong growth of '03-04, economist says
By Barney Lerten, KTVZ.COM
July 19, 2007 01:03 PM
Central Oregon's jobless rates rose more than expected in June, but the region's economy is only returning to still-strong levels of a few years ago and still outperforming much of the state, a regional economist said Thursday.
"It sounds bad, but it's not bad," said Steve Williams, Oregon Employment Department economist in Bend.
Deschutes County's unemployment rate rose 0.3 of a point to 4.4 percent in June, but remains the fifth-lowest among Oregon's 36 counties. The rate was equal to the June 2006 level, which was the lowest for the month since 1969.
Crook County's rate increased 0.4 of a point to 5.7 percent, higher than year-ago levels. And Jefferson County's June rate jumped a half-point, to 6.7 percent, also higher than a year ago and similar to the June 2002 figure, Williams said.
Deschutes County gained 1,630 jobs in June, the fifth month in a row, but slightly below expectations, Williams said. The county has added 4,860 jobs this year, more than 900 fewer than in the first half of 2006, he said.
The real estate slowdown is an "overall factor in everything," Williams said, but he noted that current year-to-year job growth is back to the more sustainable levels of 2003-04, about 2.5 percent a year - compared to over 7 percent in the peak levels of 2005-06.
"It's the fact we had these two years of astronomical growth that was fueled by all sorts of things - some (real estate) speculation, some ‘interesting' ways to finance a home," the economist said.
"Compare us to larger metro areas, we're still outperforming them," Williams added.
Every Deschutes County industry added jobs last month, the first such occurrence since May of 2006, Williams said. The largest job gains were in industries that typically see strong growth in the spring and early summer, such as leisure and hospitality, the retail trade, construction and professional and business services.
Crook County added 180 jobs in June, the fourth month of job gains this year. Jefferson County added 100 jobs in June, below what's expected for that month, but up from May's loss of 10 jobs.
When we went from 61% home ownership to 69% home ownership, how many of those borderline buyers really should have bought?
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We should do some research on this.
The fact is the subprime is not just about the 10% that shouldn't have bought, the reason for sub-prime meltdown is that the rich are dumping their second homes, more than the paupers are dumping their first.
NO MODEL PREDICTED THIS.
Look no farther than Bend, Oregon secretary's at MTG company's have speculative property in Bend. Everyone became 'rich' and invested their money in Real-Estate, now everyone is going to become poor.
Certainly its been better to be a renter for quite a few years. We would really need to see the TRUE picture of home-ownership to have an idea.
Prior to the civil war home ownership was not that common, about 1910 cheap housing was created using the 'Ford Techniques'. That was when home-ownership took off, then it really went crazy after WWII with the Leviton Homes, which were dirt cheap.
Yes, there are people who shouldn't have bought, and yes if their ARM exceeds their ability to pay they'll lose their home. The real problem is that 'AAA' people bought speculation property, and given that they have nothing to lose, because of zero-down they're dumping the homes. The model assumed the well off wouldn't do this. So much for models, so much for sub-prime CDO BOND theory.
I actually think that the heart of the idea of encouraging home ownership was a good idea.
The bad idea was selling a MTG that people couldn't afford. The bad idea was letting people buy more houses than they could afford.
That said if these two things hadn't been allowed then we wouldn't have seen the buying frenzy that made every body rich, and now poor.
I have the solution for unemployed RE Agents!
Virtual Real Estate- Absolutely Brilliant!!!!
http://tinyurl.com/yvwetv
"Instead of build as much as possible, it'll be Build One & Sell It... then we'll talk about your next loan. Banks gotta lend, builders gotta build, it'll just be throttled WAY back, closer to a Zero Inventories mindset."
Y'know, I think you're absolutely right.
Some people are going to get ground down in the process, but the lenders are throwing some pretty strict discipline back into the marketplace right now, trying to boil the froth off as fast as possible, without killing too many of their customers (aka builders) in the process.
But some are gonna go. And money is going to feel a lot tighter in that industry than it has in a lot of years.
And the banks' profit growth figures arent going to look nearly as gaudy as they did over the past two or three years. All the way down to low double digits -- boo hoo.
Which is good for everybody, long term
Just hurts a little for a lot, and a lot for some, in the meantime. (Remember 17 percent avg mortgage rates in 1982? A big ouch then ... but the start of a 27-year economic boom that still hasn't really played out yet)
A big ouch then ... but the start of a 27-year economic boom that still hasn't really played out yet
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The market collapsed in 1983 and didn't recover until 1986, since 1986 Oregon had no down until 2006 that's 20 years of up, for the past year and the next five years will be ALL down for Oregon, and Bend being the MOST over-priced pig of all will be exceptionally hit.
Lastly, Oregon is ALWAYS the last to fall, and the last to recover.
lenders are throwing some pretty strict discipline back into the marketplace right now, trying to boil the froth off as fast as possible, without killing too many of their customers (aka builders) in the process.
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Too many Realtors, Too many MTG brokers, Too many Builders, too many Bankers, and NO BUYERS.
In the next 2-3 years the Banks are going to get a ton of homes back, whether they want them or not, and nobody is going to want them.
Any Bank that's throwing money or even loaning money right now to a Builder is a bank that throwing good money in a black hole.
The fact is the more your build, the poorer you get.
The City keeps building, the condo girls keep building, everyone is heading to the poor-house, but everyday they keep adding debt.
Besides the mantra that Bend RE only goes up 30%/yr, the other mantra has been "Debt is Good", that RE is "Good Debt", no such thing as good debt.
No such thing as GOOD BLEEDING.
Not a pretty picture.
Just heard that Mr. Sebastian isn't paying his subs. Somehow though, he has money to start his other development off of shevlin.
One aspect of economic history that has not been discussed for awhile, if at all is leverage.
During the Great Depression, it wasn't RE so much that caused the problems, but Margin stock purchase at a ten-to-one ratio. Shoe-shine boys would get ten-cents for a shine, and buy $1 worth of stock, and then watch it go to $10. ... What did they have in the game? Ten cents. Then they would sell the $10 stock and leverage again and buy $100 worth of stock, and assume that it would go to $1,000.
The game was played by all, in this case it was possible for a child to become rich.
Now that our man-child was rich, he could buy stuff on credit.
Eventually the game collapsed, and so did prices. Things went down to what they were really worth 1/10, as that was the skin that folks had in the game. After the collapse of 1929 strict rules on margin were created.
Now lets jump to the 2001+ RE Lottery. Forget about 10 to 1, or even 100 to 1. Try 100 to zero. With NOTHING down people could buy a $1 Million home, and they did, many mexicans making $25K down in Sacramento region were sold $750k homes.
Given the history of Margin effects what will RE fall? It used to even with 1% down you could say that when things fell back to there real value it would be 1/100.
There is a mixture of course, because many people own their homes, and many didn't over pay.
This is just the beginning Atlanta which was the fastest growing city in America post 2001 is already seeing property that had sold last year for $380k go for $100k at auction. There are simply NO buyers. This is just the beginning, eventually bargain hunters will have too many homes. These things are expensive to maintain.
Who would have guessed that 'AAA' Bond Funds representing the best people, with the best homes, in the best area, would only fetch 1 cent on the dollar? This is only the beginning there are 1,000's of Bond Funds that must be unwound.
These Bond Funds also practiced leverage like the shoe-shine boy, they call themselves 'hedge-funds' and they traded Billions of dollars of bonds for very little real money of their own. Once the market headed south even 2-3% the entirety of the funds were wiped out.
Recently in Bend, Oregon each person could buy four houses, often for nothing down, on stated-income, people didn't even rent the homes as they knew they could sell it for +30% next year. Who needed to rent for $12k/yr, when you were making $120k/yr on appreciation! Every secretary at every MTG, RE shop was in the bank. Every Realtor at NWXC had 2-3 houses each.
For all time when a bubble bursts things go back to their true worth. In time of course things stabilize because of the fact many people didn't play the game and have cash. During the crisis itself when people over-react things can quickly go back to what they're worth. Say our realtor what was there actual NET-WORTH pre-boom? Not much, most live hand to mouth. With so many people in Bend playing the game, so little little true inherent wealth present in the first place Bend has a long way to fall.
Let's truly hope that there really is some cali's that didn't lose their financial ass that know a good deal and believe in the future of Bend. We cannot count on Portland, because while Bend started going down last year, Portland didn't hit peak until Jun-07, so people in Portland aren't going to recover until after Bend. The first to recover nationally will have money to buy the bargains in Bend, which in time will lead the homes back to price stabilization. Which I predict to be 4X of annual household income ( $40k/yr)
Lastly, because of 10 to 1 margin, after the 1929 a home that had been bought for $10k, was worth $1k, the reason was that 90% of the pre-bust cash had been hot air. In our Bend its hard to put a real number on the margin ratio as many put down zero which would be infinite, and a few 20% which would be five to one. Then there are those who are free and clear. The average margin ratio for those who bought in the last five years is most likely in the 100's.
Just heard that Mr. Sebastian isn't paying his subs. Somehow though, he has money to start his other development off of shevlin.
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This isn't unusual during a BUST. There are always MORE stupid lenders who believe the dream. There are many hungry sub's desperate for work.
Is he not paying the sub's for the current project or a prior uncomplete?
Regarding this subject, the thing to watch MOST closely is credit at the local material store. Generally for Contractors they get all their lumber and materials for NUTTIN, and then pay in months, its one thing not to pay a sub, because he's on a non-compete what can he do? NOTHING, cannot even go work for someone else.
But once a contractor is on the shit list of say Miller's Lumber, then what does he do? Drive to Redmond for material? Suppliers generally will only go 30 days, given the bleeding my guess is that smart suppliers are NOW going cash.
The builder works on DRAWS from a bank, no work gets done NO cash, which means NO cash for them, they have to keep starting new jobs, and getting draws to get a cash flow.
The thing that ALWAYS kills them is credit. Once every supplier in town NO longer extends credit your fucked.
You can fuck your sub's all day long. Subs like to get fucked, that's why they're subs and not generals.
A good contractor is one who has loyal subs and pays them on time, These kind of contractors are VERY hard to find. Most sub's are used to getting fucked.
In summary watch credit extension, go to the Hard-Ware store and ask if you can open an account on terms and ask if 90 days is OK, look for an expression, this is how you'll known how soon the BEND building will implode.
Once the credit is NO longer extended everything comes to a halt, no work for nobody the sub knows this too, so he'll often just go work somewhere else, and wait.
No material no work. Materials require real money, but suppliers aren't banks. Contractors are notorious for paying late, we're now over a year into tough times for contractors. The bleeding is terminal.
For most if you couldn't have sold your development / project to some other sucker back in the spring your now fucked, as all your money is in your project and everyone knows that the shit will NOT sell when complete.
Anybody ever travel to Mexico and see rebar hanging out of everything? This is what Bend will look like, find some easy money, start a new project, get some cash, and then do it again. Finish something? No way in hell whats the point.
Welcome to Bend.
Kelleher will be selling 2500 sq-ft lots here within 2-3 years, if he doesn't lose the investment. Nobody does big houses on big lots during an RE depression. This place will be Levittown little 800sqft affordable cottages that sell.
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From public golf course to high-end subdivision
Neighborhood on former Orion Greens site to offer 41 half-acre lots
By David Fisher / The Bulletin
Published: July 19. 2007 5:00AM PST
Fred and Violet Misner looked out over fairways and a pond when they bought their house on Orion Greens Golf Course seven years ago.
Soon, they will look into the backyards of neighboring homes, instead. But the Misners are not complaining, largely, Fred Misner said, because developer Darrin Kelleher and his development partners are doing what they said they would do when they closed Bend's first public golf course in 2005.
They're replacing the course with half-acre lots - much larger than most of Bend's available building lots. They're also pricing the ground at $300,000 and up.
So the houses the Misners will look at will likely be million-dollar homes, with plenty of green around them.
Even though the "green" isn't in a golf green.
"I think it's going to be a real beautiful neighborhood with what they are doing down there," Misner said Wednesday. "There'll be plenty of room ... and my house won't get hit with golf balls every day."
Altogether, Kelleher, a Bend native, and his partners have carved 41 lots out of the old golf course. In addition to the roughly $12.3 million land purchase price, they have sunk $4 million into new streets, curbs, boulevards and a sewer line that will drain into the Bend city sewer plant instead of into septic tanks.
The section of east Bend that the old golf course sits in is largely zoned for low-density housing - in other words, houses on large lots - mostly because city sewer lines to the area are too small to handle denser neighborhoods, Kelleher said. Consequently, most homes in the area are on septic tanks. And, since the city can't plat subdivisions on septic tanks anymore, few large subdivisions are available within city limits with such large housing lots.
Carving a new sewer line for the neighborhood required blasting and chipping through as much as 23 feet of solid rock to get to the nearest main line on Reed Market Road, Kelleher said, but he's hoping the uniqueness of the subdivision will be its main selling point, despite the slow Bend real estate market.
High-end custom home builders have indicated some interest in the big lots, Coldwell Banker/Morris Real Estate broker Norma DuBois said, but, for the most part, not until they sell some of the homes they have already built and get cleared by their lenders to buy more land. Second-home buyers are another likely market, said Kelleher's father, Don Kelleher, who's also a Coldwell Banker broker.
"Truly, things are not selling in Bend right now," Darrin Kelleher said after a Wednesday afternoon barbecue for 130 brokers and builders to kick off the subdivision's sales. "So if this sells, then what do you call it - a tribute to a different kind of product."
The median price on residential lots in Bend slipped 5.46 percent to $199,000 in the first six months of this year, compared with the same period in 2006, according to the Central Oregon Multiple Listing Service. Only 80 lots sold in the first half of this year, down 38.9 percent from the same period last year.
Orion Greens was designed and built in 1982 by Bend developer Orion Austin Reid, who died June 11, 2006, at age 90.
Reid used the little executive-sized course as an attraction to sell lots in the neighborhoods around it, and he and his family maintained it as Bend's first public golf course with the cheapest rates in town - $26 for 18 holes by 2005, the year the family sold it to Kelleher and his partners.
The price tag paid by Kelleher and his partners in OGD Partners Inc., was $12.35 million, according to county tax records.
Kelleher took stiff heat from the neighbors when he announced that the new ownership group intended to close the course and build over it, according to Bulletin reports from the time, but most of the angst died down later in the fall when he submitted plans with the city to cut the course into large lots, matching the character of the surrounding neighborhoods.
Today, Kelleher said he's confident that most of the neighbors view him as a good addition. And their future neighbors will pay to join it - the prices on Kelleher's new lots range from $300,000 to $400,000.
"It's a tough deal. Change is not an easy thing," Kelleher said. "But it's a beautiful project."
Kelleher has 41 lots for sale out of the old golf course. In addition to the roughly $12.3 million land purchase price, they have sunk $4 million into new streets.
His cost is over $16M, he's selling the 40 lots for $300k ( $12M expected ), thus he's hoping to lose a whopping $4M of other peoples money. I hope this guy is getting a fee, and not a percentage of the profit.
The only way this thing pencils is long term ALL of the golf course goes to 2500sq-ft lots, which is of course what Mom is working on right now at the Bend Planning and Permit Center.
>> Just heard that Mr. Sebastian isn't paying his subs <<
..but the news for Renaissance, down at the Bend Planning department is good. He just got approval for his new Deschutes River development adjacent to River Rim. The Elk will have to go play some where else.
http://www.ci.bend.or.us/depts/community_development/planning_division/docs/06_254_HODecision.pdf
Was at the tour of homes today. I notice, much more hard pressure sell compared with years past. Also loads of open houses capitalizing on the proximity of tour homes.
I posted this over on BendBB
Huh. MLS # 2709453
$6,069,500 for an entire subdiv, lock, stock, and 61 smokin' barrels:
MLS description:
Ready to build 61 lot subdivision in Bend on the SE side. Buy one or all! $99,500 per lot.
Well, well, well. What does this remind me of? Oh yes, right right right right:
REVERSE STOCK splits after the NASDAQ imploded.
People who buy land wholesale, make their money selling it retail. When they start selling it wholesale, it means they got problems.
What I like, is this person is trying to bag this at some sort of retail premium. "Buy one or all."
This is the bank talkin'.
Ready to build 61 lot subdivision in Bend on the SE side. Buy one or all! $99,500 per lot.
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He's asking 50 cents on the dollar, do I hear 20 cents on teh dollar? Do I hear 1 cent??
Was at the tour of homes today. I notice, much more hard pressure sell compared with years past.
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Hard pressure, EVERYONE in this tourist town gets paid in July & August, summer now is already over.
Most of Bends 2,000 realtors have no closing's on their calendar.
Pressure in Bend?
Ready to build 61 lot subdivision in Bend on the SE side. Buy one or all! $99,500 per lot.
Well, I for one, hope that someone takes him up on buying just one lot @ $99K. It'll put a comp in at 50% off the $200K price tags they're asking for micro-lots around here.
And this is probably just a nasty little 6-10ac property that this freak paid millions for. This is the sort of deal that has forced people to pay ridiculous prices for homes. Structures ain't the problem... it's ludicrous land prices. I hope people like this take a bath, and spec idiots/developers stop buying every little postage stamp in-town & turning it into 20 home/ac subdiv crappers.
By the sounds of it, this guy is about to go bust. Could probably get $150-200K/lot if he had a few years... obviously he doesn't. Hey, more power to Randy Sebastian and his idiotic ilk who think the buy-N-dice strategy is a license to print money.
I hope people like this take a bath, and spec idiots/developers stop buying every little postage stamp in-town & turning it into 20 home/ac subdiv crappers.
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Noh, people's mothers in the planning department need to quit approving the crap.
Did anyone else here go to the $275 per person Broken Top Wine Party? The Pre & Post party's of course are the best.
This could be the last year :(
Crappy Little Desert Lots.
I have repeatedly mentioned the fact that crappy little desert land cost 0.06/cents acre.
Traditionally rock-farmers paid $100 an Acre. Thus even at post bust price of $16k/acre this desert crap is still OVER-PRICED.
At the high 5,000 sqft lots were selling in Bend for $300k, and sold to builders who got hosed.
The normal model in Siberia has been to to an acre ( 40k sqft ), divide into eights 5000sqft lots and sell each for $200k, thus take land that costs 0.06cents/acre and sell for $1.6M/acre. Not a bad return.
When I ask the rhetorical question "How low will they go" IHTBYB Said somewhere in the middle. I say NO WAY IN HELL. Somewhere in the middle is $99k/lot, and they're already not selling at that price.
A 50 cents on the dollar is $100k, 20 cents is $40k. I think that is tops, personally I think its going to be a penny on the dollar, which is still a whopping $2k/lot. That's $16k/acre for shitting desert land that you can do NOTHING with unless you have water rights.
The 'middle is MY OPINION' will be somewhere between 20 cents and 1 cent thus $40k - $2k. Given that the traditional price was $100/acre to the rock farmer or $12/lot. That is still a huge gain for worthless desert land.
The middle is $20k/lot. That means the land would be $160k/acre STILL TOO MUCH. The ONLY model that makes sense is penny on the dollar. That the lot will go to $2k and the acre to $16k, this is what it 'MIGHT' fetch in a few years.
I'm not saying this is a good thing or bad thing, this is just sandy desert land with some sage and tumble-weed and an occasional juniper. The fact that the land went from 0.06 cents/acre to $1.6M/acre, and then back to $1k/acre is a good explanation of hyper de-flation.
For those that paid $12M for forty acres, and put $4M into infrastructure, and thus have $16M of OPM. They need to sell at $400k/acre to break even, thus split them into 1/2 acre lots at $200k, still these are only really worth $8k.
Hey - I am commenting because there are so many posts here and I have a question that many of you will have opinions on.
So, a man walks into a bar (So, I've got this house...)
Seriously, I am a single mom who has a house and a plan in another state. It is late to be listing my house now and with inventory soaring, I am not sure what good it'll do to add to the problem unless I bargain basement my listing price, which might not get me any closer to my goals.
I can hang on here until Spring and try to list, BUT, will it get any better, or will prices keep coming down and inventory keep going up? I know no one has a crystal ball, but you all here, have a much better handle on the pulse of RE than I do?
My other option is to rent out my house, go rent something in my desired location and try to list again hte Spring, or maybe I should just try to rent until 2009, when things are going to get good again (as if)
Any comments or serious suggestions will be appreciated greatly.
Thank you!
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