Monday, September 24, 2007

Bend & Columbia Air -- Redux

Damn it, damn it, damn it.

I had a nice little post concept comparing Bend and Columbia Air ready for this week, complete with prescient predictions of doom for both. I know, maybe too similar to last weeks Popeil Pocket Fisherman post, but Columbia and Bend are an even more appropriate comparison, and the problems and fate of both seem inexorably connected. Bend and Columbia Air share so many characteristics.

First, both are what I can only describe as "high quality". Or are at least perceived as "high quality". In this particular comparison, I think Columbia has a clear premium over most other plane makers. It's hard to compare Bend As A Product, but it is difficult to live in a place for purely voluntary reasons, and say that it sucks. Bend appeals to me quite a bit, and I still think that despite increasing deficiencies, it's still a pretty nice place to live. Both Columbia & Bend as "products" have definite appeal.

But they both also share a insidious "profitless prosperity", something quite widespread during the NASDAQ bubble. Companies with absolutely no hope of EVER making money came out of the woodwork. Some were even located in Bend, if you can believe that. Highspeed Networks was designed for the sole and specific purpose of going public and making its founders rich. Highspeed got a ton of private funding which it proceeded to burn through with breathtaking rapidity. They turned down repeated offers for many millions. They were holding out for The Big Score -- $100 million each. Alas they missed the top, and by 2003 were wiped out, the scraps were picked up by vultures for next to nothing.

Columbia Air was not built for the specific purpose of capitalizing on a bubble, per se, but it suffered much the same fate as Highspeed. Chronically high costs in an industry with astronomical capital needs. Columbia tried to cure the condition by positioning itself as a "Premium" manufacturer, and charging quite a bit more than others in it's space. This is often a good move for low-unit makers. Like Aston Martin, you become a manufacturer of choice for those who are willing to max out their spending for The Best. This was probably a good choice for Columbia.

But like Aston, you have to accept your marginal niche role. You can be abnormally hurt by cyclicality. This did not happen to Columbia though. "Small aerospace" has been inordinately strong for years. 9/11 actually helped this sector as many chose to forgo long lines and either go with small planes or "timeshare" like outfits like Netjets. Columbia Air was built from baby to adolescent in the best of times.

But even this was not enough to keep Columbia afloat, and it was almost entirely bought by the Malaysian government. Now, I can tell you that the Absentee Owner Funding My Company From Afar, And They Happen To Be A Sovereign Government model of running a business is fraught with financial & moral hazard. "Loans" quickly become "Income" to be spent, instead of invested at an internal ROI to cover the payments. And as the Sovereign Sugar Daddy loans become "income", there comes to exist a persistent condition of Profitless Prosperity. The company NEVER makes money, and is actually plagued with HUGE LOSSES, but nevertheless continues to survive, and curiously enough, thrives like never before. From all appearances, things seem to be going swimmingly, when in fact the income statement and balance sheet are rotting from the inside. This is Columbia Air: All spit & polish & prosperity with great product... but an insidious financial condition guarantees the implosion of the financial Ponzi scheme.

This is Bend. Apparent prosperity of almost unknown magnitude. Upgrades here, there, everywhere. Expansion in all corners, and the Engine of the Local Economy experiencing so many years of asset inflation, that the balance sheet looks positively glorious. Income IS HIGHER. ASSETS are at all-time highs. Everything looks positive, and regressing back to The Bad Old Days really seems mathematically impossible.

But Columbia Air & Bend will almost certainly share the same fate. If you haven't heard, the vultures are circling Columbia, with Textron (parent company of Cessna) having made an offer to purchase the company. And it wasn't due to "independent interest", it was due to the Malay's circulating a memo to anyone and everyone that Columbia is available for bid in whatever form bidders saw fit, whether carved up carcass or on-going operation, because otherwise Columbia is going bankrupt. The Malays pulled the plug.

Yes, Columbia Air, like all Ponzi schemes is finally collapsing. Taking in a dollar, and selling it for 80 cents will ultimately implode whether backed by governments or little old ladies. The Malays just delayed the inevitable by buying a majority interest several years back. It probably cost them tens of millions.

The same will happen to Bend. Doesn't seem like it should, but it will. And figuring it out is pathologically simple. LOOK AT OUR INCOME STATEMENT. We've doubled income since 1990. Gravy. Great. But our assets are up 5 fold. Lots of people make the argument that virtually all Bend homes are 100% equity financed. Ummm.. if you believe that, I have an aircraft maker & a bridge to sell you. Bend is income has been funded by the liability side of it's balance sheet for at least 10 years. To some extent this has always been true.

But in the past 5 years, the practice of borrowing money to actually refi loans, and then begin paying those loans until the next refi has basically been a way of life. EVERYONE in Bend does this. Look at any business downtown, and look at it's income: trace those dollars back to their "Source" and you'll find they originated from the liability side of some companies or individuals balance sheet. NOT income. This place is, like Columbia Air, experiencing liability-fueled prosperity, aka Ponzi Scheme.

Columbia Air. Bend. Same thing. Prosperity. Ever rising employment. Premium high quality products. Wondrous untold good fortune. All fueled by Ponzi financing, and doomed to self-destruct.

STATUS REPORT: Columbia Air was sold Friday. They had to accept an offer, or declare BK. From

Sources involved in the negotiation tell ANN the company "ran out of time" in negotiations... and had to accept an offer, from an as-yet-unreported entity, that had a late-Friday deadline.

What that means for Columbia Aircraft Company... current and future customers... and the company's employees in Bend, OR... remains to be seen.

ANN confirmed earlier this week the identity of Textron, the parent organization overseeing the mighty GA manufacturer Cessna, as one of the interested parties for Columbia's assets.

It is not known whether Textron was the winning bidder.

A bidder, almost certainly Cessna, had a Friday deadline, which was probably accepted. This Whitelaw guy had ZERO CHANCE of doing this thing. LBO financing is bye-bye for this cycle. Be a decade or so before it's a viable scam. "What it means for Columbia Air" is as PLANE (ya like that?) as the nose on my face: it'll be dismantled, and every employee will be unceremoniously fired. Or possibly offered a min wage call center job in Kansas. Columbia Air is NO MORE. Like all Ponzi Schemes, it collapsed of it's own weight.

Similarly, Bend will also go down. In a strange twist of perverse logic, since the numbers required to keep Ponzi schemes alive must by definition escalate geometrically, the marginal largess of the process makes it seem like everyone is getting richer & richer right up until Judgment Day. But it will end. It's ending RIGHT NOW. The first hints of distress have begun. And don't be "tricked" by "linear thinking". If someone owns 20 homes, with equity of a million dollars and asset values of 20 million, the liquidation of 19 homes to pay off the debts is virtually NEVER possible. Not only that, the forced liquidation phase itself makes the valuations almost entirely fictional. Read Duncans blog about the sport card bubble, the pogs bubble... once it bursts, the liquidation itself cascades values to losses that simply defy rational analysis.

We're in the midst of the forced liquidation of the Bend RE Ponzi Scheme. "The Dealers" (aka Builders) are no longer engaged in the "retail" end of the business, and are liquidating WHOLESALE. Like Columbia, who used to sell individual planes, the business facility itself must be liquidated. Bend home selling is a process that is evolving into a completely untenable business model. As I noted in previous comments, if builders don't drink the Kool-Aid and stick to cost-plus work, shutting down is no problem. But an awful lot of Kool-Aid was consumed, and the vast majority of builders got into the land-spec business, which was enormously lucrative. So lucrative in fact, that many builders were really stealth land speculators -- building homes was really a marginal & unpleasant sideline. And in the fantasy World of easy money, many borrowed without end to buy The Dream. THIS is what will lead to forced liquidation around here. There IS a HUGE amount of borrowed money that is being called due, and one need only look around to see that we are awash in "product", but there are no buyers. None. None at any price. This is what happens when the bottom drops out.

Ye Olde BendBubble2 has apparently been "rediscovered" by what I thought to be a near-extinct species: The True Believer. Yup, Life Is Good and his ilk seem to come out of hibernation to give me and others a good swipe. Welp, it's all good, I hope I give as good as I get. LIG and others post their prophesies of Eternal Optimism, and it's probably good, because sometimes I and others (you know who you are) seem to dwell excessively on the negative.

But unlike others, I am really not the slightest bit interested in driving out the Amenity Locusts, or conducting a one-man assault on Bend home prices; I don't even really think such a thing is possible. I'm a REALIST. I want to know WHAT IS REAL. I want to plan, and have the best shot at planning a viable if not prosperous future. One look at Columbia Air should tell you why: Every single employee there is in an uncomfortable place right now. Virtually ALL stand to lose their jobs. ALL OF THEM. I posted what I hope was a "realist" view of the Columbia Air situation several times on this blog, given the limited information I have. And that "prediction" was "Marketing the upside of a Ponzi Scheme is FUTILE, and you'd better start looking for alternative employment... NOW!". Predictably, I was shouted down, although I remember a fairly honest & heartfelt appeal by someone who obviously worked at Columbia to stop cutting them off at the knees. Of course I never did, and never could cut Columbia off at the knees; a realist knows this. It was really an appeal to prolong the life of a totally unsustainable Ponzi scheme.

This is what we are hearing in large measure regarding Bend RE by Perma-Optimists. And in one regard, I respect this ebullient life-view. You've got to have Believers, otherwise we're all still cavemen. Seeing past the problems & obstacles to a truly innovative end is a great advance in the human condition. People like this make the World go round.

Unfortunately, in certain circumstances, people like this die. Every year, Perma-Optimists die on Everest. They ignore their own mortality, they become blind to the truly insurmountable nature of the obstacles that face them. They refuse to acknowledge the "Wake Up Call" that reality is sending them. And they die. Columbia Air probably sent the Malay government signals that All Is Not Well, every quarter. But it strong human nature not to admit you're wrong, and Perma-Optimists have One Unified Response To Peril:


Sometimes it does pass. But when it's a Ponzi Scheme, it CANNOT PASS. Mathematically impossible. It MUST IMPLODE. The Optimist never sees this, and usually perishes. The realist also many times perishes, because they underestimate the true severity of the problem. Understand this: Bend RE is doomed to implode. If you are an eternal optimist, that funny feeling you have in the pit of your stomach is your body trying to tell you that Things Have Gone Decidedly WRONG. Good, happy attitudes are NOT ENOUGH to save you. MORE MARKETING is NOT A SURVIVAL TECHNIQUE.

HOMESELLERS: Do you want to survive? Check PPSF comps on BendBB, find THE LOWEST in your neighborhood, and price your home(s) 10-20% below that. NWX has already fallen from a low PPSF of $164/sf in Feburary, to $130/sf now. NWX and EVERY SINGLE NEIGHBORHOOD in Cent OR will make NEW LOWS. And the losses that have been largely mild so far, will become geometric. Marginal half-measures will simply ensure YOU NEVER SELL. OK, and this is NOT A PREDICTION. It's already happening. Any straight-shooter Realtor not experiencing Perma-Optimist Kool-Aid poisoning will tell you the same. You can see in BendBB data that several Realtors are having heart-to-hearts with their non-discretionary sellers (95% of the population -- not 0% as rumored), about dropping price to neighborhood rock-bottom PPSF lows to get'er done. And THEY ARE SELLING.

Unfortunately, thus begins the geometric cascade lower. You must continually cut price, because like lemmings running off a cliff, price cutting becomes the Only Known Way To Liquidate Product. Ask Duncan. It's straight cutthroat competition on price only. Anyone who used to sell product out the front door, starts going wholesale and shipping product on pallets out the back door. AND NO PRICE IS TOO LOW IN THE END. Bubbles attract lemmings like old people attract stink. And as Duncans shop illustrates, you can do OK surfing bubbles, but by God you gotta know when to bail, and bail like hell when the time comes.

I really feel bad for Columbia Air employees. A lot of people made commitments and moved here to build this company, bought into & drank the local Kool-Aid, made huge personal financial commitments, and will now have to unwind them in a market that has simply died. It really is a disaster. And it WAS NOT the point of this blog to cut off Columbia at the knees (as I said, a Ponzi scheme collapses of its own weight... ALWAYS), but to give people a REALIST view of Bend, and what you can really expect from this place. I think prior to BEM's kick-ass blog, there was nothing but 100% UPSIDE MARKETING, PERMA OPTIMIST MARKETING of all things Bend. And that type of thing DOES serve some sort of purpose; there needs to be vision and hope in many situations. But like climbers on Everest who don't survive the journey, there also needs to be some "grounding". Some rubber-meets-the-road real facts, free of spin and bullshit. THAT is what I have always hoped to achieve with this blog. To be the yin to the yang of Kool-Aid poisoned Bend media.

And maybe NOW, many Columbia Air employees (and probably MANY MANY OTHERS IN THE FUTURE) will see why I and others are more than a LITTLE UPSET by Bend medias "EVERYBODY HAPPY" party line. It's perma-optimist. It "feels good". But it's a phantom, and if you make a large scale life-change based on it, you will be financially destroyed. And they DO NOT CARE if you go bust. You are the grist of the Bend media mill that grinds people like you up. And if you read this blog, and think "NOT ME!", well then do as you will. Nothing and no amount of evidence will convince you of ANYTHING.

Just remember though, when you're SUFFOCATING financially having drank the Bend Kool-Aid till your mouth is permanently discolored, that you were warned. As goes Columbia Air, so goes Bend. The parallels are so numerous it's almost comical. Incompetent management, liability funded prosperity, and on and on. We will go down, we ARE going down. Bend is the Ultimate Ponzi Scheme, and it must end. This blog has pointed out the roadsigns on the path to complete destruction ad nauseum. If you think this blog is The Cause, you are deluded and are a slave to the idea that Marketing Solves All, and by extension Negative Marketing Destroys All. I repeat, this blog IS NOT NEGATIVE MARKETING, it's REALISM. Maybe I am equally deluded into thinking that True Believers can be convinced to TAKE RESPONSIBILITY FOR WHAT THEY HAVE CREATED. But like most 5 years old children, convincing them of something they do not want to believe is impossible.



Monday, September 17, 2007

Bend = Popeil Pocket Fisherman

Sometimes, in fact most of the time, I actually want to write about things I see in the previous weeks comments. Stuff from BEM, Duncan, and "Timothy" (although sometimes I wonder who that is), yup even BendBust (with too many aliases to remember), and the True Believers. But it seems I always get something that sticks in my craw in the meantime & I end up writing about that. So I determined that I would do that this week & not be carried away by other things... But first:

Remember the "Popeil Pocket Fisherman"? Oh, yes.

"The biggest fishing invention since the hook...and still only $19.95!"

It's actually a marginal product as any sentient being would know, who knows ANYTHING about fishing hardware. I mean, it's a dinky little fishing pole made with crap components. So why did it succeed?

Well, first, in the grand scheme of things, it didn't succeed wildly. Almost EVERYONE has heard of it, but I don't know anyone who actually owns one. And it never succeeded wildly because it is, right on the face of it, a marginal non-spectacular product. You can see that right away, without having to buy one. It's a little fishing pole, with a short little snub pole.

Now Freudian remarks aside, a short fishing pole is really functionally inferior to a longer one. It's only real benefit is it allows for more compact storage. But for that benefit you pay quite a bit more than you'd pay for a regular fishing rod. I bought a no-name rod & reel a year or two ago for about $7. So how on Earth does the Popeil Pocket Fisherman, an inferior and far higher cost alternative, even succeed?

Three ways: Over-the-top marketing, a tiny niche market, and buyer ignorance.

As I said, almost everyone has heard of the Popeil Pocket Fisherman. THAT is just good, pervasive & what admittedly is effective marketing. If you market something, ANYTHING, hard enough, you'll almost always find someone to buy it, if it's even a country mile within reasonable. If you look at Ron Popeils' company, Ronco, it is effectively a marketing front for a series of what are strange, novelty, and middling quality items. But they are pervasively marketed in "Crazy Eddie" style with a "willing and eager" (and totally fake) audience, in a style that is apparently effective enough that I remember Ronco commercials even decades after having not seen one.

And there does exist a very, very small market for compact fishing gear. For some people, I can't imagine who as I am neither a big fisherman nor constrained by space consideration to that extent, the Popeil Pocket Fisherman is a great alternative.

Finally, strange, substandard novelty products capitalize on buyer ignorance. If you know NOTHING about fishing gear, and Ronco has somehow convinced you of your potential need for a fishing rod, and they are convincing you with their "audience" that is stunned & amazed by their crappy offering, then you might just pay $20 for something worth, at most $7, just because you don't know any better. In fact, buyer ignorance paired with almost hypnotic marketing are the only possible way that products like the Popeil Pocket Fisherman even exist.

Maybe I'm just weird that way, but I immediately see many parallels between the Popeil Pocket Fisherman and Bend. First, there does exist a market for what Bend offers. Hell, I live here and when I first got here, the natural geography, scenery, small town feel, and opportunities to actually make a living here were very appealing. Unfortunately, some of that appeal is being dissipated by Prop 37, massive in-fill development, pervasive tract housing, almost totally irrational home pricing, hostile and incompetent city government, increasing percentage of people immigrating here who do not share my values (don't litter, don't be an asshole, clean up your dogshit, etc) , and so on. But still, Bend is nice, just much less so than 5 years ago.

So there does exist a "market" for what Bend has to offer, despite my own personal observations that what it does have to offer is declining in quantity and quality. As Popeil Pocket Fisherman demonstrates, if you market a middling product hard enough, it will sell to someone. But it's getting harder, much harder. Ye Olde BendBubble2 had some visitors of an ilk it hasn't had in awhile: Yup, People Who Compare Bend to The Highest Price Housing On Earth To Prove That Bend Is Dirt Cheap. Here's a comment after posting 10 over-the-top CA markets with higher medians than Bend.

All with median prices more than 2x Bend's median price. Oregon in general and Bend in particular haven't caught up with California and Washington prices, not by a longshot.

Of course, logically shutting down people like this has been done by me & others with such regularity & ease over the past year or two, that I practically do it in my sleep. Remember the "Yugo"? Yeah, the Yugo was The Cheapest car made -- in dollars. By these people similar logical estimation, the Yugo was, de facto, The Best Car Ever Made because it was the cheapest. Geez. Of course the Yugo was a disaster, because the car itself was a disaster.

Now, I don't want to suggest "Bend" is a "Yugo". It's not. A Yugo-like product is doomed to failure, no matter how cheap it is. Burns... that's getting closer. I actually think Burns is getting better, but that's another story. Bend, as a product in marketable form, is The Popeil Pocket Fisherman. Middling quality with some marginal features that do appeal to a fairly small number of "buyers". That doesn't mean "worthless" by any means. After all Popeil sold Ronco in August 2005 for $55 million, a pretty decent sum. But compared to the Ronco core competence of marketing novelty items, Ronco's market share in it's collective markets has never been more than 1%. It takes advantage primarily of buyer ignorance to capture a tiny share of a huge market.

That's Bend. A wildly over-marketed destination of middle of the road quality. Marketing is ALL WE HAVE. This place practically worships it, because like Ronco, it's essentially Bend's Core Competence. That's why when we receive widespread recognition, it's value is computed to the penny:

"It (Outside Magazine) reaches a demographic that most other advertising efforts don't reach because of a limited budget," Yax said. "Most of our advertising efforts don't go nationally. This is how we reach the national travel audience." The three-quarter-page article in Outside would have cost $71,720 as an advertisement, Yax said.

This is from a Summer article in the Bulletin, "More praise heaped on Bend". This is just strange. I lived in places that received this sort of "free publicity", and never was there an article computing it's "marketing value" -- right down to the penny -- in the local paper. This is what we do, it's what this town is: We are Ronco.

But there's the rub: Ronco ultimately has to abandon each of it's products in a serial fashion: The Veg-O-matic, GLH9 Hair-in-a-can, Mr Microphone ("Hey, good looking, I'll be back to pick you up later. Broadcast your voice on any FM radio!!!". Seriously, that was the ad tagline....), The Cap Snaffler - "Snaffles caps off any size jug, bottle, or jar… and it really, really works."

OK, each ultimately blows up because once you've sold the .01% of the population that actually needs it, and then you've fleeced the .99% that is so mentally decrepit they fall for your marketing or they are just ignorant, the market just declines from there. Your only real solution is to wait a generation for a new batch of suckers. But even they will have some sort of memory passed on that will lessen the marketing blitz effect. Wildly overmarketing the same crappy product is a DOA business plan after the first time. THAT is also Bend. We've just had our first, last and ONLY dose of success. But like the Popeil Pocket Fisherman, that's it. We're done. THAT particular gambit will NEVER work again.

But you know what? We will waste MILLIONS for years, if not DECADES, trying to Keep The Dream Alive. Like "Uncle Rico" on Napolean Dynamite who just kept reliving his glory year, 1983, Bend will end up a pathetic has-been if we keep flogging our one-single glory period.

Like BendBust, I am damn tired of repeating this, but this place needs a REAL ECONOMY. Not housekeeping, retail clerks, pizza delivery, or even construction. Real, sustained business. Here's an acid test for how REAL a local economy is: Do you see more "sales" of businesses or straight "closures"? An economy with "real" businesses will have an overwhelming percentage of "sales". There is "something" there of value that is salable. A "project" economy will have straight closures. There was nothing there of durable value in the first place, so it could never really be sold. That's why construction companies rarely "sell". They are "projects", not real "annuity-like" companies. You buy a general contractor, you've bought hot air.

Bend has an overwhelming number of totally "fake" businesses. They're not real businesses. A one-man law firm, accountant, or doctor office is NOT a business. It's a job. That's what Bends economy is, which is also why a predominant number of businesses here simply close their doors instead of sell. There's nothing there.

That's what we are. There's not much here. And if someone of relatively nominal intelligence were to closely inspect "Bend" as a product they would either buy or not, they would quickly come to the conclusion that we are OVERPRICED. Not totally worthless, and not the Ferrari of towns, but just somewhere in the middle. But in the Ronco style of over marketing, we have become totally dependent of a business model where we are overpriced with respect to our "fundamental value" by double, triple, or even quadruple. And man, without those "hot air dollars" we would fold.

That's what we are: Ronco marketing of Uncle Rico. In 1986. The Glory Years are Over. But dumb Uncle Rico will unfortunately NEVER FORGET 1983.

Moving on..... From Bend Economy Man:

I would never mess with perfection, Paul, but I think sometime you should do a "bust-o-meter" on Central Oregon grand schemes falling victim to the RE bust

"Never mess with perfection"? You shut down your blog! Start it up again!

OK, I'm all better now. Anywho, regarding the Implode-O-meter, I had a similar thought. Maybe put it in the sidebar. BEM named The Shire, some of the vacant eyesore lots downtown, and other potential "busts". And I guarantee you there will be more. I think. The funding for "facility based building" from housing to Redmond Waterpark took a turn for the worse in the past few weeks. Mercato is a bust either way, it's just a question of whether the Crocodile Dundee Bank of Tasmania will pull the funding before it's completed.

I think they will. Bankers are like Wildebeests, they move in herds. Stick together, and the chances of a leopard pulling you down are relatively low. Go out where you stand alone, and you will die. THAT is where much of Central Oregon projects seem to stand. They are in some instances almost pathologically weird (The Shire? Redmond Waterpark? Only in a bubble...), and most residential projects are being built into a market that has basically collapsed.

To BEM's point, there will be some Implosion Candidates, but there will also be many that are just abandoned. I saw in craigslist a 24 lot dev for townhomes where the thing has gone "Wholesale". Can't sell the lots retail, so let's try to bail on this thing wholesale... at 95% of retail cost. THIS is what I think will constitute the bulk of "Implosions". Of course these wholesale liquidations won't sell. Right here on BendBubble2's RSS feed, I saw some developer trying to bail on some lots wholesale, and what's funny is that after computing for Realtor fees and points and everything else, anyone who actually bought at his ask & actually got what he said the lots were worth retail, WOULD LOSE MONEY! Awesome!

"I have made a grievous financial mistake and paid WAY TOO MUCH for a craptacular couple of acres that I can never sell. But if you act today, you can take over my place, and what's better, I can GUARANTEE YOU'LL LOSE MONEY! It's Win-Win!

Oh wait, no. It's Win-Lose!

Oh, no. Actually, it's Lose-Lose!"

THIS will be the legacy of development deals done from today on, for as far as the eye can see. Lose-Lose. Anyone who's bought recently will lose. If you buy from them, YOU will lose. That's the reason they're selling for Gods sake.

Implode-O-meter, good idea.

From Duncan --

Wednesday, September 12, 2007

So income has gone up double, but housing prices have increased by 5 times? Not to worry, rich people will buy all the houses.

I'm still amazed and astounded by the reactions I get in my store from visitors. The comment, "It's happening were I come from, too." The comment, "We're thinking about moving here."

And then, when I question their knowledge of the local conditions, the realization that they don't have a friggen clue!

Perhaps when it comes to the crunch, they come to their senses. But I have a sinking feeling that they are moving here willy nilly, thinking they are going to get a comparable job to the one they left, and sitting pretty on a nest egg of equity.

So the question becomes. How long does it take for them to lose their nest egg?

Bend just keeps sucking up all that cash. And the longer the newcomers are oblivious, the longer high-end retail keeps opening. (Not one, but two bookstores opening in Redmond?)

Maybe this is just another facet of the cubic-zirconia that is Bend. We've marketed the hell out of this place, we've actually realized some ridiculous price gains and reeled in some particularly rich suckers... er, uh buyers. But INCOME. Yeah, that pesky measure of ECONOMIC REALITY, has remained almost pathologically depressed.

What's GREAT, is this place seems to want this illusion to persist, AT ALL COSTS. Screw income, screw it that no one who is actually here can survive. Just reel in suckers to keep cost inflation as high as possible for a small number of producers, Bends Elite. Reminds me of somewhere:

Under the leadership of current president Robert Mugabe the economy of Zimbabwe declined from one of the strongest in Africa to one of the weakest.

The downward spiral of the economy has been attributed mainly to mismanagement and corruption of the Mugabe regime and the eviction of more than 4,000 white farmers in the controversial land redistribution of 2000.

Inflation rose from an annual rate of 32% in 1998 to an official estimated high of 7,634.8% in August 2007,[39] a state of hyperinflation. The IMF predicted inflation will reach 6,430% by the end of 2008. Estimates from private sector economists estimate inflation at about four times the official figures.

In August 2006 a new revalued Zimbabwean dollar was introduced, equal to 1000 old Zimbabwean dollars. The exchange rate fell from 24 old Zimbabwean dollars per U.S. dollar (USD) in 1998 to 250,000 old or 250 new Zimbabwean dollars per USD at the official rate,[42] and an estimated 120,000,000 old or 120,000 revalued Zimbabwean dollars per US dollar on the parallel market[43], in June 2007.

Mugabe points to foreign governments and alleged "sabotage" as the cause of this, as well as the country's 80%[44] formal unemployment rate. Critics of Mugabe's administration, including the majority of the international community, blame Mugabe's controversial program which sought to seize land from white commercial farmers.

The economic meltdown and repressive political measures in Zimbabwe has led to a flood of refugees into neighboring countries. An estimated 3,4 million Zimbabweans — a quarter of the population — had fled abroad by mid 2007.[50] Some 3 million of these have gone to South Africa.[51]

Ah yes, good old Zimbabwe. A place where you look to see how disastrous insular governmental corruption can decimate an economy. See any parallels to Bend?

  • Robert Mugabe = Bend City Council
  • Mugabe's Supposed Economic Sabotage = Let's Hire A PR Marketing Firm Cuz We F'd Up Juniper Ridge
  • 120,000,000 Zimbabwe dollars = Bend Median Home Price
  • Economic Meltdown & Refugees = Bends Future

Of course, like Mugabe, Bend City Council feels they have carte blanche to wreck this town just as long as they can continue to peddle economic influence to a microscopic portion of the population, the Bend RE juggernaut. Outcome? Bends Popeil Pocket Fisherman sellers have so far succeeded in bilking some real idiots out of their life savings, but that market is by definition small & shrinking away to ZERO.

I have no doubt that like Mugabe, Bend City Council will continue to bang this little fiefdom up the corn chute for all it's worth, and the end result will be economic disaster & a massive flight of REFUGEES out of Bend when the true "hot air" nature of it's primary product is revealed.

Finally, from BendBust:

If you can go down 25% do it, becuase this time next year will be -50%.

There are NO buyers, there is NO money, the only thing you can do is market the thing yourself, keep your realtor, everyday promote the house on Craigs, and everywhere you can, take out an AD of your own every sunday in the Oregonian, and promote the home. This way you'll catch that one guy with money, but YOU must lower the price, and work your ass off NOW, if you keep dragging your ass, you will be giving the house away next year.

WHAT! "Keep your realtor"? Are you PRO-BEND REAL ESTATE, BendBust?

OK, Buster, don't blow an O-ring. Just fuckin' with ya. But he brings up a good point, the money is GONE. I'm not sure I agree with his percentages, but when you start looking at the very peculiar & unique situation that is Bend RE (extraordinary RE economic concentration, double or triple the "normal" levels in regular towns, the extraordinary appreciation, and coupled with that a huge correlation of local incomes to RE prices), it becomes hard if not impossible to estimate the impact of the current credit contagion on a place like Bend.

The Credit Contagion may be the only, or the first in a long line of "surprises", that have long been talked about here, as post hoc reasons for a massive and almost unbelievable collapse in Bend RE prices some years from now. As Timmy has said (I think. Maybe I just thought it.), when stocks implode, the reasons for the implosion are only widely known & disseminated once the disaster is total & complete. We won't really know what the catalysts are in their full entirety until home prices here have imploded.

Cynics will say, "Then HOW DO YOU KNOW IT'LL HAPPEN!". Just because I don't know the exact reasons for a bubble bursting, doesn't mean I can't predict that it's very likely one will. The Ultimate Reason ALWAYS ends up being "The Whole Ponzi Scheme Collapsed Of It's Own Weight". That's why all Bubbles burst. There were "exterior" reasons for Bends Bubble, that were largely beyond our control; the national housing bubble, easy money, and a penchant for North-migrating equity locusts to move here. But there are several reasons that are ALL OUR FAULT, and we not only did nothing to mitigate their inflating effect, we have and ARE STILL plowing everything we've got into them. In summary:

Bend is a Pocket Popeil Fisherman (a middling town), being wildly overmarketed by Robert Mugabe (Bend City Council) for the single and sole reason of enriching a small elite number influencers (Bend RE developers). The outcome is easy to predict as day follows night:

Economic destruction and massive refugee exodus.

This is Bends fate. Like the Pocket Fisherman, we had our shot. Like Uncle Rico, we are past our prime. And like Robert Mugabe, we will be driven into economic catastrophe because our government is corrupt & incompetent. We could have taken our one-shot windfall & invested wisely & built a Real Town with Real Jobs. But no. We're beating a dead horse, and all indications show that The Powers That Be will beat this horse to bloody mush until this town is a shadow of it's former self. Bends Bubble collapse and economic destruction are a foregone conclusion because of this.

It's NOT a prediction and I don't "want" it to happen, it's just brutally obvious common sense.

Monday, September 10, 2007


Before I get to why you should fire your lazy-ass Realtor, I've been running SQL on BendBB's awesome Googlefied listing data, and found a few interesting things. Here is a short list of the largest declines in specific neighborhoods. The thing to realize is this is Aug data joined with July on the MLS number. It is NOT separate queries run on dissimilar homes: ALL the stats represented were for homes represented in BOTH MONTHS only. So it's sort of like Case-Shiller data, only the exact same homes are compared. These are the biggest August 1 month losses in subdivs with at least 6 homes:

  1. Awbrey Point (9 homes) -7.4%
  2. Awbrey Heights (7 homes) -5.0%
  3. Bonne Home (6 homes) -4.4%
  4. Shevlin Crest (7 homes) -4.1%
  5. Boyd Acre Crossing (8 homes) -4.0%
  6. Center (7 homes) -3.9%
  7. Three Pines (9 homes) -3.9%
  8. Quail Pine Estates (6 homes) -3.7%
  9. Gardenside (10 homes) -3.6%
  10. Tillicum Village (6 homes) -3.4%

Here are the 10 largest subdivs & their AVG losses:

  1. Deschutes River Woods (61 homes) -2.1%
  2. Northwest Crossing (54 homes) -1.3%
  3. RiverRim (51 homes) -.7%
  4. Broken Top (38 homes) -.9%
  5. Awbrey Butte (33 homes) -1.9%
  6. River Canyon Estates (27 homes) -1.7%
  7. Inn of the 7th (23 homes) -3.3%
  8. Lava Ridges (19 homes ) -.6%
  9. Whispering Pines (18 homes) -.7%
  10. Rivers Edge Village (18 homes) -1.5%

Now, I looked into that Awbrey Point loss of 7.4% on the 9 homes listed there. That's a really substantial loss, with the AVG price on those 9 homes going from $397,911, clear down to $368,600, or over $30K/house. That is a large, almost "concerted" decline. So I looked at the listings, and could quickly see a pattern. EVERY SINGLE home in Awbrey Point was reduced between Sunday, Aug 26 and Wednesday, Aug 29.

It was kicked off on Sunday by Nancy Melrose, of Melrose Realty. She whacked MLS listing 2702963 for a righteous 17.2% markdown (cumulative, 4th price reduction), from $459K, to $379,900. She also spanked MLS 2702961 for 12.9% (cumulative, 2nd reduction), down to $364.9K from $419K. According to BendBB's tables, both these townhomes have been listed since December 2003. Yes, 2003 (although I sort of wonder if that's real) (ADDENDUM: Ooops, that's because they're NOT! These were listed on Mar 12, 2007. My bad...). Strangely, MLS shows construction dates of "2007". And MLS interior shots show them both to be vacant.

Now, of course it's hard to say if it was "reaction" or coincidence, but every single other home in that subdiv was then reduced in the next 3 days. MLS numbers 2705471 (down 8.8%), 2705463 (down 7.8%), 2705470 (down 9.6%), 2705448 (down 7.8%), 2705466 (down 8.5%), and 2705468 (down 9.3%). (There was also another home, MLS 2708395, that was reduced 3.5% on Aug 28).

ALL these homes are listed by a single Realtor, Eileen Dees, at Steve Scott. Now look at her MLS numbers...2705448, 2705466, 2705468, 2705470, 2705471.... Them's builders numbers. Those badboys have been vacant from Day 1, most built in 2006.

I find this sort of interesting. It tells me that either builders are REAL tired of paying carry on these white elephants & want them MOVED, or Realtors are starting to have heart-to-hearts with their clients about waking up & smelling the REALITY. Dees & Melrose seemed to engage in a little competitive reduction here. Hell, maybe it's the same builder with both Realtors and (s)he said SELL! And there may just be the beginnings of a cascading reduction in prices. Sellers & Realtors are LOOKING around and reacting to lower comps by lowering their own price. A price reduction contagion? It could happen....

It's pretty tough to figure out what big swaths of stats like this mean, there's just so much. But it seems telling that in this instance, there is a decided "competition" to mark down price. Completely deluded sellers with ridiculous asking prices seems to have been the rule to date, 100% enabled by their dumbass Realtors. This little Awbrey Point sample seems to indicate that maybe... FINALLY... these people are waking up to the fact that:

1) Ridiculous pricing will simply impede EVER selling
2) If the guy next door marks down, YOU better mark down

These two facts, while almost inanely stupid commonsense, have been largely absent from the Seller Mindset in this town for 5 years. Wildly idiotic prices, and comparable pricing by listing brokers that looks like it was done with a dartboard.

I (used to) pride myself on being able to drive by almost ANY property, and coming within 2-3% of the ask. Hell, I don't even guess anymore. My wife will show me pics in the local mags of homes for sale, and cover up the price, and ask me what I think they're asking (we are an exciting lot). 4-5 years ago I could read the description, and about half the time hit it within $500. Now? Someone could be asking $150K.. or $300K... or a million. I have no idea. This IS NOT usual or normal. It's pie-in-the-sky pricing. And until a fairly well-informed person can guess within 2-3% of what a home owner is asking, our market will remain UNHEALTHY. People HATE uncertainty. Especially when it's uncertainty regarding the largest purchase in their life.

Wow, I've seldom taken such a beating for saying that there actually MAY EXIST some homes in the Bend area worth buying. Even Duncan questioned the Bearish conviction of Paul-doh! I put out the usual caveats, that I thought Bend RE is a BAD INVESTMENT, that this (possible buying of a Bend home) really only works for long term owner/occupiers, and the like. Still, I got whomped. So maybe I'll try one more time to describe what I think about Bend RE prices, in graph form:

See, I think there are "Normal" times for Bend & most cities throughout the World, when RE is priced fairly appropriately given local incomes, or even Conveyor Belt incomes, when appropriate. As was pointed out in a recent Bulletin article, Bend medians in the late 80's were around $50K, while the rest of the US was closer to $100K. We were probably moderately undervalued back then. Our local economics stunk, and consequently so did our home prices. We were the Flint Michigan of Oregon. We had low prices, and we deserved it.

This is in sharp contrast to today. Admittedly, Bends economy has improved vastly from the Bad Old Days. It would have been hard for it to do anything but. But has it improved so radically, that we deserve one of the largest premiums in the country over the national median? I don't think so.

As a matter of fact, I think our high prices will be our undoing. They are proving to be more than just a short-lived affair, and companies are starting to make long term plans based on our high costs. For the most part, they are leaving. This can't be UNDONE. Once they're gone, getting them back will be near impossible. Seaswirl is NOT coming back to Culver. Oregon Woodworking... gone. Columbia Air... On life support. There are many others that are packing up & leaving or are already gone. These companies are dead & gone (or damn close), and they are not coming back. Our city leaders have chosen to expend resources to ramp up industries that are notoriously low paying. Housekeepers CANNOT afford $400,000 homes.

Anyway, the above graph more clearly illustrates what I think about the Bend market. Virtually ALL homes are priced FAR TOO high. FAR TOO HIGH! But there does exist a small (but growing, as prices decline) percentage that are within eyeshot of normalcy. "Eyeshot" being defined as 2.5 STD's above the mean in "Normal" times. I define "normalcy" as $190K, or so, medians in Bend. And there does exist a small number of people who HAVE TO come to Bend, and either by choice or necessity, HAVE to buy a home. I was simply pointing out what I thought were "relatively" inexpensive homes... not straight out inexpensive homes. I don't believe there is even a single INEXPENSIVE home in Cent OR. NOT ONE.

OK, finally for FIRE YOUR LAZY ASS REALTOR. OK, yesterday I was on a beer deprived bender over on BendBB's board, essentially saying that sellers should DEMAND that their Realtors show up to EVERY SINGLE showing of your house. EVERY SINGLE ONE. After all, these are strangers in your house, you have no idea what they are doing, or what they're like. I also pointed out that one of the first persons to look at my house when I was selling initially represented himself as looking at my house "for a client". He was a licensed Realtor, and this "story" later proved to be false. It was kind of weird, this single guy who showed no credentials just wandering through our house. It was creepy. I mean, I don't think he stole anything, but he had no problem lying to me right off the bat. You absolutely should have someone representing you AT EVERY SHOWING. PERIOD. But ESPECIALLY when you are not there. And really, you should NEVER be at a showing, it is your Realtors job to be there. And I got this response, ostensibly from a Realtor:

so question, if I am a listing agent and I have 60 + listings and 6 of them are being shown at the same time, how am i supposed to be at all 6! get a life, if you hire the best they will be busy marketing you home to buyers and other realtors. You don't hire a realtor to attend showings, you hire to spend their money and make an monatary investment in marketing your home at no risk to you. Maybe I should ask you up front to fork over the money to advertise you would that make you feel? Wrong isn't it? then demanding we spend all our time working one single listing, when we have many other to service as well.

Here was my response:

so question, if I am a listing agent and I have 60 + listings and 6 of them are being shown at the same time, how am i supposed to be at all 6!

Excuse for not doing your job. Here's the solution, listen close:


I know. I came up with that in less than 48 hrs. I've been asked to speak at MIT. Nobel Peace Prize, that is.

get a life, if you hire the best they will be busy marketing you home to buyers and other realtors


And stop trying to imply that MARKETING takes more than 10 seconds per decade. Yeah, I know, I've done it.

"Hi, Marketing Jerks, here comes a fax. Market it. "It's overpriced", is the sum total of my knowledge of the situation. OK, bye."

You don't hire a realtor to attend showings, you hire to spend their money and make an monatary investment in marketing your home at no risk to you.

Nice. THANK YOU for telling me, OSTENSIBLY YOUR FUCKIN' MEAL TICKET, WHY I'M HIRING YOU. At NO RISK to me? What's that Big Ass Wad of cash you deadbeats take? Chicken feed? At no Risk, my ass.

"ATTENTION JEWS! We are offering a NO RISK shower. STEP RIGHT UP!"

Maybe I should ask you up front to fork over the money to advertise you would that make you feel?

It'd make me feel like I'm doing an FSBO, much the way I felt while my house was listed a few years back by the laziest sack-a snot that ever walked this planet. Actually this would be a FAR PREFERABLE business model than what we have today:

"HI, I just got my GED & I'm a Realtor. You're selling your house, please name your astronomical price cuz I'm too stupid & lazy figure it out. Could you hurry, I have some "marketing" to do at Silver Moon."

Wrong isn't it? then demanding we spend all our time working one single listing, when we have many other to service as well.

Right. My Realtor could ONLY ATTEND THE 3 SHOWINGS HE DID FOR MY HOUSE EVERY WEEK: Sum total weekly time spent; 1 hour at showings, 1 hour commuting. See, that's a problem when your an alcoholic, meth addict, or in mens restrooms, or whatever it is you do 65 hrs/week.

OK dude, I feel bad for you. Your a lazy-as-hell listing monkey who ain't worked a day in 5 years, and you caught wind of some heretical bullshit that suggests YOU WORK. I know, I'd raise hell too. But it's a fact, you're going to have to start working, put that Realtor/GED license to use.

This just burns my ass. This lazy bastard is trying to tell ME that he's TOO BUSY to do his job. "Other listings" and all. "What am I supposed to do?", he says.

You lazy sack of shit, YOU'RE SUPPOSED TO WORK! I have paid almost $60,000 in commissions since arriving in Cent OR, and was essentially ABANDONED once the listing contract was signed. WORST SERVICE EVER. Well, "SERVICE" is a misnomer, since I've basically NEVER RECEIVED ANY SERVICE.

My God, this ONE differentiator would probably result in a gold mine of listings. This ONE THING. Personally, I would go immediately to a Realtor offering to do this. Will it happen? Look at the above Realtor reply. Lazy sack of crap is too busy telling me exactly what he will do for me, which is precious little, rather than listening to what I want. Lazy bastard.

My Advice: INSIST, and I mean by GOD DEMAND, that your listing broker go to EVERY SINGLE showing of your house. DEMAND IT. Those lazy bastards are making HUGE MONEY, and every single seller, whether individual with a $80K cracker box rusted out mobile death hole, to a 100 unit multi-million dollar luxury home builder, EVERYONE should demand their Realtor be at EVERY SINGLE SHOWING. The second they think about putting a lockbox on the door, FIRE 'EM.

It is EASILY accomplished, especially given the fact that homes now sell about as often as leap year. Demand it. Those bastards should EARN that money, and the LEAST THEY COULD DO is actually accompany TOTAL STRANGERS into your house. It's just insane not to have someone you know & trust in YOUR HOME. If your Realtor will not go to every, single showing from now on:


Monday, September 3, 2007

Bend's Best Bargains

Sometimes, I sort of blow my top on this blog (luckily, it's mainly in comments) after there is the occasional jab from a True Believer that I and others are "bitter" or something about having been left behind by Bends Bubble-nomics. And I guess on some level that's right. On a purely selfish level, I'm a little pissed that price levels totally precluded me from buying a house, because for me, an expenditure of that amount HAS TO make financial sense for me. It HAS TO.

Some people are saying (now that appreciation is no longer feasible) that your house is your HOME, and that's it, finances be damned. Of course, 2 years ago this was laughable, and "transactors" were touting the financial benefits ONLY of buying multiple homes. Houses WERE NOT "homes", they were Flipper Bait, pure and simple. I bridle at the hypocrisy that most people who are NOW saying you have to "forget" the financial aspects of a home purchase and revel in the warm touchy-feel-ly aspects are NO DOUBT the same people flipping properties as fast as possible just a few short months ago ridiculing those who "weren't in the game" for the money ONLY.

When I look for a house, it MUST make sense on some "quantitative" level. Like a stock. The numbers have to work. Price per sqft and all that. That gives me a subset of what I can look at from a qualitative level. Location, schools, and certain "sacrifices" that usually come with a bargain price. My first home in Cent OR was a screaming bargain because of a qualitative "defect": a horrendous floor plan layout. In all other aspects it exceeded my expectations, but the floor plan was a disaster. And when you walked in the place, that was practically all you could see, it was awful. But I saw beyond that, and could see that if you knocked out just a few walls, it would be a palace. And that's what I did, and I sold it for a nice profit.

And in "normal" times, this can happen with fairly decent regularity. Find a place with some hope of curing some sort of defect, buy it, fix it and sell it. There are some homes with no detectable problems and they just seem unreasonably cheap, but those are pretty darn rare. And there is the fairly common problem of a cheap home with an incurable defect: Geodesic homes, rusted out mobiles, homes with profound foundation problems, etc. Sometimes even these are curable, usually by insurance fire or target practice.

And one principle I always adhere to is only buying a home I am willing to live in FOREVER. That is very qualitative, but it tells me something about a place on a gut level that no other metric does. If I am willing to live in it forever, than reselling it at a reasonable chance of a profit in a reasonable time will almost certainly be possible. But if it's NOT.. I'll still be OK.

But during Bend's Monster Bubble, this process stopped dead. At the top and a large chunk of time surrounding the top (probably even now), there was virtually no property purchase that made RATIONAL sense. None. I looked for property for weeks & months, and not a SINGLE home was worth buying. This is still largely true, from my perspective. During the runup, prices that seemed ridiculously high at a point in time, seemed completely reasonable 6 months later. And this process repeated several times.

I have this opportunistic bent, and it's basically how I have survived my whole life. But in Bend, from 2004 to Present, the process stopped dead for me. There was NOTHING that made sense on a financial basis, no homes, no land, no businesses. And I guess I am a little TO'd by this fact. I am NOT pissed I Missed The Bubble, and the flippin' good times appreciated by others. It's more that I know in an economy so far out of whack that I will probably not be able to get "back to business" in any relevant time period, and on a collective basis that the local Bend economy is doomed because of the proverbial "Doubling Down" on REd is the ONLY economic model that has survived more than 6 months in this town for the current generation, and hence it's all we got. Like Pavlov's Dogs, virtually this whole town has been conditioned to Buy RE whenever The Bulletin rings a bell, which happens with amazing regularity.

So am I ticked off that Bend's RE markets don't have the decency to serve my own selfish needs? Yeah, sort of. Am I as big an ass as the jerks who have flipped from Houses As Financial Windfall to Houses As Homes HYPOCRITES? Maybe. But I have found my own financial "weathervane" to be damn reliable regarding the future. Well, at least in the sample size of "2" that I have experienced.

First, was the stock market bubble of 2000. I had dropped out of that market quite awhile before the top, after having been active for MANY years. It made ZERO economic sense to me. Curiously, I had pulled all my stock money, and was fixing up my house! And ALL my friends who typically had little or no experience/knowledge of stocks were borrowing to buy. And their SOLE nugget of the turning of the profit-making crank is CAPITAL APPRECIATION trumps all. Niggly details, like what the comany does to make money, or even what industry it was in, were irrelevancies left to prudes and dolts and little trolls. Just "buying", sight unseen was SEXY & COOL, and hell, how dumb could it be? EVERYONE IS DOING IT.

Well, everyone but me. I was one of the prudes. I actually thought price WAS important with respect to The Underlying Realities (And a confession: I DID buy ONE stock at the top, Berkshire Hathaway. In one of the delicious ironies of all-time, BRKA hit a multi-year low on exactly the day the NASDAQ hit it's all-time high...). So I am also like Pavlov's Dog, except it is (appropriately) contrary to an extreme: When I see EVERYONE doing "something", with a fundamental disconnect between what they are doing and the details underlying the transaction and the only rational reasoning for doing that "something" is APPRECIATION, something is terribly, terribly wrong and Bad Times are coming.

Man, I get this feeling IN SPADES now. Not really with regard to the national RE bubble. Truthfully, since coming to Bend in 2001, I haven't traveled extensively. Just little regional trips, and the market was pretty normal when I got here. But now the markets outside of Bend are just a pale shadow of the mindless frothy-mouthed frantic insanity that has gripped this town. I've never seen anything like it, with every "institutional" (City Gov't) and media outlet feeding the frenzy to the fullest extent of its ability. And the residents are just overwhlemingly IGNORANT of the situation. There is No Problem for the vast majority of Bendites regarding the RE bubble. They don't even know one exists, or it is Not Really A Bubble. "Bend's always been this way", is a familiar mantra. Huh?

Bend has NEVER been This Way. In 1986 the Bend median home price was around $50K and the national median was double that. Today the national median is $220K, and ours is $350K! Any longtime Bend resident will tell you that Bend has been a perennial bastion of lower-than-average home prices, almost certainly because of the lower-than-average business prospects & productivity of the area. Not to beat a dead horse, but we aren't the Next Aspen cuz we're too big (Conveyor Belt theory of growth will NEVER work), and businesses NEEDED to prop up housing prices are exiting at an alarming rate. We need high-growth, high tech, high productivity business here, and we need it yesterday. Without it, Bend RE is simply a house of soggy cards. An illusion, a phantom, doomed to implode.

What is Bend, to me? Well, as I said, large expenditures for me MUST pass some sort of quantitative test. THAT gives me a subset that I can work within and look for "situations" that make economic sense. So everywhere is full of a variety of situations, homes, businesses, all sorts of things, all distributed along a bell curve, some overpriced, some underpriced, the vast majority fairly priced, or close. At least, this is how it "usually" is in most places in times of "normalcy", and so it was when I got here in 2001. But the RE bubble took hold, and this aggregate Bell Curve of Opportunity started sliding to the right, UP the price scale. Things that were on the left tail went from attractive to middle of the road... then to overvalued... then to plain outrageous. Stuff on the right hand side that started too high to begin with, just went out of sight. The entire town is currently in "suspended rational animation": virtually NOTHING makes sense on a rational economic basis. Well, almost nothing. THIS is what Bend is to me.

Now we're entering The Crush: Where nitwits with almost eerily bad timing and thin financing are getting crushed out of the game. Desperation is setting in. Prices are falling, and there are some players who never had any business being in the Game, and they are being wiped out. The Bell Curve is moving left again, and it's also flattening and getting wider. There are some instances of homes being priced within eyeshot of normalcy. And although they are still above my own personal ROI requirements, there are probably lots of people for who losing some money on a house is secondary to the avoidance of the hassles of renting & other considerations. And so with those caveats firmly in place, here are some of Bends Best Bargains:

For the Thrifty Millionaire on a Budget, Realtor Dana Furlan of John L Scott has this 5,534sf whacky shack at Rivers Edge Village for $1,097,000.

To see this badboy, just start heading West on Mt Washington near the Mall (is it still a mall now?), and just take every road near the golf course. Or maybe someone can note in the comments where it is. It appears to be unoccupied, so that can sometimes give you some leverage. It was built in 2002 and it's on half an acre. Architecturally, it ain't my bag, and that driveway looks too wide. It's priced at $198/sf in an area tightly priced at $242/sf. Per BendBB, it's had 2 price reductions, and it showed up in his data in May at $1.295MM originally. If you have the means, this home might be worth a look as it seems to be about 20% below area listed "comps". Maybe go in and throw them a stroke-inducing lowball & see what sticks. But as always, Caveat Emptor & look for The Problem: the defect that could be a deal-buster that is currently giving the owner nighmares. If it's curable by you & you can clearly display it for the World to see, you can make it work for you.

Next is a house that has popped up on several screens as being a possible valuation gem.

This unpretentious 3,088sf house is up on Awbrey, built in 2003. From the COR page, all appears well. But this place has seen a mind-boggling SEVEN price changes (reductions?) since originally being listed at $829,900. Today they are asking $550K, and at $178/sf this place is well below the admittedly heterogeneous Awbrey area average of almost $300/sf. It's listed by Karen Milne at Brooks. My Cardinal Rule is protect yourself from the downside, and this place looks plain cheap. Worth a driveby, and anyone who's got details regarding exact location or other info is welcome to post it in the comments. From a plain quant perspective, this is one of the cheapest homes in Bend.

There's the Price Is No Object crowd, and there's the Price Is The Only Object crowd (rusted out mobile 20 miles East of LaPine on boulder strewn "road"), and then there's the Vast Middle. They want a good value, but there are certain things they won't compromise on. This house is in Ridgewater (near 15th & Ferguson) in SE Bend.

At 2,231sf it's a moderately sized, moderately priced little place, and it's fairly new, built in 2005. Originally listed at $380K, they want $320K today. This is the fungible goo of Flipper Bait thrown up by the hundreds & thousands, but this place "seems" like a a screaming bargain at $143/sf compared to almost $200/sf for the 13 surrounding properties. It's a tightly priced subdiv, and again the downside seems very limited on this place. This place looks like a Go at ask, but you might find The Problem, air it in high relief, and knock it down below $300K. For the vast middle of the Bell Curve of buyers, this one is a good deal. It's listed by Lisa Garcia at Sunriver Realty.

Now for The Price Is Damn Near The Only Object, this house is in Obsidian Meadows in Redmond.

OK, this is a straight up, mass tract housing unit stamped out by the trillions with no personality, landscaping, or any other function other than keeping rain off your head for a decade or so. At $229K, it's had no reductions, but it's $119/sf, which is quite a bit lower than the subdiv median of $133. Well, in relative terms, since the STD in Obsidian Meadows is just under $8. My own feeling is that this sort of place is worth about $100/sf, +/- $10. But that might be realized so far in the future (never?), that the interim costs of renting are swamped out by simply buying a place like this today. In fact it's a pretty bad idea to wait on low-priced homes to depreciate by renting in the meantime: If this place drops 10% ($23K) in 5 years, you'll easily pay far more than that renting in the meantime. Whereas a $2MM shack getting whacked for 10% is $200K, and that can be worth the wait.

And now for Paul-dohs personal favorites: Here are two places that I think are just interesting. The first is in Promise Lane, a subdiv off Eagle on the East side:

If you know Promise Lane, you know it's a Flipper Bait subdiv, full of lifeless shells stamped out by shameless hucksters. Then there's this place. A log cabin built in 1978, it's got 2 bed, 3 baths, and 2,540sf. No garage is The Problem, though, that is clear. It's vacant, and I've had a look thru the window, and it looks livable, maybe a little dark with seemingly low ceilings. But, I LOVE log homes, despite all their maintenance issues. And this place passes the Quant Test with flying colors, having been marked WAY DOWN from $399K down to $299K. It's listed by Sheri Abell of Palmer Home Sales, who I think stamped out Promise Lane. This is a fish out of water home, and is just sort of odd. Why Palmer didn't tear it down, who knows. But it's not a Gold Rush whacky shack, having been built back when Men Were Men, and Women Were Also Sort Of Men, so it's probably built like a tank. And it's big and it's cheap, and it's priced at an already cheap $118/sf! Hell, even if you don't want to live in it, it might even serve as a stable rental. I just think this place is cool.

Now for the Paul-doh's All Time Favorite, Price Is No Object, I Just Won The Lottery Mega Shack:

I mean Damn! This is probably one of my favorite homes of all time, and had I the means to easily afford it, it'd be mine NOW. It's over in Saddleback West, a nutty little subdiv out beyond Shevlin Park, just full of all sorts of places, from grubby, hard scrabble 70's crap, to this log monster. I've actually been in this home, and can tell you that you about drop a load in your shorts at the grandeur of the entry. It's enormous. And just drop dead beautiful. And the occupants have done everything right in decorating it. Take the first right in Saddleback, drive a ways, then take another right... it's on your right 2nd or 3rd house. Holy Crap.

It's 5,006sf, and priced at $1.195MM, down from $1.5MM. Frankly, I can't understand why it hasn't sold. After 2 price drops it's at $238/sf, which you can see by driving by is a bargain. This place is the reason I bought lottery tickets back when Powerball ran up to $315MM: I would buy this place in a heartbeat if I had the money. Maybe it's not selling because it's log, or something, but I can tell you it is Log Done Right, not like the previous house above, which is closer to Log Done To Our Budget... Which Was Thin. This place is a Diamond.

So there you have it: The Best Home in Bend is the massive log monster listed by Sandy Garner at Coldwell Banker Morris. The Best Bargain in Bend? That goes to the SE Bend Ridgewater home listed by Lisa Garcia at Sunriver Realty.

(If you have your own favorites that don't appear to be shamless marketing by an RE slime, I'll probably post them in future posts. Shameless marketing will at best be ignored, at worst will receive the full-bore brunt of ridicule that I and many others can throw at it. At some point, I'll probably do a post about the Best Deals in high volume subdivs, like NWX, Skyliners, RiverRim, and the like, cuz these places are where most of Bends buying is getting done.)