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.)