Bend Oregon: In A Depression Right Now

Well, I don't know if anyone else has noticed, by Ye Olde BendBubble2 blog has expended much virtual ink on the idea that there are people that need to be convinced that there is in fact a RE Bubble of unparalleled size imploding right now in our fair city. I've long talked that the nationwide implosion of wealth would be probably the most dramatic economic event in this country this decade (Or 2. Or 3), and it would probably be far and away the most important event in the history of Bend. So many previous posts were about convincing you that it was coming, and trying to guide people in a rational course of action, if you are caught in the Bend RE bubble. Hmmmm....that doesn't seem to be really necessary anymore.

If you can fog a mirror, you may have begun to perceive through the numerous obscure references to the US economy imploding before our eyes that have become de rigeur on The Nightly News & on the Presidential Cacophony of Bullshit, that The Shit Has Officially Hit The Fan. You may have started to notice a frenzied attempt to calm the masses with a large number of $600 checks. Yes, yes. That'll set things right. I'm looking at a $100K spanking on each of my 5 Bend spec homes, and by God, $600 will make it all better.

And as an aside, the Classic Stupidity of Liberals was aired on KTVZ, with respect to a "poll" asking locals what they would do with their refund check. The second person asked was a red-faced Bush hater, who responded, "I don't see how anyone can accept money from that... lying.... MAN!". Such vitriol for Bush is common, but ONLY KTVZ would have aired such an irrelevant liberal rant. Good call, dumbshits.

And so this blog must move to a new phase of chronicling the destruction, instead of convincing you about the depth & breadth of the coming horrors. The horror is here. And it's not leaving for the rest of our lives. It'll lead to a helluva recession in this country, despite protestations that it'll be short & mild. The government has NEVER predicted anything but short & mild recessions.

Bends fate is dramatically different though. We'll return to the Bend of Olde. Yes, when the dreadlocked set were easily employed for the Summer. When Bend teachers worked retail all Summer. 12% unemployment in February. You know, the good stuff, Depression era Bend.

Yes, I actually heard The "D" Word, by the abortion of Suzie Orman, Melony Hobson, on Good Morning America. Of course she said it would not happen in America EVER, but she actually defined what a depression is: 10% drop in GDP. I didn't know that. She said there has actually been a Depression since WWII, although she didn't say when. I'm guessing the early 80's.

Anyway, I've said often Bend is headed for a recession, which of course we are already in, right now. But that is sort damning our town with faint praise: We're headed for a Depression, in fact we are probably in it's beginning stages RIGHT NOW. And before it's over, DOWN 10% will look Damn Good.


So, with that I will try to temper my Predictions Of Doom, because it seems quite obvious to any sentient being that we are in the teeth of the most ravaging economic conflagration this town & the country will experience in the next 100 years.

So what's on the mind of our blessed commenters?

Well, there is one thread that sort of makes me chuckle, but lemme quote a wikipedia chunk on what an Alchemist is, first:

The best known goals of the alchemists were the transmutation of common metals into gold (called chrysopoeia) or silver (less well known is plant alchemy, or "spagyric"); the creation of a "panacea or the elixir of life," a remedy that supposedly would cure all diseases and prolong life indefinitely; and the discovery of a universal solvent.^[1] Although these were not the only uses for the science, they were the ones most documented and well known. Starting with the Middle Ages, European alchemists invested much effort on the search for the "philosopher's stone", a legendary substance that was believed to be an essential ingredient for either or both of those goals. The Philosophers Stone was believed to mystically amplify the user's knowledge of alchemy so much that anything was attainable. Alchemists enjoyed prestige and support through the centuries, though not for their pursuit of those goals, nor the mystic and philosophical speculation that dominates their literature. Rather it was for their mundane contributions to the "chemical" industries of the day—the invention of gunpowder, ore testing and refining, metalworking, production of ink, dyes, paints, and cosmetics, leather tanning, ceramics and glass manufacture, preparation of extracts and liquors, and so on (it seems that the preparation of aqua vitae, the "water of life", was a fairly popular "experiment" among European alchemists).

Alchemy? What the hell sort of analogy is this about? Here's some guesses:

1) New Bend business transplant, International Environmental Technologies.
2) Bend real estate.
3) Bend, itself
4) Capstone turbines
5) The Shire
6) Tuscany Arctic Pine Butt Munkees
7) All of the above
8) Number 9

Yeah, my own guess is Number 8, which in fact leads to Number 9, which in fact leads to... confusion & nothing. Which, if you've been reading this blog for long, is pretty close to the mark. But, perhaps it is All of the Above.

Bend is built on the idea that you can convert an empty fantasy into something of substance. IET, is so perfect for Bend, it really is amusing. All the essentials are there:

1) Overly Impressive, yet meaningless name? CHECK!
2) Business Plan that defies the Second Law of Thermodynamics? CHECK!
3) Black box technology that somehow promises infinite wealth, yet sells zero units? CHECK!
4) Dumbfuck town willing to fund hucksters into the next century? CHECK!

As Brucey put it:

Whenever I hear about creating energy using extremely high temps, I start to wonder just how much net energy you end up with...

See, I was raised in a town where you burned your garbage in a big 32 gallon drum out back. NEVER did I get anything back, when I burned shit. But the alchemists at IET have totally bamboozled EDCO (ie Bend taxpayers) into sucking their corporate beanbag to relocate here. Here was Jeff Surma's (IET CEO) pitch:

Jeff: Roger Lee, how goes it? Dude, we have totally made a Magic Garbage Can, where you throw shit in, and out pops unlimited wealth! It's awesome!

Roger: Really? Cool! Cuz we need some big shit now that our previous Master Plan, "Double Down On Red", has imploded. What happens if I throw garbage in it?

Jeff: Dude, it totally produces this stuff, it's like plasma gas, that actually powers anything you want!

Roger: Really? What if I take a shit in my hand, and throw it in there?

Jeff: Dude, out pops a solid gold toilet! Seriously!

Roger: This seems to defy 9th grade physics though. Plus I've taken a shit in about 600 campfires, and never ended up with a solid gold toilet.

Jeff: Dude! That's old school, bullshit theory! It's 2008! It's Hammertime! This is the New Economy! Haven't you heard of Rumpelstiltskin? That shits in a BOOK! It's been proven in Estonian physics labs that this stuff works! Dude, just to prove how lucrative this is, here's a free coupon for a bottle of $4 wine at the Grocery Outlet!

Roger: Damn! It must really work!

And so forth. IET is exactly the sort of company this town attracts. Whether it's turning straw into gold, water into wine, or shit into solid gold toilets, Bend is your kind of town if you're in the grifting trade. You'll notice that water-to-wine, bullshit energy products make the rounds everytime oil pops up 50% "Gas additives" that boost your mileage to 300mpg? Yeah, every pop in oil. This is the same thing, it's just the Long Con for The Big Money.

And Bend is the Perfect Mark.

City of Bend On It's Way To Going Broke

An anonymous poster put the contents of this Bulletin piece in the comments, "Bend park board’s HQ on track as ball fields are slashed".

Pretty straightforward: Our fair City assumed that Doubling Down On Red was The Eternal Road To Riches back in the day, but unfortunately they didn't do 2 things first:

1) Read this blog
2) Think

So Big Fun, enviro-friendly, The Money Will Never End sort of projects, like Bend Pine Disneyworld are being scaled back to meth-den, gang-run Mexi-Cali shithole "parks", featuring parking lot & portable toilets, and the occasional raped jogger.

The scaling back on this particular project should give you pause about moving to, or staying in a city that is RIGHT NOW laying off cops: From $13MM, clear down to $2MM, or an 85% cut. THIS is just a hint of what's to come, and really happens to anyplace that sells it's soul to the devil or Brooks Resources: QUALITY OF LIFE GOES AWAY.

We made a Faustian Bargain that we'd do anything to be Number 1. Welp, the devil delivered, and now it's time to pay. Practically FREE SDC charges have transferred profits from the Citizens of Bend, to Mike Hollern, Randy Sebastian, and other shysters. Instead of parks, we have parking lots. Instead of cops, we'll have crack houses. Instead of handicap ramps, we have... nothing. Instead of mass transit, we got a junk yard.

And it's cold comfort that people like Hollern plowed their cash back into Fields of Dreams like Yarrow and Ironhorse, with a time to 100% absorption of 1 Human Lifetime.

Bankers Lament:

Who can forget the day I proudly posted The Plaza, as the first entry on our little RIP Hall Of Fame? Well, according to posts here and on BendBB, the $20.5MM note on The Plaza was sold by Umpqua Bank, possibly to make payroll, for $7MM.

First I'll note that statements about a "30%" return are slightly off the mark. This would have yielded Umpqua a tidy $26MM, give or take. No, the real return was -66%. Remember the post about how the Number 70, seemed to be popping up more than normal? This one is another close call.

I will say right now, that you should go have a look at the Plaza units, and offer 30 cents on the dollar. Those are going to be some nice rentals. And at $120/sf, they might even pencil, if you defer maintenance, and really gouge renters on their deposits. Right Buster?

In addition to Umpqua's shellacking, CACB posted their "dismal" results for Q4. Someone posted rather extensive financial highlights in the comments. Here are some interesting ratios & figures (2007 vs 2006, and the % chg):

Return on average total shareholders' equity (book) 7.42% 15.93% -53.4%
Delinquent >30 days to total loans 0.47% 0.09% 450.6%
Non-performing assets to total loans 2.23% 0.16% 1302.1%
Non-performing assets (5) 45,696 3,005 1420.7%
Net loan charge-offs (annualized) 0.33% 0.08% 308.5%

Yeah. I guess that 1302% INCREASE IN NON-PERFORMING ASSETS caught my eye. Seems like a uncomfortable trend? I don't know, maybe I'm just alarmist. Although they also noted this about their Developer Loans:

As background, this portfolio represents loans made to developers for the purpose of acquiring raw land and/or for the subsequent development of residential lots. The nationwide downturn in real estate has slowed lot and home sales within the Company's markets. This has impacted certain developers by lengthening the marketing period of their projects and negatively affecting borrower liquidity and collateral values. Accordingly, at December 31, 2007, those land development loans adversely rated through our internal risk-rating process totaled approximately $151 million or about 48% of the land development portfolio. Generally when a loan is adversely rated, an elevated level of credit reserve may be allocated based upon current facts and circumstances. In part, the higher provision for the fourth quarter represents the outcome of this ongoing process.

Huh. I guess Paul-doh is lucky he did not bet HALF OF ALL DEVELOPER LOANS IN BEND ARE BULLSHIT, cuz I would have lost. Only 48% of CACB loans to developers are in trouble. Still manageable, but I think CACB exec's might wanna keep an eye on that, cuz that could go seriously wrong. Not today, and not tomorrow. But someday. But these guys are sharp. Look at this analysis:

At December 31, 2007, Customer Relationship deposits(1) were up 7.2% compared to a year ago but decreased 2.9% on a linked-quarter basis. This decline in part reflects the end of the peak summer and fall tourism and construction season wherein deposit balances typically ease through the winter quarter. However, management also believes a general slowing in real estate activity has contributed to this trend, as deposits in real estate related business accounts show a reduction in average and end of period balances as compared to the prior year and quarter.

"Management believes a general slowdown in real estate" is adversely impacting deposits. Wow. They nailed that to the wall. But, it's no biggie, right now. But again, a trend to watch. This leads me to another topic:

SMEAR IT OUT:

You ever notice that Elizabeth Taylor is always "smeared out". She's all fuzzy & big-tittied. She almost looks doable.

Well, of course she is horrible, which is why the Paparazzi never get her; a clear photograph would bust the lense. Same with Bend, the Horror That Is Bend RE, and Bend Media.

To the extent that they ARE even covering the RE meltdown (The biggest story in Bend history. Have I said that?), they are SMEARING OUT the facts as much as is possible to give us the Lizzy Taylor titty bang.

The Smear Across Time:
Unemployment? Well... it's realy not so bad, cuz it's WHERE IT WAS 5 YEARS AGO.

Smear Across Geography:
And unemployment in Deschutes, Crook, Jefferson, Baker, Wallowa counties when mixed with Uzbekistan is at a comforting 8%.

Right. When we can count on The Bulletin to cover things, they are SMEARING them out to an almost ridiculous degree. WHY? Of course, because if you average in ANYTHING that occurred in 2004-2006, it drags everything up. If you smear it across many counties, or even better, the entire Northwest, it's impossible to figure out how Bend is actually doing.

And after all, we are MORONS who can't scratch our way out of a wet paper sack, at least according to the Bulletin.

Affordable Home In Bend:

This one is classic.

Now, first I'll say that this place needs affordable homes. And on the face of it, the Wednesday Bulletin article, "Low-cost houses in Bend's future" looks good for Bend's affordability problem. But is it affordable, or is it another "Eagle's Landing" maneuver, where prices are lowered, but the PRODUCT YOU'RE GETTING is also dramatically downsized? Buster say:

"Work Force Housing", somebody smells federal work projects coming, note the word "Force", they say no federal aid will be needed, but the "Work" will be Federal, and the projects forced, but is this enough to rescue the City of Bend.

I also got this distinct feeling as well. This is LABORER SHIT SHACK HOUSING. My Lord, they even interviewed housing development expert & Cessna exec Doug Oliver regarding this:


Cessna spokesman Doug Oliver said he tended to agree. Oliver said he's not familiar with the Mirada project specifically, but the consensus at Cessna's Witchita, Kan., headquarters is that its Bend plant is destined for growth in its work force, and anything that makes it easier to attract workers from outside the area, if that becomes necessary, will help its future here.

This is just awesome! Classic Bulletin-fueled insanity. Some shithole patch of scrub has been downgraded to Crap Shack Development, so David Fisher IMMEDIATELY runs out to the airport to blow.... errr, uh, interview any Cessna exec he can get his lips on. Their response?


"I don't know shit about this, but the mothership is 100% for stuff that makes us money, including the reclamation of energy from crap, plowing over foreclosed land, cross-breeding alien monkeys with humans, green energy garbage cans, and porno's where chicks go ass to ass on giant dildos like Jennifer Connelly did in Requiem For A Dream. That is the sum total of our knowledge about this issue."

Good job, David Fisher.

Econo-Rocket RETURNS... WITH A VENGENCE!

BEM, smart dude extraordinaire, has just checked in with this nugg:

CACB:

As background, this portfolio represents loans made to developers for the purpose of acquiring raw land and/or for the subsequent development of residential lots. The nationwide downturn in real estate has slowed lot and home sales within the Company's markets. This has impacted certain developers by lengthening the marketing period of their projects and negatively affecting borrower liquidity and collateral values.

"Nationwide downturn." Yeah, right. In other words, "beyond our control," "out of our hands," "couldn't see it coming." Someone at BOTC's been talking to the lawyers...

OK, back to reality. What seemed more likely in 2005, mass hysteria aside:

Option A: that an isolated, small town with no significant economic base except homebuilding and tourism, over 100 miles from any Interstate, over 100 miles from any city with over 100,000 population, over 100 miles from any 4-year college, surrounded on three sides by hundreds of miles of open land, with a population topping 70,000 and a median household income of under $50,000, can sustain indefinitely a median home price of close to half a million dollars, and a property price runup of over 100% in five years is based on fundamental economic strength and is a trend expected to continue into the foreseeable future.

Option B: that when there's been a property runup of over 100% in five years and the median home price approaches $500,000 in a community as described above, a massive speculative bubble has been formed and asset values are unstable; a major devaluation of property prices is therefore expected.

2 things. First this gels with the short thread about Half, OR. If you've never been there, it is one of the more bleak-ass near-ghost towns at The End Of A One-Way Street. If you're looking for others, WALK OUTSIDE. Bend is The Premiere ONE WAY TOWN. People coming here, typically turn around 180 degrees when it's time to go. Typical of places with this characteristic is a 100% DISSIPATION BASED ECONOMY. Fairbanks, AK is such a place. Skagway AK is another. Walk about 100 yards beyond the TOURIST SHMEAR, and you find NOTHING. These sorts of places are hollowed out, gutted communities, filled with borderline catatonic inhabitants going out of their minds.

You can closely figure out THE BUST of such places by going to a local Wal-Mart: They bust the hardest when the auto department is FULL OF GASOLINE ADDITIVES. Why? These places are 100% dissipation economies that ARE EXPENSIVE TO GET TO, AND TO ADD INSULT TO INJURY, IT'S EVEN MORE COSTLY TO LEAVE THEM. Bend is 100% dependent on Cheap Gas, but with oil at $100/bbl, we are dead meat. Namely Bachelor is DEAD. Notice there has been NO MENTION about Bachelor in the Bulletin this year. Why? Of course, Bachelor has busted as hard or harder than RE.

Second, there is an EXTREMELY well-written opinion piece in todays Bulletin, that made me speculate that I have AGAIN, identified who BEM really is. So I'll end this weeks post, with this incredibly smart piece about Bends decline, where the words "Motherfucker" and "smelly cunt" are not even used once:

Bend’s short-sighted planning will have far-reaching effects
By Alistair Paterson / Bulletin guest columnist
Published: January 26. 2008 5:00AM PST

As a transplant to Bend from Kauai, Hawaii, I am struck by the similarities between the two communities. Both are about the same size, have approximately the same number of people and face the same growing pains and challenges, i.e. a rapidly expanding population base and an infrastructure struggling to keep pace with it. Additionally, they pride themselves on their natural beauty and their numerous outdoor athletic activities. Indeed, the prose in their respective tourist publications is so similar one might easily suppose it’s generated from the same source.

What puzzles me is why these wonderful places are so willing to surrender all the qualities that made them so special. There’s still hope that Kauai may retain some of its rural appeal, but Bend, based on its recent past, appears committed to a never-ending stream of new “community” housing developments. Even the most casual observer cannot help but note the large number of cheaply constructed tenement-style row houses that will certainly deteriorate into the slums of the future.

Somehow, developers have convinced the powers that be that these poorly conceived communities serve Bend’s best interest. While the real estate market was booming, their heavily promoted product was quickly snapped up by a naive audience of buyers easily persuaded that this would be their last chance to jump aboard the real estate express. With the continuing downward spiral of the market, however, these same developers are being forced to significantly discount their product. The result is that they cut even more corners in the building process and subsequently market the homes for substantially less money than they persuaded buyers to pay for them over the past few years. Potential buyers would have been well advised to remember the adage “the bitterness of poor quality remains long after the sweetness of low price has disappeared.”

The situation has deteriorated so dramatically that across the nation Bend is perceived as having been vastly overbuilt and on an inventory versus population ratio, the amount of unsold homes on the market is among the highest in the country. It’s well past due that the overactive promotional glands of the visitor’s bureau, the chamber of commerce and the City Council be tempered by these facts. Any more development is not only ill-advised but practically suicidal, at least until current inventory levels have been significantly reduced and infrastructure improvements catch up with the recent population explosion. To even consider allowing Juniper Ridge to proceed under the current conditions is essentially nothing short of criminal.

Yes — planning for future growth is prudent and appropriate, but it’s also essential that the city take off its rose-colored glasses and accept the reality that Bend has a crisis on its hands. The visitor’s bureau spends $250,000 on its most recent advertising campaign but ignores the fact that, thanks to this thoughtless development frenzy, there is no longer even an attractive approach to the city. Anyone driving into Bend — according to current promotional materials the land of blue skies, powdery snow, elegant fare, snow angels and sleigh rides — will instead face clogged roads, urban sprawl, commercial strip malls, enormous billboards, a downtown with the worst festive lighting display of any resort area, and a city sharply divided between the haves and the have-nots.

In more than 30 years of general real estate, I’ve never observed such a lovely community with so many red flags waving at the same time. The current proliferation of gated communities is one of the first signs of a city in crisis, as these only serve to further polarize and divide a community that is increasingly losing all sense of its original appeal and ambiance. I know the people who live in these enclaves will object to this description, but it’s quickly obvious that the vast majority of their residents are recent transplants who escaped to Bend only to work toward the destruction of everything that drew me here originally. If indeed the tourist bureau’s promotional material is to be believed, why are gated areas a requisite at all?

The impact of such short-sighted planning coupled with a nationwide real estate crunch will have far-reaching effects for the city of Bend. I believe it will be at least four years before the median real estate prices return to those of 2006. It’s vital to remember that sooner or later, you reap what you sow, and if there is not an immediate perspective adjustment at every level of planning and promotion, then the only thing requiring more money will be a minor name change and new entry signage stating “Welcome to Bend — a gorgeous little community until greed took the lead.”

Alistair Paterson lives in Bend.