Monday, February 25, 2008

Extinct Species Found In Bend Oregon

ADDENDUM: Bend Economy Man emerges from year-long hibernation & posts to his blog:
http://bendoregonbubble.blogspot.com/
YEAH!

Well, if you wondered what Armageddon looks like, go outside. This is it.

I posted an "Addendum" to last weeks post regarding mstuckers mid-Feb update on Month to date sales.

One home a day sold.

Not that that rate could possibly be sustained at such a low level, but that's 365 homes a year! We did 2,849 sales in 2005.

If there's anything I'm sure of, it's that number will pick WAY up. 6 months ago I was also sure that we could NEVER get to where we are today.

timothy said... The gears have ground to a halt. You can hear the silence. Next up: the flood of "spring" inventory.

As I've said before: This will get worse than you or I ever thought possible. Even Bends Gold Standard builders is starting to crack:

Anonymous said...

The layoffs are a comin'. Palisch homes just laid off 17 employees including 4 of their 6 superintendents. They were the last builder still slamming houses up. Supposedly unloaded the building that their offices are located in also. Maybe wal mart is hiring.

Even Duncan hopped on the Prediction Bandwagon, and NAILED IT!

So, I think we'll see the first battleground in the dining industry. Obviously, a lot of older restaurants are seeing the handwriting on the wall. The second battleground I'll predict -- with absolutely no inside knowledge, just a guess -- is in office space and condo's, especially on the west side. Third battleground are the outliers -- businesses and stores located in what may be zoned retail but not normally seen as retail.

BANG! The very NEXT DAY, the Bulletin runs this piece (and kudo's to them, I suppose, for running ANY sort of real estate piece... FINALLY):

Area’s industrial and office space vacancies rising

‘If you’re in an expansion mode,’ says one local broker, ‘it’s a great time to be looking’

By David Fisher / The Bulletin

Published: February 24. 2008 4:00AM PST

When Chemica Technologies, a Bend-based biotech research firm, pulled up stakes and moved to Portland last year, the managers at Grace Bio-Labs didn’t hesitate.

Grace, a maker of patented labware for the molecular study of cells, was about to burst out of its space on Empire Avenue, Business Development Director Michelle Carney said. So it bought the building that Chemica left on west Bend’s Cyber Drive, complete with built-out lab space and offices.

Now Grace Bio-Labs, which has been in Central Oregon since 1986, has 2½ times more space for its 17 employees, with room to build out further.

“It’s very well suited to what we do,” Carney said. “So it was just a matter of being in the right place at the right time and having the right connections that we found this building when we did.”

Businesses throughout Bend and Redmond are finding industrial and office space easier to come by this year.

After three straight years of relatively tight vacancies and gradually rising lease rates, vacancies opened up in the fourth quarter of last year, Bruce Kemp, principal broker at Compass Commercial Real Estate, said Thursday. The change was fueled partly by a contraction in housing-related business sectors and partly by the effects of new buildings coming onto the market.

According to Compass’ quarterly survey of 177 buildings, office vacancies rose to 11.2 percent in Bend by the end of the year, nearly double the 6.5 percent of fourth quarter 2006.

Industrial buildings also loosened up in both Bend and Redmond, according to Compass’ survey. Bend’s fourth quarter vacancy rate reached 10.5 percent in industrial space.

Redmond’s reached 17.3 percent, bloated mostly by the addition of new buildings.

The total amount of space leased in both markets increased through the year, but not at the same rate of growth the markets saw in 2006. In Bend, 48,800 square feet of new office space was leased out through 2007 — less than half the 124,000 square feet that was absorbed in 2006.

Industrial absorption in Bend amounted to a little less than 85,700 square feet, according to Compass’ numbers, about 33 percent off the 2006 pace.

In Redmond, less than half as much new space was absorbed in 2007 as in 2006.

The bottom line for potential tenants is simple, Kemp said. Lease rates have remained stuck, but tenants are getting much better incentive deals from prospective landlords, ranging from richer tenant improvement allowances to several months of free rent, as landlords scramble to get their buildings filled.

“If you’re in an expansion mode,” Kemp said, “it’s a great time to be looking for space.”

Who’s looking?

After a moribund fall, activity in the commercial leasing market is picking up as companies, like Grace Bio-Labs, that are not related to the housing industry begin to realize that they might be able to find a decent deal on new space, said Steve Larsen, principal broker at Steve Larsen Properties.

Much of the interest seems to be coming from the nonhousing-related financial and service sectors — insurance brokers, lawyers, accountants — who have needed for some time to grow their practices to keep up with the expanding population, but have felt shut out by a tight leasing market, Larsen said.

Now, with monthly Bend office lease rates stuck in the $1.65 to $2 per square foot range, depending on class and location, and with landlord incentives rising, some are making their moves.

“I think there are a lot of people who have kind of been on the fence for a while through 2007 who are making those kinds of decisions, either because they are out of space or they can’t wait any longer,” Larsen said.

Still, there is an air of caution in the wind, Kemp said, and it’s tipping the weight of the market toward leasing rather than buying space, and toward holding off rather than starting a new building project.

From a tenant’s perspective, the factors that go into making those decisions can get complex, Kemp noted, but it boils down to a basic question: Is there more money to be made by investing in a building or by paying rent and investing the upfront cash back into the business?

Right now, market factors are tipping the table toward leasing, Kemp said. First, there’s the question of whether to invest in a building or in something else. With lease rates flat, it’s tougher for the income stream on a commercial building to compete with the 6.5 percent or more in simple interest that a similar investment could draw in the general economy.

Then there is the question of rising or decreasing real estate values, Kemp said: Right now, there’s downward pressure on the price of commercial buildings, and particularly fierce pressure on the price of commercial land.

Consequently, Kemp said, he would expect the major office buildings that are already under construction in Bend, including The ODS Cos. building at Wilson and Bond streets and the 38,000-square-foot Bonnett Point office building at the corner of Simpson Street and Colorado Avenue, to finish up and gradually fill up this year. But any new construction that starts is likely to be a build-to-suit project for a locked-in tenant — and he doesn’t expect to see many of those.

“It’s a little bit cautionary,” Kemp said. “I think people who may want to buy at some point in time are probably going to lease rather than buy right now.”

Office condos

That’s not to say that sellers aren’t trying.

Ron Ross, a commercial property broker for RE/MAX Equity Group in Bend, said he counted eight to 10 sales of commercial buildings in Bend in 2007. Last month, there were 66 commercial units listed for sale, Ross said. About half were buildings and the rest were office condos.

Office condominiums — buildings in which the tenants can buy a small piece of a larger building, rather than having to shell out the millions that it takes to build a full-sized, Class A structure — are a relatively new concept to Bend. Two of the largest, the 32,000-square-foot Vision Plaza building and the neighboring 11,420-square-foot Columbia View Suites, sit next door to each other on west Bend’s Columbia Street. Both have had units for sale for about six months and neither is close to full.

Ross is dubious of the concept’s staying power, particularly in a market that is already overbuilt.

“They just flat have not been successful,” Ross told a group of reporters and real estate agents at a Central Oregon Association of Realtors lunch Wednesday. “I’m sorry if I’m offending anybody here, but they have not been selling office condos.”

Larsen, the listing agent for Vision Plaza, said he has one of the building’s units under contract and another in negotiations. There are two letters of intent to lease some of its space — an option that wasn’t part of the owners’ plan when the building was built.

“Obviously, the last six months were not what I, as the listing agent, or the owners anticipated,” Larsen conceded, but he blamed the building’s slow sales more on market timing than on the concept.

It took more than 18 months to take the Vision Plaza building, where 1,200-square-foot units are listed for around $367,000, from the concept stage to completion, Larsen said. The market changed during that cycle — a risk that all developers of commercial buildings, most of which are large, expensive and time-consuming to build, face.

If it were easy, everybody would be doing it, and for a while, a lot of people did. But it’s a risky business,” Larsen said.

That’s true, Ross agreed. The current market has driven out most of its speculators and tax-deferred property exchangers, leaving a different sort of playing field. But it’s taking awhile, he said, for some of its players to adjust.

“Property has to stand on its own, fundamentally, right now, and if it does, we have good buyer interest,” Ross said. “That means it has to have real tenants, with good leases that are supporting the price point. If that happens, property can sell in today’s market. But unfortunately, we have a lot of sellers who don’t understand that, and even a lot of brokers who don’t understand that, so we’re building up an excess of inventory.

“Long-term, I’ve seen this picture before,” said Ross, who’s been in Central Oregon real estate since the economic troubles of the early 1980s. “I’m actually very positive … you just have to take a bigger picture, longer-term view.”

David Fisher can be reached at 541-617-7862 or at dfisher@bendbulletin.com.

First off, lemme say that Duncan has been calling this for awhile. Personally I am fairly out of touch with commercial, except for a glimmer of personal knowledge that downtown is becoming wildly overbuilt, with unsustainable lease rates. I ultimately think that the credit/housing bust will affect EVERYTHING, but this was one of those things that's off my radar.

Second, note that business expansion as measured by office space absorption has dropped in half in 2007 vs 2006. And 2007 was not really supposed to be weak. In fact, EVERYONE seemed to state repeadedly that commercial was 100% IMMUNE from the whole crdit/housing bust, at least in Bend.

My Lord, they were building commercial space like crazy in 2007!

I actually drank the Commercial Immunity Kool-Aid, and thought Bend commercial would be OK. I did NOT understand the economics of how that could happen, because I personally thought the lease rates were insane, and I thought the "office condo" had all the appeal of the "home condo": Nice if you love living wall-to-wall with your neighbors and sharing in the financial pain of the weakest link.

That horrible abomination out near Colorado will probably end up on the RIP board. Office Condo's? Geez, that'll end up being another collective "What the fuck were we thinking?" head slapper.

Apparently Dunc was right, and the only thing collapsing (Yes, they are collapsing. I don't need a freakin' dictionary to figure that out.) faster than the Bend housing market, is now the imploding commercial market.

We are headed towards a mega-glut in commercial space in Bend. Nice high, double digit vacancy rates, and all that good stuff. All those pining for The Good Old Days, circa 1983, in Bend will soon have their wishes granted.

The most interesting quote in the Bulletin piece, to me, was this:

Is there more money to be made by investing in a building or by paying rent and investing the upfront cash back into the business?

Yeah! My "Rent And Invest The Difference" motto is starting to get some traction.

Of course it would be considered far more quickly in a purely financial setting like commercial. Rent & Invest The Diff is harder to implement with your wife & kids involved.

Ross' final quote about being "positive longer-term" is a continuation on the Elizabeth Taylor SMEAR IT OUT thesis. Everything will be fine if you take the 1,000 year view.

OK, I agree with that.

Good job Dunc, on nailing this one!

So... what else happened this week?

Oh right. CACB revised their quarterly earnings to pocket change.

Huh, seemed like they had ironed out all the Q4 messiness last month:

Cascade Bancorp (Oregon) (Nasdaq: CACB) Released Results for the Fourth Quarter and Full Year 2007, Confirming Earnings Per Share at $0.19 and $1.23, Respectively
BEND, Ore., Jan. 23 /PRNewswire-FirstCall/ -- Cascade Bancorp ("Cascade")
CACB reported 2007 full year Diluted Earnings Per Share (EPS-diluted) at $1.23 per share down 8.4% as compared to 2006 with Net Income at $35.0 million versus $35.7 million for 2006. As pre-announced on January 3, 2008, the Company confirmed it recorded a $7.5 million (pre-tax) provision for credit losses for the fourth quarter of 2007 to increase the Company's level of credit reserves primarily related to its residential land development loan portfolio. This resulted in a full year 2007 provision of $11.3 million versus $6.0 million in 2006. Fourth quarter 2007 earnings per share were $0.19 per share on $5.3 million of net income, compared to $0.36 per share and $10.2 million for the year ago quarter and as compared to $0.35 for the linked-quarter. The Company also confirmed its pre-announced fourth quarter net-charge-offs of approximately $3.9 million, a majority of which were against loans affected by the real estate downturn.

Sorry! Hold the bus! 'Member that thing we said last month? Scratch that, that was a big load of shit! Man, were we way off. We actually got our ass waxed. Here ya go, this here is the Real Deal:


Market Report -- In Play (CACB)

February 21, 2008 4:31 PM ET

Cascade Bancorp increases Q4 provision for credit losses Co announces that it revised its estimated Q4 earnings from its previously reported results on Jan 23. Co says its Q4 results are reduced to $0.01 per share. This updated earnings estimate is the result of an $8.1 mln (pre-tax) increase in its provision for credit losses to $15.6 mln from the $7.5 mln previously announced. Co says "As we navigate through this challenging downturn in the real estate market, we will continue to monitor our loan portfolio and take appropriate measures to reserve against the risks posed."

Some among us seemed DUBIOUS about this financial wink-wink...


Bend Economy Man said...

Just a thought:

If Bank of the Cascades had 4Q 2007 earnings of $0.01 per share, probably a safe bet that in 1Q 2008 it's running at a loss.

CACB really "lucked out" (wink-wink) that even after revising its accounting mistakes, it managed to eke out a meager profit, thus delaying the inevitable "Bank of the Cascades Unprofitable" headline for a few months.

How, by the way, has P. Moss kept her job the whole time?

My target CACB stock price for April 2008: $9.

The financial sophisticates at Cascade Bancorp decided that they would sidestep the financial implosion overwhelming them:

Step 1) Drink Kool-Aid non-stop
2) Report earnings 50% below prior year
3) Wait for the hub-bub to die down, then drop the other ONE FOURTH of the earnings bomb.

Hey WAIT! "ONE FOURTH"? That sort implies this line of bullshit spewing forth from Patty "Never A Quarterly Loss On My Watch" Moss is NOT OVER.

Right. See, the losses at CACB dwarf their Kool-Aid fueled idiocy. The losses are FAR larger than what they are reporting. They have applied liberal amounts of ELIZABETH TAYLOR-FICATION to their reporting so that the horror is minimized.

Moss & Crew get the ::eye roll:: of the week for this little facade.

Anonymous posted this:

More people moving in, but at a slower pace
California continues to be No. 1 feeder market by far
By David Fisher / The Bulletin
Published: February 17. 2008 4:00AM PST

Back in 2006, Altrec.com CEO Mike Morford and his managers figured they had to get their company out of Seattle. The offices of the online seller of outdoor gear were 15 traffic-choked miles from its warehouse, and it was running out of space.

It was tough to compete for top-level techies in a region dominated by Amazon.com and Microsoft, Morford recalled Wednesday. People’s commutes were tough.
Nobody, in other words, was having much fun.

So the company cast a net around seven or eight Western towns and regions, including Central Oregon, weighing 20 or more different variables, from transportation to space availability to state incentives, to find a new place.


It settled on Redmond. Since it moved in September 2006, the company has brought 17 families to Central Oregon from outside the area, Morford said. Its total staff has tripled, partly because it has been relatively easy to attract talented people to the area to keep its Web design, marketing and search engine functions going, and partly because it has found a reasonable supply of them here.

“It actually has worked out better than we thought it would,” Morford said. “We knew it was going to be fun, in the sense of moving to Central Oregon, but I’ve been amazed at the number of people from places like San Francisco and Seattle who know about Bend. They have a place in Sunriver, or they’ve vacationed here or something, and they are trying to figure out how to live here.”


The total number of new families moving into and out of the area has slowed with the national housing slump, if data on interstate shipments from three of the country’s largest movers is any indication, but the basic trend remains strong.

People who can afford to move, and who can afford to hire movers, continue to prefer moving into Central Oregon to moving out of it by about a 2-to-1 margin.


Overall in 2007, United Van Lines LLC, Mayflower Transit LLC and Atlas Van Lines Inc. reported 369 shipments into Central Oregon’s three counties, and 179 shipments to other states.
California accounted for the bulk of the inbound shipments with 37.9 percent, followed by shipments from Washington state at 9.8 percent.

Overall, four times more Californians moved in than moved out, with 140 coming in to 33 moving out. Washington’s 36 inbound shipments exactly doubled the number moving out of the region to that state, but some numbers were more balanced.

Sixteen shipments headed for Arizona, while only 19 came in from there
, according to statistics from the three movers.

Colorado sent 18 shipments into Central Oregon, but got 15 back.
Massachusetts was the only net draw from the Central Oregon region, attracting eight shipments out, but sending only two back.

Slowdown in moves
The inbound migration pattern may have remained strong through 2007, nearly exactly reflecting the 2-to-1 inbound ratio of 2006. But the total amount of movement dropped substantially. The 369 inbound trips of 2007 were down nearly 15 percent from 2006. Outbound moves dipped, too, dropping 10.5 percent from 2006 to 179.

The data, collected from the three movers last week by The Bulletin, gives an incomplete picture of the region’s total migration pattern because it includes only interstate moves. Moves within Oregon are regulated by a different arm of government that doesn’t require the same type of data collection.


Still, the drop in overall numbers reflects a national slowdown in shipments, Atlas Van Lines spokeswoman Barbara Cox said, which is grounded in a single factor: A sluggish housing market is making it tougher for people to sell their homes where they are, which makes it tougher for them to relocate.


The slowdown is as apparent in Central Oregon, a region whose housing economy has traditionally been dependent on newcomers for its strength, as it is in the rest of the country.
Sales of single-family homes on lots dropped 26.7 percent to 1,520 last year in Bend, according to the Central Oregon Association of Realtors, while the number of homes listed for sale topped 1,200 at the end of the year.

Redmond’s sales fell even further, dropping nearly 43 percent to 516, with more than 500 homes still listed for sale at the end of the year.
As they have in much of the country, slowing sales are translating into lower prices.

In west Bend’s NorthWest Crossing, a 400-acre subdivision developed by Brooks Resources Corp. and Tennant Development, sales of housing units slid into the 45 to 50 range in 2006 and 2007, from the 105 sold in 2005, according to David Quiros, principal broker at NorthWest Crossing Realty.
About 75 percent of the NorthWest Crossing inventory that sold last year went to buyers from outside the area, at prices that were significantly off.

Lots in the subdivision today are listed as low as $138,000, he said, down from the spring 2006 peaks of nearly $200,000.


The fiercest downturn in moving activity seemed to settle in last fall, a couple of months after a credit crunch bit the nation’s mortgage lending markets, said Harold Perry, owner of local Atlas agent City Moving and Storage Co., and it hasn’t picked up yet.
“We had some things going last year, but jeez, there’s nothing going on this year,” Perry said, calling this year the worst winter he’s seen in the local moving business since the early 1980s. “You could almost go to sleep and not miss anything, so it’s bad. Whether it comes back or not is anybody’s guess.”

Given the number of unsold houses in Central Oregon and its biggest feeder markets, the leaders of Brooks Resources, the region’s biggest development company, figure that land and home prices may have to work their way back roughly to 2003 levels before the market regains some semblance of supply-and-demand balance, Brooks Resources President Kirk Schueler said.

That would bring median home prices in Bend back to the mid-$200,000 range.
The median sales price through 2007 for Bend homes on lots stood at about $349,000, according to the Central Oregon Multiple Listing Service.

“Our prediction — I guess maybe it’s a hope — is that it squares around when we get back around the 2003 area,” Schueler said, “and it varies. Different pockets of town will do better than others.”
Who wants to be here Meanwhile, Nancy Lynch, who’s owned local United Van Lines agent Bend Storage & Transfer Inc. since 1981, said she expects the same kinds of migration patterns to continue, even if they happen in reduced numbers.

Some will move here from warmer climates, then move back again after a few winters of snow and cold. Some will move here with half-formed dreams of economic success, then fail and move away.


On balance, though, the area for more than a decade has been a magnet for retiring baby boomers and others who are anxious to get away from the rat races, Lynch said, and the ones who have either brought jobs or money with them — or both — have had the best luck sticking.
If they can get here.

California reported its lowest number of outbound moves in more than a decade
, according to Atlas’ year-end report, possibly because people found it difficult to extricate themselves from houses in that state’s hard-hit markets. But despite the national slowdown in movement, Atlas’ national statistics still indicated a strong inclination for people in the country to move West, according to the company’s year-end report, with net movement particularly strong into the Northwest.


Falling prices in the local housing stock might actually help the region pull out of its funk faster than the rest of the nation, since its underlying desirability apparently remains undiminished, said Roger Lee, executive director of Economic Development for Central Oregon.
“People still want to own homes and, in our case, boomers still want to be in the Pacific Northwest,” Lee said, “so things are playing well for us. If we were in the same position in Detroit, I don’t know what my forecast would be.”

February 17, 2008 10:58 AM

First of all, this piece goes on and on about the TREMENDOUS inbound inbalance between Oregon & just about everywhere else. Population figures from the Census bureau:

California: 36.5MM
Washington: 6.4MM
Arizona: 6.2MM
Oregon: 3.7MM

OK, we are TINY compared to these other places! There's NO ONE here to somehow push that ratio positive. There will probably NEVER be an outbound positive ratio to ANY of these states... EVER!

This also reminds me of the recent reports that Oregon is among the lowest states in foreclosure. Wyoming is The Lowest. Lowest number of foreclosures in the country are in Wyoming.

Wow! Real estate must be KICKING ASS in Wyoming, right?

Huh, here's a nugg printed by BendBB, "New data reveal depth of housing slump":

The states suffering the biggest drop in sales in the third quarter were Nevada, down 44 percent and Wyoming, down 42 percent. Other states with big declines were New Mexico, down 39 percent, Oregon, down 38 percent and Arizona, down 37.6 percent.

Uh huh. It seems that when you measure things on AN ABSOLUTE BASIS, stuff like OUTBOUND MIGRATION & FORECLOSURE NUMBERS can make small markets look GREAT. That's SOLELY because the population figures are TINY.

Oregon is a TINY population state, just like Wyoming. DUH. That's why we don't have a lot of foreclosures.

Granted, there's more to it than population... Michigan is suffering from a depression, and THAT is going to keep them in the doldrums for years.

But even if WE are having the Best of Times, and Cali is suffering The Worst of Times, they WILL HAVE MORE FORECLOSURES than we ever will. Basic math.

Don't succumb to basic mathematical crap that is being printed around here. Is it true? Yes. Is it also misleading? Of course. Somehow you never find the footnote telling you that:

1) We are a very low population state & will ALWAYS have a small number foreclosures.
2) We are 18 months behind the curve of the RE Mega Bubble Implosion.

The header over on BendBB puts it well:

Economic statistics are like a bikini. What they reveal is important... what they conceal is vital.

BEM said it best with respect to these recent Disaster Scenario Bulletin stories:
Bend Economy Man said...

I think that The Bulletin showed some backbone by publishing some rough facts and deadly quotes right after the COBA campaign began. Kudos to The Bulletin.

Yes, they followed the old Bulletin formula of Misleading Headline That Says Exactly the Opposite of the Facts in the Story / "Happy News" First and Last Paragraphs / Hard-Hitting News in the Middle. But by now I think we've deduced that this is in the Bulletin's editorial standards manual.

Another nail in the Bend Miracle coffin?

80 losing jobs at Bright Wood
Layoffs amount to 16 percent of work force; company attributes cuts to housing market

By Lauren Dake / The Bulletin
Published: February 21. 2008 4:00AM PST

MADRAS — For the second time in just more than a year, Madras-based Bright Wood Corp. has laid off more than 10 percent of its work force.

Around 180 out of 1,130 employees, working mainly in manufacturing and administrative positions, will be let go, said Bright Wood President Dallas Stovall. The layoffs started Monday and should be completed by the end of the week. The cuts amount to about 16 percent of the staff.

This should come as no surprise. And like CACB earnings "surprises", this one ain't over either. The hits will keep coming.

Area tourism feeling a pinch
By Jeff McDonald / The Bulletin
Published: February 21. 2008 4:00AM PST

Skiers and snowboarders flocked to Central Oregon over Presidents Day weekend, but the business boost was short-term relief in a so-so winter for many businesses that rely on visitors, industry representatives said Wednesday, expressing nervousness about the future.

Benefiting from clear roads, ample snow and sunny days, Hoodoo Mountain Resort broke attendance records over the holiday weekend, and Mt. Bachelor ski area saw more visitors and spending. But local lodging properties and restaurants are feeling the pinch of a cooling national economy.

A slow December and January at many area lodging properties could bode ill for the region’s $498 million-a-year tourism economy, according to Alana Audette, president and CEO of Central Oregon Visitors Association, which promotes the region’s tourism industry.

“Overall, we’re still getting that sense that people are just belt-tightening a bit,” she said. “People are getting more wary about making those vacation plans. Advance reservations for spring are off, and the summer also is showing signs of slowing. It’s making us real nervous.”

Business has dropped between 15 percent and 20 percent the past 2½ months at Merenda Restaurant and Wine Bar in downtown Bend, said Jody Denton, chef and owner. He said the slowdown has affected many restaurants and retail businesses around town. Denton also is chef and owner of Deep, which opened downtown in June.

“I don’t think anybody’s immune,” Denton said. “I thought Bend would dodge the bullet until December and January, but it’s definitely trickled down.”

Bend’s cold housing industry has played a large role in slower business at Merenda and Deep, Denton said.

Folks, you wondered what absolute calamity looked like? It's here, now.

Our commercial real estate sector has finally jumped whole hog into the bursting RE horror. Ridiculous concepts like "office condos" which is a simple-minded attempt to sell RE to the only group capable of buying anymore, BUSINESS, has failed MISERABLY. Lease rates are simply unsustainable.

Local banks, that only months ago declared themselves fit as a fiddle financially & almost completely IMMUNE from the collapse... LIED. They were firmly planted in some Kool-Aid fueled hallucination where they were exempt from reality. Even I bought into this fantasy. As GHWB so eloquently put it:


When US Presidents become confused, they invoke THE WHO!

CACB plumbed new lows, and is within eyeshot of the single digits. Who would have thunk it? Even CACB Shorter covered in the $20's.

People aren't moving here anymore. Has Bend lost its luster? Well, certainly some. I got here in 2001, and am not enamored of the "attitude" that has transformed the place in just that short time. Honking, rude, self-absorbed psychotic consumerist nightmares. Hopefully the Bust will put out that fire.

More specifically, NO ONE CAN SELL THEIR HOUSE, and we are finding that THAT is the grist of the Bend economic mill. We RELY on the ability to GRIFT PEOPLE OF THEIR MONEY. Look at that quote from the "moving" piece:

they are trying to figure out how to live here.

This is just amazing. I know of Very Few places where you have to "figure out" how to live somewhere. YOU FUCKING WORK. OK, you work.

Not Central Oregon. We are grifters, we have to FIGURE OUT how to survive. And my God, has the grifter trade here been a bonanza for the last 5 years. Ask Holz-Tek: Two of the most gifted Flim-Flam men to ever grace our shores. These two drew up a Perpetual Motion Machine on a napkin, called it a "Master Plan", and sold to the City of Bend for $2,560,000! AWESOME!

Unfortunately, this gig is up. The money has gone away, and there's no one left to pay for the nightmare created during this romp. Brucey got the Big Fuck You, when he dared address this problem with Bends Big Muckety Mucks:

bruce said... On the CC meeting: LS building looks as good as we will get, Sonia is worried about money (some real "choices" will have to be made if we don't sell any JR land next year) and the dickhead John Russell simply brushed me off with a "no" when I asked him how we were planning on paying for the roads/sewers/etc. for the 50 acres we were planning on selling if all the money from that acreage was going to pay for the current shit that we are building.

I STRONGLY ENCOURAGE you to head over to Bruce's Blog, and read his headline piece, "JR Financing Just Doesn't Make Sense". Excellent review on the Circular Financial Clusterfuck that is Juniper Ridge.

Nice Bruce.

Finally I want to retract my statements of last week, that could be interpreted that this may NOT be the Best Buyers Market in 20 Years in Bend.

I thought about it, and maybe they are right. This MAY WELL be The Best Buyers Market Of ALL TIME. Check this listing over on BendBB:

2008-02-22 2613809 Bend Mtn River Estates 1475000 725000 -750000 -50.85 219 11

This little Sugar Shack has been listed since the Earth was a ball of hot magma, and worse it's been marked down ELEVEN TIMES, for a total of OVER FIFTY PERCENT.

Think about it: This little shithole has been for sale FOREVER, and has taken 11 Reality Revisions for a 50+% hit in price. This bodes well for a strategy that has been non-existent for 5 years in Central Oregon:

The Coma Inducing, "I've Gone Fuckin Blind" 50+% OFF Lowball.

This species, long ago thought extinct, actually has a basis in reality nowadays. People who previously would have not even thought about responding... well, most probably still will not respond, but SOME WILL.

The sale of RE around here is being removed from peoples DISCRETIONARY table and being put on the COMPULSORY table. They HAVE TO SELL.

Can you imagine throwing this homeowner a 50% OFF lowball on Day 1? My God, they'd call the cops on you. "We've got a crazy person in the building!".

Have a scroll through BendBB's price change boards. Those badboys are well-populated with HUGE reductions from initial DREAMY list prices. There are people who HAVE TO SELL.

Now their prices are still insane in most instances. That should tell you something, when they are still 100% too high after a 35% price reduction. BUT, you can walk to the table in todays atmosphere of Dread, and calmly throw down a LOWBALL that renders every man in the room sterile, and every pregnant woman goes into premature delivery.

And you won't be removed forcibly. They might actually talk about it. Most won't. 90+% won't. But the ones that DO, can be worth your while. Some of these people/banks that hold onto 3 or 4 $320K EMPTY rental shitholes, MAY look kindly on a $190K kick square in their hairy-ass beanbag, if it means avoiding foreclosure on the lot of them.

This could be The Best Buyers Market EVER. But you gotta have the means & the fuckin nads to walk in unabashed, and give EVERYONE in the room FINANCIAL EBOLA & THE FUCKIN AIDS with a lowball that DOES NOT saddle YOU with their Horrific Financial Problems.

If you play their game, you will get killed. You'll hold an unsalable piece of shit in a MASSIVELY DECLINING market. You'll never break even, and you'll lose money every month, and you'll take a 33% haircut AT BEST when it comes time to sell, and that's a Big IF... IF you can sell.

But, if you firmly plant a scrote busting, steal-toed LOWBALL right in their crotch, you can actually make out OK, and that is IF AND ONLY IF you do NOT plan on selling in the next decade, and you can make that cracker shack pencil as a rental. And there are Realtors who are STARVING TO DEATH for you to play this game.

So do me proud folks: Go out looking for a cracker shack, and walk proudly to the table and throw down a LOWBALL that ruptures every eyeball vein in the place.


The Sign of A Successful Bend Oregon Real Estate Transaction


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Monday, February 18, 2008

"Best Buyers Market In 20 Years, Can I Fuck You?"

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Monday, February 11, 2008

Bend Oregon: The Other Shoe Has Dropped

The Denial Continues:

Here's a good Reuters piece that summarizes the attitude of most economists towards the housing debacle, and certainly Bend media about our local situation:

Year of "denial" in U.S. subprime crisis

Fri Feb 8, 2008 7:01pm EST

By Jennifer Coogan

NEW YORK (Reuters) - One year after the first alarm bells of the subprime mortgage crisis rang on Wall Street, many of its victims are trading at half their value or less, while others have long been buried.

On February 8, 2007, HSBC (HSBA.L: Quote, Profile, Research) said it would take a charge of about $10.6 billion on subprime loans. The evening before, the No. 2 U.S. subprime lender, New Century Financial Corp (NEWCQ.PK: Quote, Profile, Research), had unexpectedly warned it faced a quarterly loss and said it would restate previous earnings.

New Century shares lost more than a third of their value on February 8, but to look at the overall market, there was no telling how big a toll the crisis would take on the U.S. stock market. The S&P 500 shed less than 2 points that day.

By spring, the stocks of subprime lenders were falling into a death spiral and dropped from the major exchanges in steady succession.

On April 2, New Century filed for bankruptcy protection. American Home Mortgage Investment Corp AHM.N followed in August. Accredited Home Lenders Holding Co (LEND.O: Quote, Profile, Research) was bought out by a private equity firm in October.

Countrywide Financial Corp (CFC.N: Quote, Profile, Research), the nation's No. 1 lender, hit a high of $44.92 on February 7, 2007. The shares are now trading at $6.58 as it awaits a takeover by Bank of America Corp (BAC.N: Quote, Profile, Research).

But despite the bloodbath in the mortgage finance sector, investors last autumn were still confident enough that the subprime debacle was contained that they pushed both the Dow and S&P 500 to lifetime highs on October 11.

From its intraday high on October 11 to Friday's close, the S&P 500 index has fallen 15.5 percent.

"That's been the history of the last year. Denial, denial denial," said Gary Shilling, president of A. Gary Shilling & Co., an investment research firm in Springfield, New Jersey. "That's what held stock up in October.

That confidence was shaken shortly after, when Merrill Lynch warned it would have to write down billions of dollars more in subprime-related debt than it had previously said. Citigroup, Bear Stearns and others added to the writedown chorus.

In a year, Merrill Lynch (MER.N: Quote, Profile, Research) has fallen nearly 45 percent. Citigroup (C.N: Quote, Profile, Research) stock has fallen more than 52 percent and Bear Stearns has shed nearly 51 percent. In addition to millions in market capitalization, all three firms have lost their chief executives.

By New Year, consensus formed that the subprime crisis would indeed spread beyond the mortgage and financial market and into the broader economy, and potentially beyond U.S. borders.

"More recently people realized the theory of decoupling was a fairytale, that the U.S. really is the world's economic leader," Shilling said. "There's still a lot of denial. The consensus is begrudgingly admitting we're into or close to recession, but the consensus is now that it will be over in the first half of the year."

Wall Street may have been late to recognize the impact of the subprime crisis, but the public caught on fast. Less than a year after HSBC and New Century fired their warning flares, the television show "Law and Order" featured a plot about a con-artist who scammed subprime mortgage holders facing foreclosure to sign over their homes.

Why is it that virtually EVERYONE "wants" this housing debacle to be mild so badly that they are perfectly FINE with making failed prediction after failed prediction that there will probably be NO RECESSION, ONLY A BARELY PERCEPTIBLE SLOWDOWN?

And incredibly this continues today. Every "prediction" is followed by COMPLETE FAILURE in it's predictive ability, but by God, they have NO PROBLEM issuing YET ANOTHER PREDICTION WHERE THERE IS NO FORMAL CONTRACTION (ie Recession).

This blog and most of it's commenters have said the Exact Opposite, And Been Dead Right.

Again: It'll be worse than you ever thought possible. It'll be worse than I thought possible. And I think it's going to be pretty gat damn bad.

To wit, mstucker posted on BendBB (don't cry Paulie... she can see other guys. We never agreed it was exclusive...) some horrendously deteriorating stats:

As of today the Jan 08 Stats are:
Residential homes on less than an acre, Bend
Sold=73
Median price=$310,000

Avg PP SF = $185.87

Avg SF = 2,057

DOM = 191


This is a 8.3% decline from Last Month! Last Month! I'm not sure how much stock I put in any stats regarding Bend RE at this point, cuz as I've said before, we've just reached The Sleeping Point: Our monthly sample sizes are too small to be reliable or indicative of any real trend. Even if I would have won the much vaunted Burrito Bet with BendBB, it would have been something of a hollow victory, cuz it could have just been a blip in the stats. 2 months below $300K? That would have been convincing.

The longest-running, internally consistent stats now seem to be coming from Doug Farmer.

David Foster seems to have thrown in the towel. Could it be that he has mentally walked away from RE as a career? Is tired of posting similar "hopeful" opinions, and pretty much being proved wrong? These posts don't really return him much given the time input? I don't know, but I sort of get the feeling that when you watch your industry disintegrate before your eyes, it's hard to stay enthused enough to write that all is well... or will be soon.

I've updated Doug's data in a google spreadsheet. There are some very forbidding numbers there.

First, it's The First Time that unit sales have fallen below 100 in Doug's data set, which goes back to Nov 2005. Only 94 units of all residential subtypes sold in Bend in January.

What does that mean?

That means the end of real estate as a career for MOST of Central Oregon. We should see mass exodus by many, MANY RE brokers in 2008. The weak will die en masse, the strong will be near-starvation, and many of them will die. Real Estate as a career & an industry (our PRIMARY industry) is Imploding.

94 units sold at an average of $388K (that's down 12.4% from Jan 2007's avg of $443K) means $36MM in sales, or about $2.2MM in commissions (assuming 6%, which is dubious at this point).

Remember, those commission dollars are split 4 ways, the respective listing & selling brokers & their respective motherships. And assuming 2,000 (that's LOW) brokers, that's $1,100 per, and divide by 4. Well, you can see this isn't sufficient for even 1/10th of our current broker count. Numbers down here is simply The End for HUNDREDS of the best paying jobs of the past 5 years.

According to Doug, the raw median for Jan was $307,500. This seems sort of odd given mstuckers addmittedly preliminary (but probably very close to the final figures) of $310K. Remember Doug's data covers "all residential subtypes" including townhomes, condos, and residential on acreage, amongst others. And it's the decent number of acreage properties that pushes Doug's median above the straight residential w/o acreage medians.

But not this month. This tells me (maybe wrongly) that acreage homes are falling apart compared to low-end stuff like mobiles.

And if higher end stuff is deteriorating, it seems maybe "trophy" home sales are starting to get hit, which also seems to be the case. Case in point, BendBB's listing data:


You can see that LISTING medians in Bend have flatlined at $400K +/- $1,000 for months. But sold prices are falling pretty regularly. So the high-end is going begging. No one is buying that stuff. Oh, they're still listing the hell out of it... but it ain't moving.

Why does this really matter? Well, I think I've heard the familiar refrain the "Bend Will Completely Escape The Fall In Prices Because Bend Is 103% Populated With Multi-Millionaires". Hmmmm... maybe that's true, but these vast fields of millionaires are starting to buy LOW END HOMES, and that's IF they buy anything at all... which they ain't.

Better than raw medians, is median PPSF:

Bend continues it's monotonic decrease, falling to $205/sf, down from a high of $227/sf in March of last year. Better to see the changes is PPSF's indexed to zero:

So you can easily see that homes as a store of value are falling HARD, especially adjusted for size, which seems to be the right measure.

So when does this conflagration end?

Welp, not soon, and not even close to current prices. Doug's AAA stat, most important number in Central Oregon economic stats is, of course, MONTHS OF INVENTORY. And at 20.01 months, this bodes VERY BADLY for the coming RE selling season. Last January this number was 12 months... and there was quite a bit of gravedancing.

WHEN SHOULD YOU BUY A HOME HERE?

I say again, "WHEN MONTHS OF INVENTORY STAYS BELOW 6 MONTHS FOR 3 MONTHS IN A ROW."

This is a deviation from my "12 months average below 6 months of inventory", and that's what I personally will look for. Either that or prices down around $200K adjusted for inflation. Yup... $200K! My 2007 number was $190K, or so so I'm adding the long-term average of 4% per annum, and rounding up a little. Hey, I'm an optimist.

But we won't see that for a long, LONG time. Why?

First, IT'S WORSE THAN ANYONE THINKS. I know, repetitive. But no one seems to be swallowing this. IT IS WORSE THAN YOU THINK. This isn't just a speed bump, neither locally or nationally. It is CATACLYSMIC. Our kids will look back on this as "Our Depression". We will ALL look back on this as The Turning Point, when we became Second Rate.

Huh? Yeah, see that's what happens when each & every person loses 1/4th... 1/3rd... or like here, 1/2 their wealth in a heavily indebted primary asset.

If you count roughly 75,000 housing units in Deschutes County, and each one losing $150K, that's $11.25 BILLION in losses. I know, doesn't seem possible, until you realize that back in the early 90's the ENTIRETY of Deschutes County real property was assessed closer to $1.5BB. It's now around $24 billion.

This is The Tsunami Wave down. This ain't that yearly cyclicality crap. Nor is it the decade long, Long Wave. This is The Big One. This one will blow out half the wealth of this place. It's OUT MIGRATION. IT'S MASS VACANCY, BOTH RESIDENTIAL & COMMERCIAL.

To repeat, IT IS WORSE THAN YOU EVER THOUGHT POSSIBLE. If you don't know what the fuck to do, it's cuz you're a deer caught in the headlights. Wake Up White People! Your ass needs to FLEE.

Sell that shithole surplus housing unit FOR WHATEVER YOU CAN GET. Hell, don't believe me, here's mstuckers take on it from a week or so ago:

I tell my buyers and sellers the truth. Don't buy now. And sell as fast as you can at the lowest price you can or stay forever.

Now I'm not sure I'm all in with the "sell at the lowest price you can" thing... I think *maybe* she means mark 'er down & get that White Elephant sold. The lowest PPSF in the neighborhood is The Only Stuff that'll sell.

Until January, you could conceivably say that the Bend RE market was "holding Up" OK. Prices had not really imploded. So you could say, "Hey, I might not have a great chance of selling, but at least I can still ask a decent price, cuz everyone else in the neighborhood is still asking more than what they paid".

No more. The Other Shoe Has Dropped. NOW, price is starting to plummet AND you have about a snowballs chance in hell of selling (remember 94 units... lowest per capita sold in Bend since The Earth was a molten ball of lava). Price is running away lower... and NO ONE is buying at these lower prices.

That sound?

That's THE OTHER SHOE HITTING THE FLOOR.

Buster Makes A Funny:

Usually Busters idea of humor is calling Bruce or I a smelly cunt. And I'll admit it was pretty funny the first 600X he said that. Now, I know that everybody has ulterior motives, little pet-projects that they want to succeed no matter what, and they'll talk about it whatever the forum topic is.

And brucey has apparently started mixing business & pleasure by threatening to legally whale on our helpless City Council unless they either staighten up... or buy Capstone turbines.

I know Bruce... I'm just bullshitting you. But Buster's response was pretty good:

Don't you fucking realize you can't send a public letter to a public official that says, Hey Bitch your breaking the law, and unless you buy 1,000 capstone micro energy butt-plugs I going to file a complaint...

That shit is funny! Sorry, just had to post that! Buster actually said something funny, without calling Brucey or I a smelly cunt!

timothy said...
>>This season, pass prices increased another 12 percent to $929.

Tim & others talked about the Bachelor debacle, in a thread started about -- *GASP* -- unfavorable piece on how the mountain is being managed via HARVESTING methods. Excerpt:

At Mt. Bachelor, mixed reviews
Bend Chamber chairman voices concerns; others say everything's OK


By Jeff McDonald / The Bulletin
Published: February 06. 2008 4:00AM PST

The chairman of the Bend Chamber of Commerce board of directors fears the region’s economy could suffer from customer dissatisfaction with Mt. Bachelor ski area.

...

Mt. Bachelor, which is owned by Park City, Utah-based Powdr Corp., had its second best season ever in 2005-06 with approximately 590,000 visitors. Visitor counts dropped about 10 percent in 2006-07, according to the Pacific Northwest Ski Areas Association.

This year’s totals are behind last year’s pace, mainly due to a slow start to the season due to late-arriving storms, a national economic slowdown and several weekends of heavy snowfall that have hindered travel, Janney said.

Bachelor is simply being managed for harvesting of profits prior to a sale. "APPARENT" profits are maximized in an imaginary wonderland of NO CAPEX EXPENDITURES. The lifts are breaking, prices are being hiked, wages are slashed, service levels are disastrous... but by God, profits are going thru the roof.

Bachelor is going to be sold.

But it will be destroyed first as Powdr maxes out profits. This is Yet Another Nail in The Central Oregon Economic Coffin. Bachelor is The Only Thing That Keeps This Place Afloat During The Winter. Take away 600,000 Bachelor visits, and you've got Armageddon.

And Bachelor is being managed to the Sleeping Point.

Luckily Bend taxpayers are joint-partners in the continued MARKETING of this calamity. You cannot MARKET your way out of a BAD REPUTATION. People's memory LASTS LONG when they are GOUGED price-wise & are ALSO SCREWED with bad service.

Predicted this last year. Busted lifts & OVERRUN... people were FURIOUS. You can't market away furious.

But luckily you & I are acting as joint-partners in scheme to prop up Bachelor in last gasp of profit maximizing before Powdr blows Bachelor out the hatch. We are spending hundreds of thousands to get people from SoCal (dupes) to stay an extra 24 hours.

Self-fulfilling disaster. Did this last year, when Bachelor was at 110% of capacity, and people showed AND GOT FURIOUS WHEN THERE WAS NO SKIING TO BE DONE. Smart. Let's MARKET our way to 120% of capacity, so as to infuriate everyone who comes here to stand in lift lines at Bachelor for hours.

Good Call Bend. Yet another reason we will go broke. Yet another reason It Will Be Worse Than You Thought Possible.

Developers adjust Bend hotel plans

Well, today we hear that Yet Another Mega-Project has been "Right Sized". Remember... nothing is ever DOWNSIZED in Bend... plans are "adjusted" toward a Better Idea Than We've Ever Yet Dreamed. Geez.

Anyway, The Village can't get funding for ludicrous square footage no one wants, so they have scaled back to merely inane square footage no one wants.

This brings up a side issue raised by BEM:

Paul,

Please put the The Village condotel on the R.I.P. list.

Also, please put the Pine Nursery sport fields. These were also killed by the RE bust.

I'm not sure what to do about this, cuz the RIP list was something I originally thought of as 100% Total Failures. Like The Plaza. Like The Shire (Note to self: Put the Shire on the RIP list). Here was my take on it:

I think the Mercado is about ready for your gravestone. Ain't seen anybody there, not even the guards the signs warn you about, for months now.

Yeah, I've noticed that thing sits untouched.

But I actually consider the fact that they are doing nothing some sort of acceptance of the reality of the Bend RE situation, and not really a failure.

They bought the land at the top, so that's about a half failure... but the crazy fuckers are not building either by financial fiat or by choice. Either way they are not digging themselves an even deeper grave.

The Plaza (and probably The Shire to a lesser extent) is a great example of someone committing 100% to a brain-dead RE concept & losing everything.

The Bend Pine park & Mercato qualify more as 1/2 failures in my eyes.

I want to prioritze these losers...

It seems there are 3 pieces to this. I guess there's the RIP tome: stuff that was built and failed spectacularly. And then there are the Brain Dead projects; like Mercato or the Redmond Water Park; alive but in a coma. And then there's the merely amputated: These are not "dead" projects, but they have been vastly scaled back. This is The Village.

But where does IronHorse fit in? Or Yarrow? These projects were necessarily "built to order" in large measure, so they could never really be classified as "dead"... but they sure as hell are failing... MASSIVELY. They fall more in the "amputee" section. They are missing Huge Chunks they were supposed to have by now.

I don't know. I want to preserve some sort of classification of these things. Bend going broke is far, FAR more a Big Deal than Mercato not getting built. Maybe I'll have some sort of classification: DOA, Brain Dead, and Amputees. Don't know. Ideas?

Speaking of insane, they quote a Bend developer, Brad Fraley, in the Village piece. He actually used to go by a pseudonym, Matt Foley. He gave talks to Realtors & stuff, pumping them up. I actually found a video of one of his recent motivational talks. It's pretty good:


Monday, February 4, 2008

Bend Overwhelmed By STD Epidemic

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