February in Bend -- The Real Estate Calamity Continues

ALERT: Over 200 comments... now in pagination mode.

BEM is Back!

Well, first of all, BEM has Come Back & posted to his blog, http://bendoregonbubble.blogspot.com/.

Awesome! And as usual he posts regarding a topic near & dear, the INANE anchoring on, and reuse of local spending estimates as The God's Truth. This is simply an editorial standards issue... or a lack thereof, of local media. Some are so outside the realm of reality that they've lost all credibility -- notably, Cascade Business Buttbangers.

COVA's Sleep Number is "498", and you can pretty much google any local media site on this figure & up comes COVA and their To The Penny Dead On The Money BS figure about "tourist spending", $498 million. Of course, this is bullshit.

The only function this sort of thing has is buffaloing local government into funding Mega-PR/Marketing bullshit programs at taxpayers expense.

"If we don't get funded, say BYE-BYE to every nickel of the $498,000,000 tourist trade!"

Uh huh. Right.

Anyway, BEM's first post in over a year is a good read, and you should go have a read... NOW!

Brucey...

Brucey did some more good stuff recently. Over on BendBB, he posted some good pics of the whithering of the local market. I think I did my own last August, Picto-Plummet - A Graphical Novel.

Actually, my first picture of Eagle's Landing is now, a totally different picture! Well, sorta different. I'm happy to announce that since I documented the 100% vacancy rate on spec lots over at Eagles Landing, that 1 LOT HAS SOLD & A HOUSE WAS BUILT! Yeah!

That does leave about 80 lots or so to go, but at this rate, my children may still be alive when Eagle's Landing finally sells out. Good Job over there guys. Bringing it in below the 100 year saturation cutoff.

And if there's one thing I'm pretty sure of, it's that if you can't sell out a STD development in under 100 years, you got problems. Yarrow & IronHorse? See, they got problems cuz they are pushing the 100 year cutoff.

You can force your kids to sell real estate, and maybe the grandkids. But the great grandkids? That's getting pretty dicey. For historical perspective, if you look BACK 100 years, you notice that the aero-pod & velocipede had recently been invented in 1908. Selling Yarrow & IronHorse in 2108 just seems like it's a bit long in tooth on the business plan side of things.

That's just me, though.

Oh right... Brucey... Bruce also pointed out that Blogger has gone to paginating comments, when they reach 200. Just be aware that you can click "newer" and "newest" links near the top & bottom of the comments area.

On to the markets...

I usually don't talk about the stock market, cuz I suck so bad at predicting it. But I always thought that somehow the meltdown in housing/credit would ultimately negatively impact stocks.

DJIA, 6 months

Notice that we've been down 4 months in a row now, but the mind-numbing losses I would have expected have not really materialized. Why?

My own (craptacular) theory? Well, imagine you got Big Money, and I mean BIG. Many, many millions, or billions. What do you do?

Seems like subprime, SIV, and CMO shenanigans have poisoned every debt issue in sight. Unless you are buying government paper, you STILL don't really know what you're getting. Whether it's dollar denominated or not, non-govt debt has gone toxic.

This leaves stocks, and weird shit like commodities. And Oil at $100/bbl, and gold near $1,000/oz don't hurt, either.

So for TRILLIONS in US retirement money, that leaves Big Stocks, US & Foreign. With the dollar going into the shitter, that really makes foreign stocks appealing.

Well, no. These issues will suffer, cuz the tsunami will wash over everything & strip it to bare metal. But it by default leaves stocks, and they have really barely moved in 8 years, and the NASDAQ is still way down from March 2000.

DJIA, 10 years

Since March 2000, we've gone from just below 12,000 on the DJIA, to 12,266 today. That's what I call a horrendous Opportunity Cost Bear Market.

Is the market up since then? Yes, but it is Far Below where you'd be had you bought zero-risk treasuries.

The P/E on the DJIA is currently 14.9, or an earnings yield of 6.7%. Greenspan frequently postulated that the 10 year treasury yield should be approximately equal to the DJIA earnings yield. The 10 year yields 4.55% now, and an equivalent earnings yield on the DJIA would put us at 18,130 on the Dow.

That summarizes my feelings about stocks. We ARE in a bear market. I think we're about to take a Hard earnings hit, but still stocks are the last bastion for Huge Money. That & treasuries. What is toxic in individual industries? Hmmmm....

Cascade Bancorp, 5 year chart

Right, right, right, right, right... Good old CACB came within striking distance of single digits, getting CRUSHED down to $10.11/sh this week.

Interestingly, no sooner do mega-bears like myself & BEM make horrendous downside predictions on this dog, and it swiftly exceeds them to the downside. CACB is probably the sort of small, RE-overexposed bank Bernanke was talking about this week:

"There will probably be some bank failures," Bernanke told Congress Thursday. "There are some small and in many cases de novo [new] banks that have heavily invested in real estate in locales where prices have fallen. Among the largest banks, the capital ratios remain good and I don't expect any serious problems among the larger banks."

Bernanke should really stop speaking. He's like the Bizarro World Opposite of Teflon Al Greespan. Everytime Al opened his pie-hole we got 100pts to the upside. Helicopter Ben sneezes, and we get killed. Poor Bastard. Besides he's Dead Wrong about "larger banks" having no serious problems. Here's some more Bernanke-izing:

From The Times

February 29, 2008

Ben Bernanke triggers dollar’s fall to new low

Gary Duncan, Economics Editor

The dollar plummeted to record lows and shares tumbled in New York and across Europe yesterday after Ben Bernanke, the Chairman of the Federal Reserve, spooked markets with a prediction of US bank failures and fresh warnings over a grim outlook for America’s economy.

In its third day of heavy losses, the embattled dollar slumped across the board on foreign exchanges after Mr Bernanke gave what economists said was a “green light” to markets to step up their assault on the US currency.

The dollar fell to a new record low against the euro, which soared to levels above $1.52 for the first time, while the dollar’s overall value on its trade-weighted index also hit a record low for a third consecutive day.

The greenback’s heavy losses combined with the latest dose of bleak US figures, with confirmation that the US economy came close to stagnating in the fourth quarter, to spark another fear-fuelled sell-off on Wall Street.

Now, we're definitely fucked. But almost none of it is this poor bastards fault.

For a look at the other publicly traded Bend-area issues, the news is not good.

Clear Choice Health Plans, 3 years

Clear Choice has suffered losses on par with CACB. I don't have insight into the problems here, but they are taking this one out to the barn for a shooting. This is largely owned by local doctors though... and these are the same people COBA is targeting to buy up their remaining 3-4,000 homes to finally absorb 650% of local disposable income.

Some good news? Yes.

Prineville Bancorp, 3yr chart

Maybe Prineville is semi-immune to the local market rout, maybe it's behind the curve even farther than Bend, maybe it's just so illiquid that no one ever trades it, or maybe this issue was just ridiculously undervalued in the single digits.

Whatever the reason, PNVL has held up relatively well. It last traded at $10.50/sh, and a P/E of about 14. Is it bound for a beating? I don't know, but PNVL has held up far better than any other local publicly traded issue.

I would have included Micro-Semi here, but it's my understanding they were bought a few years back, and the mothership is not really a Bend-based business.

Finally, local RE... The Rout Continues

mstucker (marge?) posted this in the comments:

Marge said...

I posted this at Bendbb.

Feb sold stats as of 3/1/08.

Bend Residential homes on less than an acre:
45 Sold @ median of $322,500
Bend all types of residential
58 Sold @ median of $327,500
Current active listings are 1876.
Hopefully a few more sales will be reported next week as brokers catch up with reporting to MLS.
There seems to be more homes going pending the past 60 days though.

In 2007 the numbers were:
Bend all types res
169 Sold @ $335k
in 2006 it was 190 Sold @$336k
I looked all the way back to 1997 and can't find a Feb. with such low sales. In 97 it was 101 sold @ a median of 118k. Might have to go back to 1987 to get that low. MLS only goes back to 97.

Whoa. Read & re-read folks. This is just death. Here is my response to Tim's question about figures post back on March 20:

IHateToBurstYourBubble said...

So Paul, how many years of inventory will we have at the end of February?

Well, last Feb David Foster recorded 132 sales, and 1,168 homes for sale at the end of that month. That's about 8.9 months of inventory.

Jan 08 was 13% higher inventory than Jan 07, and Feb 07 was 1,173, so if Feb is 13% higher than last Feb, that yields 1,326 homes.

If we sell 50 homes, that's 26.5 months. 40 homes is 33.15 months. 30 homes (Armaggedon), yields 44.2 months.

We're going to have to really bust it out to hit 50 homes by the end of the month. 30 homes seems to horrible to consider. I'm guessing 30 months for Feb 08, or 2 1/2 years.

That's GAME OVER for soooooo many people around here. That's Hasson, Remax & Morris shutting down shop in The Old Mill & leasing 1,000sf next to a consignment shop, or something. These people cannot make their lease/mtg payments at that level of sales, much less anything else.

I think a lot of brokerage will go "boutique" in the next few years. Big franchises will exit. Lots of little 4-5 man shops. And of course the rise of cut-rate, limited service shops. Bye-bye 6%.

Well, now we know. a CORE site search on "Bend Residential" today, yields 1,336 homes. 45 solds rounds up to 30 months inventory. That excludes condo's, acreage properties, manufactured's, etc.

OK, what I've kept track of with Doug Fosters data is all Bend residential. The news here is worse. There are 1,883 units of all residential types for sale in Bend, and marge's pre-lim figure of 58 solds (bound to be revised up, mind you) yields 32.5 months inventory.

Months Inventory, Bend Oregon, all residential types, May 2006 to Feb 2008.

There it is. I've said it before, and I'll say it again... and again... and again.

"Months of Inventory is The Most Important Indicator Of Central Oregon's Economic Health."

And maybe you've spotted a subtle trend in this number... yeah, it's headed up. Just a bit. I think several area Realtors suggested 6 months is a "normal" figure.

Anyone remember when such RE sages as Pam Lester said things were "so low, they could not go lower"? Just point to the area on the graph... as I recall it was Aug 22 of last year:

Prices still sliding, sales still slowing

If prices drop further, losses may be in store for industry
By David Fisher / The Bulletin
Published: August 22. 2007 4:00AM PST

In the meantime, though, things have gotten to the point in the local markets, especially for home builders on recently purchased land, where prices can’t sink much further without inviting losses, Redmond-based Century 21 Gold Country agent Pam Lester said.

“I don’t expect prices to go anywhere but up from here,” Lester said, “because they can’t go any lower.”

Can't argue with that. That there is airtight logic.

I like Fishers subtitle on this one:

If prices drop further, losses may be in store for industry

Read further in the piece, and you see the stats for last July:

In Bend, 109 single-family homes on less than an acre of land sold in July, down 27.8 percent from June’s sales, according to the Central Oregon Multiple Listing Service. The median price — the price at which half sold for more and half for less — stood at $340,000, 4.5 percent less than the median price of homes sold in July 2006.

Monthly sales figures in Redmond, Crook County and Jefferson County also fell to their lowest levels in five years, according to the MLS, while median sale prices dipped below prices in the same month a year ago.

In Redmond, 40 non-acreage homes sold in July, down 45.2 percent from July 2006. Median prices also slipped to $247,000, down 5.7 percent from the same month last year.

In Crook County, 11 homes sold — half of the July 2006 number — while median sales prices slid to $190,000, off 13.5 percent from homes sold in July 2006.

In Jefferson County, eight homes sold — a third of the July 2006 volume — while median sales prices dipped 4.9 percent from July 2006 to $173,250.

So.... according to marge, medians HAVE dropped. But what's truly imploded is volume.

Where's the Bulletin story on THE LOSSES? Hmmm... maybe it's on it's way, right BEM?

BendBB statistical goodness...

And finally BendBB has come out with his monthly statistical goodness. God bless that crazy fucker.

Anyway, there are some trends of note:

First, Desert Skeeze continues to prove The Old Adage, "Don't buy shit in Desert Skeeze." OK, maybe a more generic adage is "People don't like buying jumbo STD's built to 3rd World Standards within whispering distance of their neighbors".

At $315K, and 3,390/sf, this $93/sf STD jumbo-crapper is STILL the Cheapest Shithole in town. This badboy started out at $399,900, and has suffered 4 markdowns totalling 21.23%, not counting prior listings, which there may have been.

Hell, it's only been a few weeks since this turd busted the $100/sf barrier. I talked about a run to the 60's. This thing has already dropped another 7%, and still no takers.

A confirmed 6 figure short sale is this Pollock-fueled nightmare in Forum Meadows:

Forum Meadows Coyote Ugliness

The owner of this barf bucket periodically begs to be put out of his misery on craigslist. He claims to have bought this snotpile in the mid 400's, and it's now clear down to $249K, and still no takers. It's 2,517sf, so it's busted below $100/sf as well... but the bottom continues to rush away.

We're headed for $60/sf.

What really jumped out this month was the BRUTAL 1-SHOT price drops on bare land. And not shit, out East STD-2-Be crap. The Good Stuff.

The Reserve at Broken Top had several lots take a near 40% beating. This one got spanked for 42.3% in 1 reduction. That is serious shit. Luckily the listing Realtor has got some hotness.

"Hi, I'm Ashley Erickson. My hobbies include being hot, skiing, and spanking bare land listings for 40%"

Here's a rundown on some YoY PPSF price trends on big subdiv's:

DRW: Feb 2007, AVG(PPSF): $215.40. Now $181.43
Northwest Xing: $283.46 a year ago, now $251.46
RiverRim: $224.10, now $221.54.
Broken Top: $325.53 last year, now $316.05.
Awbrey Butte: $319.52, now $280.96
Parks at Broken Top: $259.48, now $224.10

And just for you, Timmy:

Skyliner Summit was $208.00/sf, and is now $202.90.

So PPSF figures that used to be mixed, and not really definitive, are now pretty universally down YoY. But still not Down Hard.

What is really Down Hard is your ability to actually sell at your ask. No one is selling anything. Look at that Months Of Inventory graph. That's The End. Bye bye Morris and Hasson. Bye bye Amerititle. Bye bye 80+% of all mortgage brokers... or more. Bye bye Old Mill RE leaches.

30 months of Inventory is the End of our local economy. Notice the layoffs occurring? Again, NOT A COINCIDENCE. And this is certainly Not the End of them. And like The Unlisted Dark Matter, these layoffs are like an iceberg: You're only hearing about 10% of them. The Big Boys who can't hide it, cuz the laid off will make sure the press hears about it.

Knife River, Brightwood, the entire town of Gilchrist, Deschutes County, Seaswirl, Oregon Woodworking and a litany of others are in the first stages of culling their ranks or flat out shutting down. Most income hits are being taken by "RE free lancers", off the books. That shadow sector has been gutted already. These are the fuckers that kept Merenda & the local Hummer dealer alive.

The Good News? Well, Deschutes County traditionally "bottoms" in February. Things usually get better from here, for about the next 6-8 months. Sales will pick up, things will be declared "OK", and such.

But if you really need to sell, realize that this yearly game of musical chairs ends as predictably as it starts, and if you Need Out, this is Your Time.

Mark It DOWN. Not a little, A LOT. 40-50%. You MIGHT be able to sell. But this is IT. Don't buy into the "The Sun Will Come Out Tomorrow" Bull Shit. This is a temporary respite, and I do mean TEMPORARY. We're in the LONG WAVE DOWN. Decades Down. We just happen to be starting a meager, half-hearted, but predictable yearly wave up. It'll end soon, and that's IF it really gets going, which it may not.

If you've been "waiting", now is your time. But it's still going to hurt like hell. But I guarantee you'll be happy you take the hit today, rather than enduring death by a thousand cuts. If you suffer a brain hemorrhage cuz you are getting lowballed, you'd better buck up & take it. It will NEVER get better than RIGHT NOW.

Sellers have taken a total of 3,781 price cuts in BendBB's data, banging the cumulative value of that RE from $967.8 million, down to $852.7 million. And the price cutting still has So Far to go, you won't believe it when it's over. This place is FLOODED with square footage, both residential & commercial. We are in the beginning stages of an economic tsunami here.

But in the next 3-4 months, you can actually take advantage of a small seasonal respite & actually sell, but you will have to accept that you will be ravaged monetarily. That's it. My Lord, "dunc" just posted on BendBB that foreclosures here outnumber sales:

Feb., 08 Notice of Defaults: 109
Feb., 08 Houses Sold: 58

Look at the Months Inventory graph. Look at THAT foreclosure data. That AIN'T RIGHT. That is SERIOUSLY WRONG. Foreclosures outnumber Sales? In Bend? NEVER!

Well, it's happening. It's Armageddon. But you have a tiny window, right now. Bail Out, Mark it down... or You Will NEVER SELL. EVER. They will carry you out.