Saturday, May 31, 2008

Bend Oregon: Mass Exodus to CA and AZ

Here's a comment I responded to Friday morning:

IHateToBurstYourBubble said...

“We’re still a growing area — we’re adding people and residents,” Williams said...

That's not what I heard.

May 30, 2008 6:07 AM

Coincidentally, there is a piece in todays paper, "As gas prices cut into profits, region’s movers get creative", that peripherally mentions something that I heard this week from a very reliable source:

Other customers say they can’t find jobs or afford housing, and so they are moving elsewhere.

“We can’t keep trucks in, especially on the weekend,” she said.

I heard that local truck renters have dramatically raised outbound prices, because Bend is experiencing a mass exodus like nothing these businesses have ever seen before.

Their inbound, one-way truck count has gone to near zero, while outbound numbers are so overwhelming, they have had to raise prices several fold to recoup costs of getting trucks back to Bend.

Again, a damn reliable source.

What's the upshot of things like this?

First and foremost is the edict to Think For Yourself. This place has "officially" 2-3X the construction base employment levels of Oregon overall. That is almost certainly low. "11.6% involved in construction"? Yeah, right. Try 25-40%.

Anyone with half a brain knows that RE & RE-related industries practically overwhelm the Cent OR economy. Health care is the only thing that comes close. They talk about manufacturing being a big driver, but tell me how the mass layoffs at Brightwood are NOT RE related.

I'd say maybe Les Schwab is RE-resistant... but they do own Juniper Ridge...

Second, DO NOT believe statements like the following:

"People are still moving to Central Oregon to enjoy our unique lifestyle, climate...."

This is one of those HORRIBLY contrived statements, with some parts truth, and some parts bald-faced lies. Remember this:

The buyers have come “from all over the country,” Breeze said. One is from England. About half are planning to use their units as primary homes. The other half are second-home buyers.

Uh huh. Look at all the implied bullshit in this statement. "International demand". "Such a flood of buyers that we have to hastily make up off-the-cuff estimates of what sort of buyers they are, whether super-affluent second home buyers, or just the local idle rich". "Breeze can barely contain the flood of buyers coming from every corner of the US"....

In case you've been in a cave, The Plaza was taken off Breeze & husband Wurzel's hands by their lender.

Here's more:

Closer to home in Bend, some developers are dialing back, at least for the short term. DesertScape LLC President Craig Glazier said his group has shelved plans for a new mixed-use building on the lot next to the Deschutes Brewery on Bond Street, although it has already demolished the building that stood there before, partly because the group is preoccupied with its work on the new Red Rock shopping center around Redmond’s new Wal-Mart Supercenter, and partly in response to market conditions.

We’re not worried that things aren’t gonna move,” Glazier said. “It’s just that you can only do so much.

Hmmmm. Of course there is more hilarity:

Local real estate agent Becky Breeze and her husband are building a 42-unit condominium project in the Old Mill District. Breeze already has sold most of her units. She said buyers know what they want and they don't balk at prices.

"They want to live in a custom home," Breeze said. "And they don't want to sacrifice quality. They want to be close to walking trails and the mountains. They're really mobile and they have a lot of money," she said.

Ah yes. Breeze's hallucinations still haunt the Old Mill to this day. So many rich, international, jet-setting billionaires coming here from Dubai & Tokyo that they've queued up in their Bentley's at her office with their trunks stuffed with cash.

Of course, The Bulletin was more than happy to report these fantasies. And they do to this day.

More praise heaped on Bend
"Bend is a growing city filled with our kinds of readers," Weeden said. "A lot are active in the outdoors. They are working hard, playing hard, drinking good beer and listening to good music. There also is good nightlife, which is key."

Then we find maybe not is all on the up & up:

DVA, which worked with Bend writer Tim Neville and Outside's editorial staff on content for the article, contracts with the Bend Visitor & Convention Bureau to promote tourism for the city.

Then we get the obligatory Good News quote from a local retailer:

"The magazines have been rating Bend highly for years, so we don't pay as much attention as we used to," said Don Leet, co-owner. "But there are more tourists who come into town that rent bikes and mention the articles. We definitely noticed."

Uh huh.

Just so you are not confused, realize that Bend has grown into a grifters paradise with the complicity of our local bought & paid for whorehouse of a paper, local RE developers, and the City Council, all working in concert to entice, reel in, land, and finally fleece of every last nickel marks (ie patsies) from every corner.

And fleece them we have. We happened to engage in this game at a time coinciding with the greatest credit expansion ever recorded, in an industry that just happens to run this 2 horse shithole. Of course, the players have chalked up their success to personal brilliance.

And have no doubt, this coincidence has had an almost belief-defying effect on Bend.

Who would have known that 25 years ago, this sleepy little busted logging town would go from one of the most under-appreciated housing markets in the US, to the single most overvalued, standing out in a sea of Florida & California bubble markets as an oddity too strange for explanation.

It's OREGON. It's CENTRAL OREGON. Go down the litany of over-valued markets & tell me how that makes sense. Please.

Prineville? No. Madras? No. Lots of people want you to Buy The Dream, but look around. They bought the dream & tried to transplant it in Prineville via Ironhorse. Result? Someone woke the fuck up one day, and realized they were in fucking PRINEVILLE, and Prineville is PRINEVILLE, and you can't sell dreams in Prineville. Same in Madras. Only more so.

Believe me, it's simply a matter of time before people realize that Bend is more like Prineville than Dubai or Tokyo or London, or any of the LONG LONG list of places that people have come from to SWARM our PR-fueled little outback meth-runner town.

This is Bend. Not Santa Barbara. Not Aspen.

And I heard from an inside source that a LOT OF PEOPLE who moved here under the pretense that Bend was an outdoor paradise (it is) with a myriad of wonderful outdoor activities (yes) and a bountiful work/play scene of almost all millionaires sipping Margaritas, drinking beer, living in mansions and in general enjoying life 24/7 (um, no), are now leaving in droves.

See, they mixed truth & lies in just the right amounts, so it's really hard to figure out that while Bend IS an outdoor wonderland, it has just about the WORST EMPLOYMENT ECONOMICS IN THE UNITED STATES. This has ALWAYS been true, except for the brief & fleeting period of 2003-2006, when Bubble-nomics took hold, and the mixed truth/lie PR fueled insanity became as close to 100% truth as it ever has, or ever will.

We are now on the unhappy side of things, and I have heard in no uncertain terms that Bend Is Getting Smaller Everyday. People are leaving In Great Numbers That May Even Rival The Rate At Which They Were Arriving Over The Past Several Years.

And the Mathematics of Growth, while rudimentary, are nonetheless easy to follow:

Each person has some level of residential RE demand. For me & the fam, it's about 400/sf each person. Now Bend is near 75K people right now. But blow that up to triple over a decade or so & even in our glutted RE market, we'd need a hell of a lot of building. That's basically what's happened here for 10 years. Coupled with a bubble, we rode this wave to good result.

But, reverse this trend, and you've got a death spiral. Here's Clive's latest inventory graph for Bend:

This actually doesn't look too bad. We're headed up towards record territory, but it looks like we've been there before. Not too bad.

Oh right. There's that little bugaboo that demand has FALLEN 50% during the course of this graphs time-line. So in terms of "inventory turn", which is the only relevant measures, we've got a real problem here.

There's the FURTHER bugaboo that Bend, in all it's perverse glory, will actually respond to the DECLINE IN HOUSING DEMAND BY BUILDING MORE HOUSES. Remember my little Mirada speech?

This point is so pivotal to Bends future, it bears repeating via analogy.

Remember golds bubble? Back in the early 80's that run to $800/oz? I barely remember it, but I do remember my father getting caught up in it, and buying old gold coins right at the top. There were infomercials 25/8 on buying gold. All sorts of little gold-related insanity got started.

Including gold mining. There was a HUGE amount of capital invested in NOT-EASILY-ABANDONED equipment, men, and infrastructure resources. Gold mining was never bigger than it was AFTER the gold bust.

And as gold prices fell, THEY MINED MORE of it. They had to sell more at lower margins just to make the same money to pay off their capital investments. And gold, like houses, has a nasty habit of accumulating above ground. Supply is never consumed, it just abounds in ever-growing quantities.

Now think of Bend as a place full of suckers who hold their whole lives savings in gold they bought at $850/oz. And further imagine that prices have fallen to $300/oz and that OF COURSE, no one is buying it because they've shot their wad at $800/oz so they have nothing left.

Lots of things are going cock-eyed in a situation like this. Traditional economics says that MORE gold should be demanded at lower prices than higher prices, and LESS supply should come onstream at lower prices.

But this is Bend.

The cost of bringing a house out of the ground for a SUPPLIER (builder) is now so much lower than just about any RESELLER (current homeowner) that the GOLD MINER is the only one who can even remotely come close to break even. And even they are losing money.

"Wait! People won't conduct business and knowingly LOSE MONEY you idiot!"


“Your average truck gets five miles to the gallon,” Dyas said. “So when you travel from here to say, Prineville, that’s 45 miles, times two. ... So I haven’t even covered my fuel to do a local move from here to Prineville. I’m actually paying the customer to let me do the move — isn’t that terrible?”

Like gold miners (and the far more applicable industry, AIRLINES), businesses can, do and WILL conduct business at losses for LONG PERIODS, if they believe there will at some point be a respite from the misery. Gold miners, airlines, and home builders are especially susceptible to this condition.

And so it goes. Bends response to the enormous glut of homes will actually be TO BUILD THEM AT A RATE NOT SEEN BEFORE. And they will sell them, or at least try to, at prices that will leave current $800/oz holders aghast.

Remember Picto-Plummet? Ah yes, the August sun beat down on crazy optimistic shit like this:
Picto-Plummet: We find out Whitey like starburst

Ah yes, Eagles Landing, where all your dreams come true. I wonder how they doin'?

Welp, all you have to do is head over to The Garner Group website, and you see that they have SOLD a home! It's this 3,225sf model home beast:
Original Vision of Eagle's Landing: $525K 3,300sf STD McMansions

A quick looksie on DIAL shows they hauled down $389,900, slightly lower than the $525K they were hoping for. Possibly due to the strange "His-N-Her dual walk-in" garage configuration.

Of further interest is the fact that the builder, Stonebridge Homes, bought the property for $80K, and then flipped it THE SAME DAY for $389,900! Good Job! I'm sure there was no double-dealing bullshit hanky-panky there.

That's of tertiary interest though. The Real News is that this GOLD MINER... err, builder, is now selling their product at a price they hadn't quite bet on given their starburst laden placard:
Lot 72, NE Dogwood Drive, $229,900 3 Bedrooms, 2 Baths, 1,432 Sq. Ft. Convenient Great Room Plan With Master Suite Separation

Uh oh. What were visions of half-million dollar mega mansions for as far as the eye can see has become artist renditions of labor shit shacks, doubling as high density, illegal alien meth dens for less than half that.

Yup, this is the VISION of a town FULL OF PEOPLE who either bought at $800/oz, or worse, refi'd at $800/oz. Your gold will remain ABOVE GROUND AND USELESS in the gold market, while suppliers continue to accelerate their production at LOWER & LOWER PRICES.

Do you see why I SHRIEKED REPEATEDLY to SELL, SELL, SELL last year at $500/oz? Mmm. Yes, it's cuz NOW we're at $300/oz and plummeting. It will not get better either. It'll just keep getting worse to the ASTONISHMENT of all. Even me.

The Point? We're still running the BUY BEND GOLD INFO-MERCIAL that reeled in all the people that have lost their $800/oz gold, and everything else for that matter in this little grift-fest. To wit, the NOD count for Deschutes County:
Number of people 100% grifted out of everything by Bend Media & local government, using taxpayer money.

And what's worse, our City Fathers have started to believe their own grifting bullshit. From Dunc's blog:

I've been trying to wrap my brain around this paragraph in the Bulletin's front page article today:

"Pepsi first started looking at Juniper Ridge land about two years ago but was told it's warehouse didn't fit the city's vision...."

This reminds me, as many things do, of a quote from the Simpsons:

We can't afford to shop in any store that has a philosophy. We just need a TV.
Marge Simpson

OK, Bend City Councilors: We can't afford your asinine dreams. You've bought into your own munificence, when really you were just the people who happened to be in the right place at a miraculous time. Without the gloss of a teflon bubble, you will be exposed as the mediocre grifting frauds you are. Except Telfer who is presciently getting the fuck out of here.

Juniper Ridge, like most things, is just an industrial park in a 2 horse shithole in the middle of nowhere.

But the WAKE UP WHITE PEEPUL phase has begun. The Kool-Aid is wearing off, and Whitey is starting to see the coyote-smugly he woke up with is truly worthy of a arm-chewoff.

Folks, Bend does have a great outdoors scene. BUT, except for this BRIEF period when insanity gripped this country at large, and practically overwhelmed the common sense of everyone in Central Oregon, Bend remains a TERRIBLE ECONOMIC PROPOSITION. I do not believe I, nor do 90% of the current population have a sense of "steady state" economics in Central Oregon. We've just never seen it.

I think Duncan has. I think Marge has. Even Buster. That's 30+ years. Not 5. Or even 10.

Do NOT buy the bullshit. PEOPLE ARE LEAVING BEND EN MASSE. I know they are. Common sense, and looking around and thinking on YOUR OWN are all you need to KNOW that it's happening.

NOD's are on par with or EXCEEDING home SALES. Do you think these people will stick around? Do you think the market is GLUTTED with homes because PEOPLE ARE STILL COMING TO BEND TO ENJOY THE FREEWHEELING LIFESTYLE?

The Bulletin, KTVZ & everyone they quote, Realtors and COVA says it's happening.

So is it?

4.5 years of acreage properties. 24+ months of residential inventory. Plummeting medians. Huge owned (second homes) and rental vacancies. Low cost supply glutting the market. Commercial vacancies up over FOUR FOLD in a year. Does this sound like ALL IS WELL?

Bend media repeats the same tired mixed truth/lies bullshit so often, so that YOU will become a parroting zombie that BELIEVES this crap, and so hence YOU WILL DECIMATE YOURSELF ECONOMICALLY by making BAD DECISIONS. They want to reel you in, land you, and gut you. That's all this town knows how to do.

But we used to EAT YOU. But now people are leaving, so we've begun to eat each other. Our little powers that be are the gold miners that are running us down the cutthroat gauntlet. Your $495K shitshack is worth $239K and falling. It'll soon be at $149K.

Look at that Garner Group meth hovel: Then go to Jett Blackburn, and look at similar homes in Burns. You'll see that meth dives there similar to Garners fancy schmancy 1,200sf meth den on Bend's Eastsiiiiiieeeede go for UNDER $50K.

OK, Bend ain't Burns. But it's CLOSE.

Read that movers article. We're headed back to POVERTY WITH A VIEW at warp speed. Everyone losing money. Craptacular economics. Crushed dreams. The Bend Equity Sinkhole.

It's just what happens here. We grift. And our local media is very clever at it:

“We’re still a growing area — we’re adding people and residents,” Williams said. “But now a higher portion of those people in the area are unemployed.”

One part is true, one is 100% dead false. But you need to open your eyes, look around, and think about it critically, or you will become one of the VAST majority that accepts statements like this at face value.

Happens EVERYDAY in Bend media. And it will continue to happen. And, it's about the best propaganda for separating people from their money that there is.

And just a little recap:

Bend residential real estate is NOT going down because of this blog.

It's not going down because I want it to, or need it to, or will somehow personally capitalize on it somehow.

Conversely, it will not go up because you want it to.

It won't go up because Costa, Hollern, Norma DuBois, or anyone else wants it to.

It will also NOT go up because in 2003, 2004, and 2005 you really WANTED it to go up and IT DID, and now you are like Pavlov's dog or a superstitious gambler with a nervous tick, who cannot get over the conditioned stimulus-response that if you JUST HOPE HARD ENOUGH, we'll return to the Good Old Days of Ever Rising Real Estate values.

No. It will go DOWN, and DOWN HARD, because that is the nature of speculative bubbles bursting. Despite Bernanke. Despite Bush. Despite You. Despite Me. It's just going to happen. And unfortunately for many, Bend is Ground Zero for The Implosion.

But Worry Not dear Readers, Bend is already returning to the Nations Top 10 Lists. But unfortunately, on the backside of a housing bubble, these are probably lists our City Fathers, the media, and our beloved home builders & developers would rather we could avoid:

It was the second time this year that the Bend metro area has ranked nationally in the top three for the highest unemployment rate increase. In February, the area ranked first in the nation, tied with Cape Coral-Fort Myers, and ahead of Punta Gorda, with a 2.6-point year-over-year increase.

We're Number 1! We're Number 1! We're Number 1!

Sunday, May 25, 2008

Bend: No More Bloody Marys, Let The RE Bubble Hangover Commence

Welp, you know how when you wake up a little "salty" from an especially brutal month-long bender of hard partying, and go straight to the hair of the dog that bit you? But then there even comes a time when that isn't enough to get rid of the pangs of reality that the party is over, and even the hangover treatment is over, and now things are just horrible. Right?

Yes, that time arrived this week.

There seemed to be this mass realization all at once, that Bernanke's Bloody Mary The Morning After, while potent & temporarily alleviating almost unspeakable horrors, has itself run out of steam. Here's a quick view of the hangover's hangover, via a 5 day snapshot of the DJIA:
DJIA - last 5 days

We got whacked for just over 500pts this past week. Probably not seen as a big deal in the context of the almost 1,500pt rise from bottom to top since March. But I think this is the beginning of Yet Another End. You can see the progression of "Ends" here:
DJIA - 2 years

You can see the initial Subprime Surprise way back in February 2007. That was brushed off as a Tsunami False Alarm, and the party went on like nothing happened.

And so it went with all-time stock market highs being made as recently as last Fall, with nary an interruption. Until early this year when Wall Street Wonks figured out that it wasn't just "us" anymore, it was "them" too, when Bear Stearns went belly up.

And you might wonder just where Bend is with respect to the rest of the country.
CACB - 5 years
Yes. Here we are at fresh new 5 year lows on Cascade Bancorp, The Little Bubble Bank That Could.

As bad as things are in the rest of the country, they are orders of magnitude worse in Bend. And they are awful bad everywhere else, now that Bernanke's Bloody Mary has worn off:

Fed lowers growth forecast, raises inflation view

By Mark Felsenthal and Glenn Somerville Wed May 21, 4:39 PM ET

WASHINGTON (Reuters) - The Federal Reserve on Wednesday slashed its 2008 U.S. economic growth forecast and signaled that mounting concerns over inflation would make further interest rate cuts unlikely.

"Several members noted that it was unlikely to be appropriate to ease policy in response to information suggesting that the economy was slowing further or even contracting slightly in the near term," the Fed said in minutes of its April 29-30 monetary policy meeting.

Fed officials said that cutting benchmark interbank lending rates by a quarter percentage point to 2 percent at their last meeting was "a close call," reinforcing the impression that they may be on hold with any further interest rate moves.

"If you had any doubt that the Fed is signaling a pause, that doubt is gone," said Christopher Low, chief economist at FTN Financial in New York.

In an accompanying forecast, the Fed cut its projection for growth to a scant 0.3 percent to 1.2 percent in 2008, down from the 1.3 percent to 2 percent it estimated three months ago.

At the same time, the Fed -- the U.S. central bank -- said it expects inflation to remain "elevated" and unemployment to increase "significantly."

Stocks tumbled, with the Dow Jones industrial average closing off 227 points, or nearly 1.8 percent, and Treasury debt prices pared losses on the Fed's forecasts. The dollar fell against the euro and the yen.

U.S. short-term interest rate futures expect no imminent change from the Fed but point to rate increases in the final months of the year.

The rate cut on April 30 was the seventh in a series that has taken the interbank lending rate down by 3.25 percentage points since September as the central bank moved to buffer an economy battered by the housing downturn and a credit crunch.

The economy has expanded at a sluggish 0.6 percent annual rate in both the last three months of 2007 and the first quarter of this year.

At the same time, however, record high oil prices have pushed up energy and food prices, raising the consumer price index by 3.9 percent in the 12 months to April.

Policy-makers felt at their April meeting that the risks that growth could slow were more closely balanced by the risks that inflation could spike higher.

"Members were ... concerned about the upside risks to the inflation outlook, given the continued increases in oil and commodity prices and the fact that some indicators suggested that inflation expectations had risen in recent months," the Fed said.

Participants at the Fed's meeting were roughly evenly divided as to whether the risks to the inflation outlook were balanced or were tilted to the upside, the minutes said.

The Fed boosted its forecasts for inflation to 3.1 to 3.4 percent in 2008 from its January 2.1 percent to 2.4 percent projection for the personal consumption expenditures index. It expects unemployment to rise to 5.5 percent to 5.7 percent for the year. The jobless rate was at 5 percent in March, but employers had cut jobs for the fourth month in a row.

The Fed warned that the risks to its scaled-down growth projection remain to the downside, particularly if house prices continue to slide lower.

"Participants saw little indication of a bottoming out in either housing activity or prices," minutes of the meeting said.

Fed officials took some comfort from signs that fragile credit markets, which were severely shaken by doubts about bad credit, appear to be on the mend.

"The generally better state of financial markets had caused participants to mark down the odds that economic activity could be severely disrupted by a further substantial deterioration in the financial environment," the minutes said.

Yup, that there says it all.

No more rate cuts (ie Morning After Bloody Marys). Higher unemployment. No more credit. Higher inflation. Lower growth.

See, that last one still shows they have a sense of humor. "Growth"? Yeah, right.

Worst Of All Possible Economic Worlds, that's what that is. Everything going straight into the crapper simultaneously. That's what we call STAGFLATION. Everything costs more, but you get fired anyway, and you are ultimately rehired at dreadful Illegal Alien Wages.

And let there be no doubt about the source of all this, it's The Housing Bubble. I know, to many on this board, that's so obvious it's literally retarded to think otherwise. Ahem:

Deschutes home prices see further declines in first quarter

Despite Deschutes County’s recent declines, home values have grown 74.96 percent over the last five years, the report said.

Linda Williams, a co-owner of Tamarack Homes, one of the four builders developing the 458-lot RiverRim subdivision in southwest Bend, said the softening of home prices in the last few quarters was inevitable, adding that price declines are due to downward pressure from people who have been forced to sell.

Nevertheless, as the traditionally strong summer sales season is about to begin, Williams believes real estate prices will hold steady, perhaps even climb.

“Until we get through the summer season and to the end of October, we’ll have a better picture, but I don’t see there will be further declines in the near future,” Williams said.

Yes. It DOES continue. In a story about the DECLINES in Deschutes County home prices, there is, AS ALWAYS, a plug by local RE wonks telling us to buy, and this whole temporary bubble nonsense is over, at least locally.

And there are people who BITE on this crap. They actually go out & look for homes & BUY THEM.

Just a flashback folks: These are the same people who tried to PANIC US INTO BUYING because if we didn't WE WOULD NEVER, EVER OWN A HOME EVER AGAIN.

THAT was actually more plausible than the idea that Bend RE is headed up, up and away from here. It ain't. From the same Bulletin piece:

The last OFHEO report, for the period ended Dec. 31, 2007, said home prices in Deschutes County depreciated 1.44 percent in the final quarter of 2007 compared with the year’s third quarter, and 2.84 percent when compared with the fourth quarter of 2006. That report ranked Deschutes County at 236th in the nation for appreciation — meaning 235 MSAs had better rates of appreciation or lesser rates of depreciation — out of a total of 291 MSAs.

Remember the Top Spot? Bend was Numero Uno? Then we were Top 5? Then Top 10?

Then it got awkward, cuz we had to do stuff like, "Bend, We're Still Top Quartile!", and such?

Right. Now we are square in the LOWEST 20% of appreciating MSA's in the U.S.

People DO NOT come a running to invest in the LOWEST 2 DECILES from my own experience. I don't know, maybe we should call the Mayor of Flint, MI and ask how it's going.

So what's the Big Picture Summary?

1) We've got runaway INFLATION. Do not believe the U.S. Government, they do all sorts of stuff to convince you that we're sitting around 3-4%. 2 words:

Got Gas?

Right, we are RIGHT NOW in a state of runaway inflation. That's BAD. But it gets worse.

2) U.S. homeowners, probably the largest amalgamation of wealthy people on Earth, are getting poorer at an rate UNTOLD IN THE ANNALS OF RECORDED HISTORY. Case-Schiller will be out Tuesday, and it will almost certainly show some of the greatest losses we've had so far.

And as an aside: We're starting to take for granted these little 1 and 2% declines, as small or insignificant. But a 1% drop in US home values is a loss on $20 TRILLION. 1% is a measly $200 BILLION. And given the ~70% ownership rate in this country, that's $1,000 loss for each person inhabiting an owned home.

Fannie Mae, and others have predicted total losses of 25%. Maybe more. In Bend the losses will be greater. FAR greater.

3) Unemployment is exploding locally. It's marching steadily higher nationwide, but it's already at Bad Old Days levels in Bend:
Bend Unemployment - Jan -Dec. MAX, AVG, and MIN values, 1990 - Date

Here's a graph of Bend unemployment, as viewed through a "seasonal" filter. That middle line is the overall AVG unemployment for each month throughout the year, and this chart covers every month from Jan 1990 to now.

The purple and yellow lines are the MAX and MIN figures ever recorded for each respective month, in that entire period. ALL unemployment figures since 1990 lie between that MAX & MIN range.

The lowest unemployment ever recorded was in Oct 2006, at a scant 3.8%. That 11.1% high mark was recorded in Feb 1994.

And it's plain to see the high cyclicality of Bends economy. The best months are May -Oct. Things get worse from there, usually bottoming out in Feb. This is why I said "Things will get better", last Feb. They always do.

But take a look at how things are going once you factor OUT the cyclicality. Here is a graph with the AVG subtracted OUT of the figures:
Bend Unemployment, Cyclically smoothed, Aug 2006 - Apr 2008

See where we just jumped up above 0? That means, after a run that brought us as low as 3% below normal yearly trend unemployment, we have actually entered the unhappy side of Bends average unemployment.

And that's "STATED" unemployment. As anyone who's been here more than 5 seconds knows, Bend is the home of the Independent Contrator, and our unemployment is ALWAYS better on the Good Side, and much worse on the unhappy side of the unemployment grind.

Note that although nominal unemployment peaked in Feb this year at 8.2%, as it almost always does, and it has since gone down to 6.8% for Apr, that in cyclically smoothed terms (ie subtracting out the AVG unemployment rate for each respective month), things are getting worse by the day.

We're in a near-unbroken uptrend in "real" unemployment around here. And it shows NO INDICATION of slowing down, much less reversing.

So where was I? Runaway inflation, massive loss of wealth, unemployment.... oh right

4) Bernanke has said "no mas" to rate cuts. This means the pick-me-up, day-after Happy Hour is over. This means the Main Street can't look forward (always forward) to ever lower rates, that make the number of craptacular ROI-positive projects expand ever wider. That means this extremely marginal source of growth is done.

It was only ever a figment that this would help, but it was a figment that Wall St seemed to cling to, to the point of myopia.

What this "no mas" statement really seemed to raise the specter of was No More Bear Stearns Bailouts. AKA: The Fed is out of The Game. Heads will roll, banks will fold, nothing is Too Big To Fail. THAT is the sort of thing that gets the stock market down.

5) Finally, it is just Quagmire Time. Nothing moving, nothing happening, economic activity just grinds to a halt. Maybe this is best illustrated through example:

Here you see MLS listing 2802501.
View Ridge STD, 2,156/sf, 4 bed, 2.5 bath, $299,900

It's your standard STD nightmare, thrown together by Triad Homes, over on the Eastsiiiieede.

Then, literally next door, you find a clone (MLS 2801622) for sale, of course:
View Ridge STD, 2,156/sf, 4 bed, 2.5 bath, $389,900

Yup. The Triad Borg Mothership crapped these two STD's out at varying times during the Bubble, and has left at least one of these people in a totally untenable position to sell their house.

I should note that both have been on the market quite awhile. Both are overpriced, it's just a matter of degree.

This is the state of RE all over Bend. Identical homes in every way, differing in price by 30%!

You might think, "Hey! That $299K shack is a Great Deal!". Maybe. But I think it's much more a signal of an Extremely Unhealthy Market. In the macro-view it's just a signal that many home values in Bend are being "made up" by the sellers BASED ON THEIR OWN CIRCUMSTANCES, and not the "market price", whatever that means.

That is what is truly scary around here. Prices, due to the vacuum of financing, lack of historically dependable comps, and a market that has literally siezed up, are almost impossible to figure out.

What's the "real value" of these 2 homes? They are almost certainly within 1-2% of each other, because they are within about 100ft of each other. It certainly seems that they are NOT worth $389K. And even $299K seems doubtful, as that home has been on the market quite awhile, without a taker. The only place to even come remotely close to a market bid is this airdropped number at $259,000 (MLS 2713223):
View Ridge STD, 1,859sf, 3 bd, 2.5 bath, $259,000

This STD nightmare briefly went pending for Assist-2-Sell, but promptly fell apart, and is now back on the market.

So we have sellers, in vast, VAST numbers simply making up prices in Bend, based on NOTHING but what they paid. Identical homes, wildly different prices; that just means an incredibly inefficient market. That means a High Cost Market.

This is a big problem everywhere in the U.S., but it is a near-crippling problem for Bend. There's no indication of where the bottom is.

Now... I can't help but re-print a recent blog post by Dunc:

Article on of Bend being the 'new' Boulder, with this comment:

"Isn't that awesome?" Alana Audette, executive director of the Central Oregon Visitors Association, said in reaction to the article. She echoed one theme: "A predominance of new business startups here is largely from people who came here on vacation" and liked what they saw.

Oh, my God.
I've told this story before, but it bears repeating. A few years ago, a lady opened a Mystery bookstore in the Brooks Alley, facing Mirror Pond Parking lot. I won't call it Brooks 'Street' because there is no vehicle access. Anyway, it was a very nice store, especially for us mystery readers. She really knew her stuff.

But I thought it doubtful that she could cut the customers down to such a small portion; and I especially doubted her location.
Finally, I asked her why she had opened on that spot. "When I used to visit, this alley was absolutely packed. I'd come for the Market."

In other words, she had come on probably the only days in the entire year when Brook's Alley was super busy, and thought that was normal.
Unlike the COVA director above, I don't think luring tourists into opening businesses in Bend is "awesome." I think it's a recipe for disaster.

1.) They most likely visited on Peak days and hours.
2.) They most likely moved from a bigger town for the small town feel.

3.) They haven't lived in Bend long enough to really get a handle on it.

There seems to me to be only three ways to understand local business conditions: either you do a heck of a lot of accurate research. Or you live here for awhile. Or you have extensive experience in the field you choose, and can make educated guesses.

The most important thing a business needs to do to survive is to calibrate as closely as possible what the most likely sales levels are going to be, and to carry the proper amount of inventory to get there and to have overhead low enough to be covered by that level of sales.
How the hell do you know that? Especially if you are from out of town? Especially if the business is a dream business and you've never done it before?

Lets say you open a restaurant that does an average of 50 tables worth of business a night after 3 years. If you opened with 75 tables for peak hours, and you can still survive with 25 tables business, than you guessed accurately. But if you opened with 100 tables, you overreached.
And every business has the same strictures. The problem with doing demographic research for Bend, it that it will probably mislead you.

Bend really is different -- most people have been here for five minutes, for instance, which completely changes the whole marketing dynamic. If, as is likely, you come from a more populated area and you've seen what you perceive as successful businesses and that Bend is lacking such a business -- your conclusion might be that Bend needs such a business. When your conclusion might ought to be -- that Bend doesn't have such a business for good reasons.

That if you actually knew any better, you'd know that several such businesses have already come and gone. And so on....
I've seen many businesses open that had great presentation, great inventory, great service-- and still failed, because there just weren't enough customers. Bend's population is rather dramatically higher during the peak season, when most business opening tourists are visiting.

But that's like visiting a restaurant on a Saturday Holiday night and expecting that to be average. They need to come back in February and November. Take a clicker and stand on the street corner and count how many people walk by, something like that.
So by all means, open a business in Bend. But live here for a year or two or three, first.

Yup. Good Old Bend. Market 'em, reel 'em in, net 'em, fleece 'em, and leave 'em for dead.

That's our modus operandi. Fleecing Noobs For The Bend Dream. And have no doubt that the RE bubble here had a strong self-reinforcing effect on parting these Noobers from their cash. Untold numbers of Amenity Businesses have opened, and will close the second their 3 year leases are up, or the owners completely run out of cash, whichever comes first. Do not underestimate the number of people who have gone this route.

Bend: The Biggest Equity Sink Hole In America. There will almost certainly be more money lost per capita in this town, than anywhere, over the next decade.

And in a similar vein, you can start to see the beginnings of the Inevitable Commercial Property Implosion now sweeping this town. Just a short hop between 3rd & Wall on Greenwood, shows an astronomical vacancy rate already shaping up for downtowns Eastside corridors.

I'm sure the piece in todays Bulletin, while sprinkled with the usual false hope, explains this problem at least in part:

Too many commercial buildings, few tenants

Tighter market poses problems for landlords, but some businesses see an opportunity

(Anyone have a copy/paste of this one for the comments?)

Remember: Commercial in Bend was supposed to be TOTALLY IMMUNE to the residential downturn. Dunc & others called bullshit on this long ago, and of course, were dead right.

GDP & homeowner wealth are literally joined at the hip. No consumer spending, and business goes to hell. And much of consumers disposable income has come from their homes over the past decade. It is hard to overstate the importance of Mortgage Equity Withdrawals, and their effect on GDP:
Mortgage Equity Withdrawals Effect on GDP

Without home equity lines being drawn down, our last "slowdown" would have been a full fledged 2 year recession. As it was, it was just a little bump in the road.

But now, We Owe. And we owe for YEARS & YEARS of spending. All them Hummers, fake titties, snowmobiles, and all the rest did not come free:
Consumer Debt

We owe just TRILLIONS, and ALL OF IT is either collaterallized by assets FALLING IN VALUE, or by nothing at all (credit cards).

So we are going to suffer. But the Real Losers will be banks, as they always are. And business in general will suffer. It's really an unheralded event taking place. Even George Soros doesn't think we've seen anything like this:

Seeing Signs of ‘Systemic Failure’

“This is not a normal crisis,” George Soros, the hedge fund pioneer turned philosopher, said today to a group of reporters he had invited to lunch at the World Economic Forum. “It is the end of an era.”

It was the “era of superleverage,” he said, and regulators have not appreciated how serious it is. “Systemic failure,” he said, may be taking place.

This is exactly what's happening. If I had to put this in "movie-terms", I would equate it to "Escape From New York". We are entering some sort of post-apocalyptic nightmare scenario. If this doesn't put to bed Dunc's idea that I'm "not negative enough", I don't know what will!

Remember: Each 1% decline in home prices equates to a loss of about $200 billion. They've estimated that banks & other financial intermediaries are expected to face worst-case scenario losses of a trillion dollars.

We've already LOST THAT, and more. Bernanke has groggied us up with unlimited Bloody Marys, and has blurred our vision for just a few more months. But the losses have done NOTHING BUT INCREASE DURING THIS MORNING HAPPY HOUR. The problem is NOT over, and in fact, it has gotten worse with our Speak No Evil, See No Evil, Hear No Evil Fed policy.

Have no doubts through the Realtor-based rosey-palm, Buy Now bullshit, the DJIA respites, and all the other blather, that we are entering a state of financial Armageddon, and absolutely NOTHING can stop it.

And Bend will go down harder than ANYWHERE on this Planet.

OK, to end this thing on a lighter note, this piece from Slate was a great commentary of home buyers remorse. If you've EVER owned a home, you KNOW that it is fraught with problems, and this author does a pretty good job explaining how bad things can go:

Flip this house. Please!

After two decades of renting, I finally bought my own home. What the hell was I thinking?

By Steve Almond

May. 23, 2008 | Thanks to the mortgage crisis and the inevitable mortgage crisis legislation, we have heard a lot of bloviating recently about what Rep. Sander Levin, D-Mich., calls "the American Dream of homeownership." Yes, along with shopping and invading countries that pose no military threat to us, homeownership is now part of the American Dream lexicon, to be invoked as a single compound noun -- like a German word, only uplifting. There is only one problem I can see with the equation of homeownership to patriotic bliss, and that is homeownership itself. How vastly overrated and costly and crazy-making an enterprise it turns out to be.

I am qualified to say this, mind you, because I entered the holy circle of homeownership two years ago. To say that I was naive about the ensuing realities would be fair, but inadequate.

But then, I had a wife who was six months pregnant and needed a nest to call her own and I, too, figured I was ready to stake my claim after more than two decades spent renting (my nadir being the dungeon studio in El Paso, Texas, whose bathroom had no door). And besides, as I was assured by the panting chorus of fellow homeowners who take it upon themselves to advise you in such situations, real estate never-ever-gabever goes down, so I wasn't even spending my money, I was just "investing" it.

Thus, in the spring of 2006, my wife and I invested in a small cape bungalow in a suburb outside of Boston. As to the exact figure we invested, or promised to invest, I would prefer not to disclose the sum for the sake of privacy, but also because mentioning it causes my testicles to do that thing where they retract into my abdomen.

I mean this as no offense to the home itself, which has, on balance, given us both much pleasure. It is not the house's fault that I failed to buy it sooner. This we can safely blame on my own protracted adolescence and undependable income.

Nonetheless, it bears mentioning that our purchase served as a bellwether for the ensuing housing market collapse. It was as if the keepers of that market were saying, "What? Even Almond has a house now? Time to bail!"

This first shock of homeownership (that property values sometimes go down) was followed by a second: hidden costs. And by "hidden" I mean, of course, "those costs I was too lazy or negligent to consider beforehand."

Property taxes, for instance. My annual bill amounted to half what I had paid in rent. There were fees for water and garbage collection and heating oil and insurance. As a self-employed person working at home, I lost that fat tax deduction I used to receive for rent payments. If only someone had told me -- or pointed me to the right book, perhaps "Homeownership for True Dumbshits" -- I would have at least tried to scare my wife into a cheaper house.

But all right, too late. The check cleared. Now we owned this cute, if somewhat cramped, domicile. The appliances were newish and the yard was immaculate and we each had an attic office, even if they were built to scale for leprechauns. I figured we could coast for the next five years.

Then it was high summer and we needed to install air conditioners, to prevent my wife from perishing. She needed other things, too -- drapes, a dresser, a new filing cabinet. And because my own household know-how maxes out at the stage known as putting together a lamp from Ikea, I had to beg my friend Billy to come over and do all this stuff for me, which he did, for free, if you don't count the retail value of verbally emasculating me for hours on end.

And so we proceeded through fall and winter. The paint continued to peel and the driveway asphalt cracked and the bricks bordering our garden came loose and the insulation in our attic crawl spaces began to congregate in toxic, cotton-candyish tufts. These were all fairly manageable -- by which I mean, fairly easy to ignore -- until the structural engineer arrived.

The structural engineer arrived at the behest of his client, who was considering buying the house two doors down. The problem was he'd seen some "step cracks" in the foundation and wanted to see if we had the same damage. (Spoiler alert: We did.)

"Is it bad?" I said.

"That depends," he said.

"On what?" I said.

The structural engineer squinted.

"Should I be worried?" I said. "Can you at least tell me that?"

"I'm really just doing a purchase consult," he said, and scurried off to sow fresh structural doubts in the mind of his client, who did not, alas, become our neighbor.

The cracks in the foundation (about which I could do nothing) quickly led to cracks in the cement wall and granite stone path that abut our garage. I decided, after a brief consultation with a contractor, that we could do nothing about these for the time being, short of prayer. I refuse to go into detail about the water damage. It's already been a long day.

I will mention, though, that my wife is fond of telling friends of ours that if we ever "come into money" she hopes to knock out a few walls in the basement and create a second bathroom with a Jacuzzi tub.

When she says these things it calls to mind those reality TV shows whose central myth of transformation centers on the home. "Extreme Makeover: Home Edition," "Trading Spaces," "Flip This House" and so on. These programs are the new pornography of the landed middle class, and they are, in their own way, as cruel as the old pornography. Just as the libidinal 13-year-old will someday discover that not all naked women look like Playboy centerfolds, so too, the first-time homeowner will have to learn that refurbishing your den, even on national TV, does nothing to heal the cracks in your foundation.

Also: the yard. By our second spring, the neighbors had begun to notice that we were somewhat laissez-faire in our approach. We are blessed with very nice neighbors, by the way, all retirees, and it pleases them to landscape with ferocity. Such is the ornamental fervor of suburban culture.

My wife claims she understands this. Still, as she gazes upon their iridescent lawns and geometrically perfect flowerbeds, it is hard for her not to feel a twinge of shame.

"Our lawn is eroding," she informed me recently.

"I don't think that's the right word," I told her.

"What would you call it, then?"

I looked out at the scabs of browned sod and dandelions. "Eroding is when the soil disappears," I said, professorially.

This exchange is characteristic of my overall attitude when it comes to home improvement. I am both self-righteous and incompetent, a truly American combination. The result is a kind of flustered inaction familiar to those who have lived in tenements. Last month, for instance, my daughter dashed out of my office and nearly plummeted down the stairs. I managed to snatch her up, but in the process fell backward and knocked a crater into the flimsy wall of my wife's office.

I have refused to hire laborers to repair the crater, arguing (somewhat plausibly) that we don't have the money and (somewhat less plausibly) that I will do it myself. My stopgap solution has been to push an end table in front of the crater.

In a sense, our political leaders, in tandem with the retail sector, have offered the same cheap coverup. They've portrayed homeownership as a birthright and a breeze. Just plunk down your 10 percent, zip over to Home Depot, and you're home free.

But maybe it's time to admit that many Americans are like me: unfit for the privilege. We buy homes we can't afford, we treat them like piggybanks, and often we lack the aptitude or interest required to care for them. Would it really be such a heresy to return to the good old days of, say, early last century, when fewer than half of all Americans owned their dwellings, as opposed to the nearly 70 percent who do today?

I suspect, as the cheap oil era dwindles and the price of upkeep surges, we'll see a return to collective living spaces. Greater density will mean less privacy. But it might also rescue us from castles we were never truly ready to rule.

Sunday, May 18, 2008

Bend Oregon real estate: "Worst of the worst"

OK, this time I really will keep this short. I did the PPP yesterday, and I think I blew an O-ring.

Well, not really. But it sure as hell was the hardest exertion I've done in awhile. And a hell of a lot of fun. It's things like the PPP that makes me really like Bend, and makes me start to overlook what have started to seem like fatal, insurmountable flaws.

It's really odd. I see a lot of what's wrong with Bend, and link it to the Amenity Locusts that populate this place. And to date, I haven't had to interact with people like that much, for the most part. I don't "do" things like the PPP. And there is a certain "crowd" that does that. I think.

Oy. If you haven't figured it out, I'm just a person riddled with self-doubt (except when it comes to Bubbles bursting). And when I participate in something with people who I perceive to be the bane of Bends existence, and then they turn out to be all right... well, I just get a little guilty about throwing these people, as a group, under the proverbial bus.

I start to think Bend has a chance. That the people who in many cases participated in the Bubble, and in many cases fueled it, are actually within eyeshot of "normal".

And I got up today & watched "Houses of Sand and Fog", which is a really great movie about a real estate situation gone horribly wrong. And it is very hard to watch this thing, because the parallels between what happens in the movie, and what will happen to Cent OR resonate very strongly with me.

I encourage you to watch it, because it brings home something that a lot of people seem to overlook when the are grave-dancing or scavenging for busted situations; and that is that peoples homes are not just investments, they many times become objects that people imbue the whole of their self-worth in, their lives.

It's pretty easy to be cold about this stuff when it's not happening to you. And sometimes it's easy to be dispassionate when you think it's happening to people who "have it coming". And a hell of a lot of people around here "have it coming".

A way out with the short sale

More local homeowners who face foreclosure are turning to a rare option to avoid that fate

By Andrew Moore / The Bulletin
Published: May 18. 2008 4:00AM PST

The short sale.

In real estate, it’s the sale of a home or property for less than the amount owed the lender. The owner nets nothing on the sale and until recently, it also meant a tax liability, as the IRS considered the difference between the sale price and outstanding loan amount as income.

It’s not a favorable option, but a short sale can be the best way for a homeowner to get out from under a loan and avoid foreclosure, according to local real estate representatives.

Trouble is, a successful short sale is entirely dependent on the lender’s authorization. A seller may find a willing buyer, but unless the lender agrees to take a loss on the property, the sale won’t happen.

And as more homeowners near foreclosure — in Deschutes County, there were 528 notices of default, a precursor to foreclosure proceedings, filed between Jan. 1 and Thursday, a 303.5 percent increase over the same period last year — more homeowners are pursuing short sales.

Tom Greene, the president of the Central Oregon Association of Realtors, said roughly 7 percent of the homes currently listed in Deschutes County are short sales. That represents a huge jump, he said, as short sales used to be exceedingly rare.

“This is a new phenomena,” Greene said. “You used to run into them once every six months.”

Short Sale 101

The reason most homeowners ask a lender for a short sale — be it hardship, a job transfer or a bad investment — is to avoid foreclosure, said Cat Zwicker-Grant, principal broker with Desert Sky Real Estate in Redmond.

The upside of a short sale is it doesn’t negatively affect a homeowner’s credit score, the way a foreclosure would. The downside is the homeowner surrenders their investment in the home and has to certify he or she has not profited from the sale in any way. In addition, most lenders want proof a homeowner doesn’t have other financial means to pay for the loan, Zwicker-Grant said.

“You are asking the bank to accept a loss on your behalf, so if they do that, they want to know you are worthy,” she said.

In other words, if it’s a second home a homeowner is trying to short-sell, the chances a bank would accept one are slim, Zwicker-Grant said.

Filing for bankruptcy won’t help, either. If you can’t make mortgage payments, you can’t keep your home, said Deidra Cherzan, a Bend attorney who specializes in bankruptcy filings.

Bankruptcy law does provide exemptions for primary residences but only if the mortgage is in good standing and the filer can continue to make payments, she said.

The key to a successful short sale is to start the process early, Zwicker-Grant said. Contact the lender, and begin the application process. The next step is to list the house and find a buyer. If one is found, the buyer submits the offer to the lender, which approves or rejects the sale.

The trick is timing, Zwicker-Grant said. Most homeowners don’t begin the short-sale process until they are behind on payments. This often puts homeowners up against the clock.

A notice of default is generally sent out after 90 days of nonpayment, and a house can be put up for auction by a lender 90 days later. If no one bids on the home, it is foreclosed on by the lender and the lender assumes ownership.

Banks or lenders typically don’t want to own real estate, so even though they may take a loss on a short sale, it’s often less costly in the long run, considering the amount a bank would pay for title fees, to maintain a home, cover its taxes and pay real estate commissions when it sells, Zwicker-Grant said.

Zwicker-Grant said banks can be choosy when it comes to approving short sales and accepting bids. Like other sellers, they often hold out for the best possible deal.

“Just because the first offer came in, (the lender) looks at what’s going to close the quickest and get them the most money,” Zwicker-Grant said. “The bank is really in the driver’s seat.”

As of Wednesday, there were 131 short-sale homes listed in Bend and 68 in Redmond, representing roughly 9 percent and 7 percent of the listings in those markets, respectively, Greene said. Since Jan. 1, 17 short sales have closed in Bend and 34 in Redmond, according to Greene.

Valerie Hunter, principal broker at H & H Preferred Real Estate in Redmond, said she has helped close nearly 40 short sales in Central Oregon in recent months, the most she’s seen in the eight years she’s specialized in them. But as banks back up with short-sale applications, Hunter said the process is getting harder.

“Seventy-five percent don’t get successfully negotiated,” Hunter said. “It’s a lot of work to do a short sale, and I try not to do them anymore because they are becoming more of a headache.”

If a short sale is approved, and a buyer purchases the seller’s home, the seller is not completely out of the woods. In past years, the amount of the loan forgiven by the lender — the difference between the outstanding loan amount and the sale price — was considered taxable income by the IRS.

That changed in December when President Bush signed the Mortgage Forgiveness Debt Relief Act of 2007. The act excludes income derived from debt forgiveness on a principal residence from taxation, but only for debt forgiven in 2007, 2008 or 2009.

For that reason and because of market conditions, Zwicker-Grant is seeing more homeowners take advantage of the process.

“Short sales have always been around, but we’ve never seen it so prevalent,” Zwicker-Grant said.

Andrew Moore can be reached at 617-7820 or

It's pretty easy, especially in a forum like this one, to take this as the greatest news in the World. Short sales & foreclosures mean that for those of us who stayed responsible and held back from the insanity, we will get much better deals, and perhaps fulfill a life's ambition.

But these people who are going through this mess, whether responsible or not, are in many cases going to end up in terrible straits. They might be homeless, they might have kids. They might be unable to own a house again for many years. And to add insult to injury, many around here are losing their jobs.

I don't want to come off like a bleeding heart woosie (too late?), but ALL involved, whether owners losing their homes, or "vulture" buyers looking to capitalize on this deteriorating situation, and ESPECIALLY the intermediaries who MADE IT HAPPEN, should stop and take stock of this:

I said from Day 1 that there would come a day when ALL INVOLVED would WISH THIS THING NEVER HAPPENED. Even those who stand to capitalize, should step back & really think about what is happening here: People are losing their homes & jobs, and are faced with interminable and extremely uncertain circumstances. Again, some have kids & will be living in their cars.

There but for the grace of God...

Houses aren't stock certificates. We live in these things. We grow up in them. We make our lives here. And God knows MANY of those who fanned the flames of this thing are selfish asses, and no one wants to see them go down hard more than I.

But there are some who are not in that camp, who are simply caught in a bad situation. And in virtually every case I rationalized, "Hey, these are just rich Cali jerks who totally deserve to suck fucking air, because they caused this thing". And in a lot of cases this is exactly the case.

But I hope to retain some sort of respectful dignity about the situation, and remember that many of these people are going through horrendous circumstances, whether low-life Cali's or not, and human misery no matter the source should not be a source of glee.

Speaking of glee.

It is getting harder & harder to write this blog. I don't think I'm about to quit imminently, but this thing was started to first Convince People that there was in fact a bubble in the bursting. I know. Reading that sounds moronic, but Yes, I do remember that there were MANY who scoffed at this blog & it's predecessor & their commenters that Bend Is Immune, Bend Is Different, Bend Will Go Forever Upward.

Geez, and for awhile it seemed like they could be right.

We now know of course that Bend IS normal. Bend is a working town. Bend is NOT Aspen, and never will be. Bend must normalize. And unlike David Foster, who seems to intimate at times, that "normalize" means "plateau at the current level, with a steadily increasing volume, such that I might actually make a living again", I do not define it so.

Normalize to me means hitting some sort of parity with respect to local incomes.

And that means medians far, Far down from here, probably near $200K, or less.

And that means financial hardships unlike anything anyone has ever seen around here. At least not in the last 25 years.

And this just means a lot of personal despair. People going hungry. Sleeping in cars. Just misery.

So maybe I should grave dance a little less. Maybe you should not gleefully cheer a bubble ever higher (you know who you are). And maybe we should all try to avoid these sort of things in the future, if possible.

Because the end result is always human misery. That's it. Some get rich, many get poor, but the game is not really zero-sum because human misery is always produced in abundance.

I'll finish with bashing what became crystal clear to me this past Wednesday, but first a question:

What do YOU think best measures the economic impact of tourism in Central Oregon?

OK, I have my own answer, and I simply look for a parallel to the impact of a company.

But actually try to come up with your own answer before reading on.


My own personal answer is "revenue". Is this the perfect answer? No.

There are some non-profits that have no real "revenue" to speak of. There are wholesalers that have enormous revenue, but have little in the way of real net profit. There are banks whose revenue may not really reflect their local influence.

So my answer is revenue, although I realize it is not perfect.

COVA's answer to this question, with respect to Central Oregon tourism, is also revenue.

Plus Wages.

Yes, that is local Revenue Plus Local Wages.

Stop. Think.

If you were trying to sell your business, would you in any circumstance list your revenue as Revenue PLUS wages? No. Not unless your crazy. You'd just post revenue. You might also post wages as a separate item. But you would NEVER SUM THEM TOGETHER.

Wages are of course paid out of revenue. Summing them in any way is almost pathologically deceptive, if you were to try to describe "influence", or Economic Impact.

But this is exactly what COVA does.

This is an obvious falsehood, so what is the motive?

That should be clear, COVA has a clear motive to wildly overstate the economic impact of tourism to the area. It is after all a taxpayer funded boondoggle. And the dollars COVA receives are in direct proportion to Economic Impact it can show to local incompetents manning City Hall.

So what to do?

Step One is take a page from the lottery system: Wildly Overstate The Jackpot. If you ever take a close look at lottery payouts, you realize that the $100 MILLION dollar stated payout, is never so.

It is paid out over 29 years. It's like summing up your mortgage, and stating that as the principal amount. That's just dumb.

So COVA does the same, and they do it in such a blatantly wrongheaded way, that I never even thought to question what they would have ever meant by Economic Impact. I straight up assumed that it was revenue, based on room taxes, and other mechanical means.

No, there is a massive double counting. It's like a bank that counts not only loans among its assets, but ALSO IT'S DEPOSITS. Which are of course liabilities.

COVA's figures for Central Oregon Economic Impact are a 100% Fraud.

And I mean that 2 ways. First is the aforementioned egregious double counting. Next is the figures themselves are 100% manufactured.

Now I and probably others have long had their doubts, especially given the surgical precision of the "revenue", when if you can even operate a calculator, you now is 100% impossible. But this past Wednesday, COVA conspired with the Bulletin to put your fears to rest with their piece, "Tourism for the whole family".

I won't reprint it here, because you can view it in it's entirety online. But it seems like it may be in response to BEM's initial suspicion that COVA's figures were so old they must be very stale, and that their inherent precision made them extremely suspect.

They promptly INCREASED their figures a few weeks later. That was a few weeks ago. In this current piece, they have INCREASED the figures yet again, with the standard surgical precision.

Audette on Tuesday released the tourism agency’s 2008 Annual Report, which showed the impact of tourism in Central Oregon increased 5.2 percent in 2007 over 2006, to $570.7 million.

Ahh. Up 5.2%. Like clockwork. Just a smooth ride upward, ever upward. How relaxing. How enjoyable.

How wonderful in securing more taxpayer funding.

COVA MUST show a smoothly increasing trajectory of IMPACT or there may exist the possibility that, God forbid, their funding might be **gasp** reduced.

And so there is a large impact. Always.

The impact is Very Large (due to double counting), and very.... smooth. Huh. Up 5.2%, you say Alana Audette? Interesting.

As I look across each of the components of the Economic Impact Of Tourism In Central Oregon, Accommodations, Eating/Drinking, Food stores, Air/ground transportation, Recreation, and Retail sales, I am struck by two things:

First, What else is there! "Retail Sales"? I mean, my God, you included everything, then you threw in the kitchen sink for good measure.

"Air transportation"? What about the endless tales spun by The Bulletin about how the Redmond airport is almost overwhelmingly dominated by BUSINESS TRAVELERS?

"Eating/drinking"? My Lord. So when I take my kids to Baldy's, I 'm having an "Economic Impact" on Cent OR Tourism?

I thought Revenue + Wages was a recipe for double counting. What COVA "defines" as tourism related, is just inane.

Now I realize that they probably DO take some percentage of local eatery receipts... but how much? They've already shown a strong predisposition to inflating things for their own benefit, can we possibly assume they've done any different here? I don't think so.

Secondly, I looked close at the SOOTHING increases in EACH AND EVERY category. To paraphrase Sir Arthur Conan Doyle:

Gregory (Scotland Yard detective): "Is there any other point to which you would wish to draw my attention?"
Holmes: "To the curious incident of the dog in the night-time."
Gregory: "The dog did nothing in the night-time."
Holmes: "That was the curious incident."

You'd think that maybe the 5.2% increase we can so confidently depend on (Did I mention that Bachelor was DOWN sharply on the season?), seemed to be accompanied by each of the component REVENUE + WAGE impact rising almost as smoothly. Very smoothly. Each one.

Dunc, when your store is up 10% on the year, what are the chances that EACH AND EVERY CATEGORY IN THE STORE IS ALSO UP 10%?

Seems slim to me. Real slim. But this is Bend. A fantasyland where all your dreams come true, all trajectories are forever up, and by God, when they aren't, the fractions are adjusted the estimations are re-jiggered, and every little thing has an almost scarily perfect Stepford Wives precision to it.

Look closely at this graph. The ONLY down local area is Jefferson County. And each and every component is down in lockstep with the total drop there. The ONLY place you find MIXED results is in useless Wasco County, where retail sales fell $100K, and all else was flat or higher.

Not Bend. All is up, and each is up. Nothing left behind, all beneficial. Fantasyland. Xanadu.

The spice must flow...

Sunday, May 11, 2008

Bend Data Blow

I figure it's time for a data blow, where a lot of the local RE trends are chartified, tablefied, and finally, crucified. But first...

I noticed over at BendBB & Jesse Felder's My Back Pages that Notices Of Default have exploded in Deschutes County. We started the year with "just" 91 in January, and already in the first 4 days of May there were 43! Even Jesse posted an actual NOD he saw taped up in his neighborhood.

He said posting NOD's was becoming a regular epidemic where he lived:

3 defaults hit my neighborhood over the past week. I took this picture of one of the NOD's this morning on a walk and all the while I heard this song in my head: Come gather 'round people Wherever you roam And admit that the waters Around you have grown And accept it that soon...

And here's a related post from Jesse about the recent Bulletin piece regarding defaults:

Today's Bulletin reports that local default notices are off the charts:

Notices of early default, which are typically filed when borrowers fall three or more months behind on their house payments, rose 245 percent in April over April 2007, according to data from the Deschutes County Clerk’s Office. There were 114 pre-foreclosure notices filed last month. In the first four months of 2008, default notices are running 261 percent ahead of the same period a year ago, hitting 437 for the period. In the first week of May, 53 notices were filed.

And you see the requisite plummet in CACB shares:

Cascade Bancorp, 1 year

And CACB, after some pretty impressive short term rallies, ended this week in a final plunge to multi-year lows:

CACB, 10 days - close $8.78/sh

I still think it is a miracle that Moss Co has not been fired yet. Seems like everyone in Bend suspends their disbelief over Bad Situations for as long as they possibly can.

Although it should be pointed out the Sliver (silver?) Lining with respect to CACB, and Bend housing in general:

As things fall in price, people generally will buy more of it. We had a nice pop in units sold when medians tanked to the recent $270K for April.

CACB book value is about $279MM, while it's market value is $246.5MM. We're heading into Deep Value valuations here. We're not really well-entrenched yet, but CACB is starting to have some appeal on a buyout basis. If we see the sixes, I might actually have to have a taste....

And just another quick diversion in the stock arena. Once in awhile I watch NBR on OPB, with the fabulously tan Paul Kangas. And I just peripherally noticed that Monaco Coach scrolled across the screen around $5, which I assumed was post-split, cuz I just saw this baby around $10 not too long ago.

Monaco Coach, 5 year chart

Nope. There wasn't a split. Monaco, which used to have a decent sized presence in Bend, has just collapsed. After market trades were in the $4.60/sh range Friday. The book on this one is $315MM, and it's selling for $153MM, or less than half book.

Could go less, but MNC qualifies as Paul-doh's Lottery Ticket Investment of the Week. Buy at $4.60/sh., go Rumpelstiltskin on it for 5-6 years, and see what happens. Possible 10 bagger. Last time I had this feeling it was Perini back in mid-2002, in the $3's and $4's

PCR, 5 year

OK, now for a little of BendBB's chartified goodness.

Here is the chart of the MEDIAN asking prices for all listings, cut up by city:

Cent OR Asking Price Medians for listings

Bend itself is almost too boring for words, having been within $1,000 of $400K for many months. That belies the real trend, which is pretty clear here:

Median PPSF

The trend in Bend Price per Sq Ft continues monotonic Down. Median's a year ago for Bend were $226/sf, and are $200/sf today (down 11.5%). Similarly, Sisters was $262/sf a year ago, and is at $242/sf today (down 7.6%).

Redmond actually did OK with a relatively small decline from $183/sf in Apr 2007 to $174/sf for Apr 2008, or a 4.9% fall.

Sunriver continues to defy bad news, and rose from $279/sf to $287/sf last month. Is Sunriver the M1 Abrams tank of RE or just the Last Domino to Fall? I dunno, but that place continues to be a bastion of Cent OR RE strength, when all else is falling apart.

Here's a look at the median sqft of homes listed:
Median SQFT

Mainly a lot of bouncing around, except for Bend, which has been on a long-term increase in the size of homes being listed. At 1,900sf last Apr, we just crossed over the 2,000sf area last month, to a 2,003sf median for Apr 2008.

And finally, this is PPSF medians indexed to 0, for ease of comparison sake:
PPSF Medians, Indexed to 0.0%

You can see that in The Real Towns of Bend & Redmond, that prices have been in a grueling decline for almost the entire period.

The much lower volume, and hence probably more suspect trends of Sisters & Sunriver have diverged, with Sisters in a jagged decline, and Sunriver just marching slowly and steadily higher.

OK, now for the straight up MEDIAN for Bend residential solds, since Jan 2007 (data courtesy of Go Bend):

Bend Median residential SOLD prices, Jan 2007 - Apr 2008

The final data point in April was provided by our own Data Goddess, marge.

You can see things have gone to the unpleasant side of $300K in quite a hurry. Data from Case-Schiller shows that this sort of macro-plunge has built up a good head of steam in other larger mega-bubble cities like Vegas & Miami for well over 18 months now.

Of course the Real Story has been the implosion in sold volume. We had 289 sales in the 2 month period, Feb-Mar 2007, compared to a hideous 148 for the same period this year. This is making real estate an untenable career for THOUSANDS locally, a figure that actually does not show up in local unemployment figures due to the Independent Contractor designation of many Realtors.

I hope to see a possible copy/paste of today's Bulletin piece, With downturn, brokers adjust in different ways, possibly in the comments area soon. :-)

And if you look at the "Ask" medians vs the actual "Sold" medians, you can see them diverging quite distinctly. "Ask" medians have dropped mildly from $411,540 to $399,000 last month, or down just 3%.

But "Sold" medians fell from $356,500 last year, clear down to $270,000, or a stunning 24%+ drop.

This tells me something. Bend is a Real Town.

People are asking The Moon for the real estate that has been planted here over the past few years, and they are quite resolute in their ask.

But fewer & fewer of those high-priced homes are selling. In the minds of the sellers of real estate around here, prices look pretty darn stable. But the stuff in the Unaffordable Range (ie over $400K), where no real working Bendite can afford to buy, is simply drying up.

So ask prices continue to barely budge, and the SQFT actually continues to go UP. But no one is buying those behemoths, because Bend is a Real Town paying Crap Wages for the most part, and hence only the bottom of the barrel is even moving.

The problem is only small bits of the bottom rung of homes are moving. Real People do NOT want to live in worker shanty's (shanties?). And the "affordable" sector of homes in Bend are the STD's of the Bubble, or well located "Center" shit shacks built in the mill-town days of Bend.

People do not like to work their asses off and live in a dive. And they won't. they'll leave & they are leaving. Bend ain't "all that". Bend is a nice, middle of the road place with a nice outdoors scene, but it ain't the White Hot Center of the Universe.

The sooner we realize that, and the sooner we actually begin advocating LOWER home prices across the board (NOT Mirada style low prices, where the lot size & square footage are hacked to nothing...), the quicker this place will recover.

Did anyone notice that with the mega-plummet to $270K medians this month, that sold volume ticked up substantially?

There's the rub. If you want much higher prices then Bend will simply have to become far smaller. And there will be some hard adjusting to the fact that at $400K medians, we won't be a Real Town, there will be mass exodus, and large parts of this place will be a ghost town. I don't think that's really possible.

Lower prices are the only real outcome.

And not to say I told you so, but...

Remember how I've said, once or twice, that you should drop price to the bottom of the range in your locale to sell? Yeah... I've said that once or twice. Back in the mid $300's, there were probably quite a few starry-eyed dreamers who believed the Best Buyers Bullshit in 20 Decades crap, when really here at your humble BBB2, we have been saying all along that IF you really had to sell & needed to sell, for whatever reason, that the best strategy was to drop the price down to the sleeping point.

And you can plainly see that yesterday's mind-numbing price slashing point are all around you now. NOD's will continue this trend.

Anyway, you can plainly see that there is wisdom there. Look at the median sold prices. The range has imploded to levels that made past "lows" look positively glorious.

We might have some short term stability here, but it will not last. We've gone beyond what people want to do, and have entered into the area of what people (and banks) MUST do. Foreclosures up nearly 300% and other such dire statitics will continue to push Bend towards the NATIONAL MEDIAN, which has just sunk below $200K.

We're a real town. That means reasonable homes at reasonable prices are simply inescapable. The inequities created by the Bubble will soon be redistributed. Those who bought long-ago and sold at the height will profit at the cost of those who relieved them of their over-priced assets.

ROI will out. Should have compared renting to owning parity, and saw that owning ROI would be miniscule or negative for the next 20 years. Rent & Invest The Diff, my friends.

"But where do I Invest The Diff, Paul-doh! Where!"

Well, as you can see by the median sold prices, it almost really doesn't matter, as long as it is NOT Bend real estate. Stick it in the mattress. Bury it in the yard. Buy Monaco or Pfizer stock. Hell, almost anything is better than losing 24% in an illiquid asset that has become damn near impossible to sell at any price.

OK, I wanted to end with a summary of how the largest subdiv's are doing with respect to number of listings & median ask prices. These are listing counts for Apr 2008 vs Apr 2007 (all listings, including bare land):

Broken Top: 72 vs 65
DRW: 67 vs 75

NWX: 63 vs 57
Renaissance@Shevlin: 52 vs N/A
Awbrey Butte: 49 vs 45

RiverRim: 48 vs 45
Gardenside: 41 vs 10
Pronghorn: 41 vs 9
Orion Greens: 40 vs N/A

River Canyon Estates: 38 vs 27

A few things jump out, the first being the jump into the Top 10 Listers by Renaissance & Orion Greens from nothing a year ago. Renaissance at Shevlin has a smattering of spec homes (4 by my count), with the vast majority being bare lots. Orion is 100% bare lots as of today.

I think Renaissances' mass defaults down in Aspen Rim is well-known to all on this board. They have 19 homes down there for sale. They are almost certainly in liquidation mode.

Another lot liquidator appears to be Gardenside, with about twice as many lots for sale as homes (30 and 14 respectively, as of May 11).

Similarly, Pronghorn has hit the wall. They have 16 homes & 36 lots for sale as of right now. Pronghorn doesn't have the excuse of being a relative Bend Noob like Gardenside. Pronghorn has been around for years. They are in talks to save the poor deci-millionaires who funded the project, and just plain don't want to obey Oregon land use laws, poor buggers.

I predict outright sales of places like Pronghorn, which will go through "thin-skinned" BK's whose only purpose is to repeal the CC&R's. Can they? Is that even legal? Don't know... I'm just saying they will sure as hell try.

The rest of that list is a mish-mash of the larger well-known subdiv's around here, some up, some down. But rest assured that Dark Matter remains the Number 1 Enemy around here. It's everywhere, just waiting for a light at the End of this Tunnel.

Here are the median ASK prices for those same subdiv's (this year vs last, HOMES ONLY, no bare land included):

Broken Top: $786,000 vs $759,000
DRW: $253,750 vs $309,450

NWX: $527,000 vs $580,750
Renaissance@Shevlin: $649,900 vs N/A

Awbrey Butte: $849,000 vs $997,000
RiverRim: $473,901 vs $477,903
Gardenside: $279,900 vs $309,200
Pronghorn: $2,924,750 vs $3,900,000
Orion Greens: N/A (no homes for sale)

River Canyon Estates: $434,450 vs $392,700

Adding lots in these medians really doesn't make sense, because then places like Pronghorn would probably show a bare lot as the representative median, while BT would probably be a home, and such.

Again, these are ask prices, and may be reflective of the Kool-Aid that is still being imbibed by the Bubble junkies. Some of these places are so thick with Bubble-types, it's hard to know if there are any "Real People" there at all. The SW side is chocked full of Bubble shacks, and I would guess that many of these people are completely unable to drop their prices.

This is Rock & A Hard Place Time: So many in this town are financially unable to bridge the gap between their asking price & market that they have no choice but to futilely hold the line on their price, but they also cannot feed the beast forever, and are quickly burning through all the assets they've taken a lifetime to accumulate.

What will happen to this place in The Great Deleveraging is hard to say, but I do know One Thing: We'll Get Real. Prices will align with incomes. Incomes here are OK, but not great, which means prices will become OK, but not great, and that means sub $200K.

I want to try (more often) to end on an Up Note, so here goes.

I had the opportunity of spending yesterday doing the Monkey Face Circle Route at Smith Rock yesterday. Besides being one of Central Oregons true geological treasures, and one hell of a nice hike, one gets a panoramic view of The Ranch At The Canyons.

Now, dismissing the fact that this place is a exclusionary gated bastion for the rich, is a prime driver for the Tuscany-themed insanity gripping the Me-Too architecture of current doomed subdiv's, and finally that it has defiled one of the great pristine swaths of Central OR farmland... it still remains one of my favorite "concept" developments. The reasons are best conveyed by photographs:

Ranch at the Canyons, Southern view
Right above where the river disappears on the left, you can see the Ranch "clubhouse" or whatever it is. That red pumice road pretty much circles this baby. And you can see it is still by and large, empty space. Nice.

Monkey Face, where the Insane Go to Die. Look at that crazy bastard climbing it!

You can see from this vantage point that Ranch homes continue to be built, and by my reckoning they will be sold. Terrebonne? I know. Furnace in the Summer? I know. Poor dirt farmers on every corner? I know. Doesn't seem possible.

But Ranch at the Canyons is truly a unique location, a concept that is actually being done Right, and is being kept to a small scale that doesn't involve half the World becoming multi-trillionaires to work out. Only relative handful of cash-rich buggers need apply for the lots ranging from $750K - $1.2MM.

And by the looks of it, the houses being built are true monstrosities.

Spec homes in the shadow of Monkey Face

I guess sometimes I underestimate some of the real uniqueness of Cent OR. Everyone comes here touting the natural beauty, and I've been here long enough to take that for granted, and only focus on the "negative changes" I don't like... like Californians. And that's about it.

But this place really does have some unique positives, and Smith Rock is just one of many. The rock climbing there is World class. I met a gal from Germany there. Many of the license plates were from out of state.

And... despite the seemingly ENDLESS whaling on local money grubbing developers, there are a Very Precious Few who seemed to preserve the idea that a concept, NOT A PROFIT MAXIMIZING SHAFT JOB, was paramount. The Ranch at the Canyons, despite a few reservations on my part, is one of those concepts.

And I say this not as a UNPAID SCHILL, but as a message to those who are simply scholcking together shake and bake STD ridden pieces of crap subdiv's. It's crunch time. And slicing & dicing your way to ridiculous profits won't work anymore. You need more... a hell of a lot more.

You need to create some real durable, lasting & hopefully unique value, because slice & dice for maxed out STD placement has been done. Then done again. And again. And again. Again.

You need to actually get back to the pre-Bubble idea of building Good Places To Live For A Real Town. Am I saying that you should build a rich-bitch enclave Tuscan themed mega-gated community like Ranch at the Canyons? Of course not. I'm also not saying you should build an unsellable nightmare like The Shire or Tuscany Pines. These are merely thinly-veiled STD's with a "philosophy" schlocked on.

It ain't easy. Except when you're in a Bubble. Then everyone and their dog can & will become a builder. But this is the backside of that, and frankly most developers will not survive. But when "Normal Times" do return, and they will in 5-10 years, remember the lesson of Ranch at the Canyons. Stick to a concept, execute without cutting corners, try to bake in some uniqueness.

To summarize regarding Ranch at the Canyons, I paraphrase Ferris Bueller:

It is so choice. If you have the means, I highly recommend picking one up.