The median price of a home in the San Francisco Bay Area tumbled 21.7 percent in May to the lowest level in nearly four years, a real estate research firm said Wednesday.

The annual decline drove the median price to $517,000 in the nine-county region, according to DataQuick Information Systems.

The median price was $660,000 in May 2007 and $510,000 in September 2004.

Last month's drop was fueled by a surge in sales of heavily discounted foreclosed homes, a trend that appears to be building across many inland areas of the state.

Earlier this week, DataQuick reported the median home price in May plunged 26.7 percent to $370,000 in a six-county region of Southern California.

Despite increased sales of foreclosed homes, overall home sales in the San Francisco Bay Area notched their slowest pace for any May in DataQuick records, which go back to 1988.

Some 6,216 new and resale homes were sold last month, down 23.1 percent from May 2007, when 8,080 homes were sold, the firm said.

Sales declined 1.5 percent last month from 6,310 in April. The median price remained flat during the same period.

Some 25.6 percent of the homes resold last month had been foreclosed on sometime in the previous 12 months, up from only 3.3 percent in May last year, the firm said.

In Solano County, where the median home price sank 31 percent to $300,000 compared with the year-ago period, more than half of all resold homes were foreclosed properties.

In Contra Costa County, which saw its median home price tumble by nearly 34 percent to $390,500 compared with last year, foreclosed homes accounted for 43.3 percent of all homes resold.

In contrast, foreclosures made up only 5.8 percent of resold homes in San Francisco County, where the median price slipped 5.4 percent to $790,000 since May 2007.

Six Southern California counties experienced a similar trend. Nearly 38 percent of all the homes sold in the region last month were in foreclosure at some point during the past 12 months.

So San Fran proper seems to be holding up relatively well, but I do not expect this to last. Yup, I know, limited space, international demand, impenetrable, etc, etc. The surrounding disaster will breach the San Fran walls. Believe it.

Similarly, it was only 1 short year ago that money center banks and the Wall St investment houses would escape the credit crunch relatively unscathed. Here's Citicorp, the 800lb gorilla of financial services for the last 25 years:

Citicorp, 5 yr

It's DAMN EASY to sit here, look out the side window, and make "predictions". Even "predicting" something like Lehman or Merrill going down at this point is not that much of a stretch.

I guess I don't give a fuck if people agree with me or not on the idea that San Fran is going down hard, but I do find it interesting that EVERYDAY this thing seems to reveal a new level of financial rot in this country. But they still believe that certain small sectors are immune.

If you're going from past experience, then you're being led astray. San Fran is THE White Hot Center of long-term collapse in the wildly over-leveraged financial system of this country. Don't believe it if you don't want to.

Speaking of collapsing mega-bubbles, we saw Cracker Ass Cracker Broke (CACB) slump to new multi-year lows, hitting the $7's.

CACB, 10 year

You can see that at current prices, CACB has had a net gain of a buck or 2 over the last decade. Incredibly, MossCo, like a cancerous goiter, remains.

The regional banks continue to be the hated pariahs of the collapsing housing market.

Fallout From Bad Loans Rocks Regional Banks

In Ohio, the Panic of 1907 drove the Fifth National Bank into the arms of the Third National Bank, creating the singularly named Fifth Third Bank of Cincinnati.

But today Fifth Third and other regional banks across the nation are being shaken to the core by a 21st century financial crisis. For many of them, things are going from bad to worse.

Home mortgages and other loans that the banks made in good times are souring so fast that many of the lenders are scrambling to prop themselves up. If the pain worsens — and many analysts say it will — some of these banks, like Fifth Third’s predecessors, may eventually seek out suitors, most likely large national rivals.

For now, however, no one seems to want the regional banks. Stock market investors are deserting them en masse. On Wednesday, Fifth Third’s share price plunged 27 percent to $9.26, its lowest level in more than a decade, after the bank said it would cut its dividend and seek to raise $2 billion. Other financial stocks, particularly regional banks’ shares, also tumbled. The Standard & Poor’s 500 Regional Banks Index sank 6.8 percent.

“Everybody is trying to figure out where the bottom is,” said Jennifer Thompson, a regional bank analyst for Portales Partners in New York. “Every time a bank reports another capital raise or reports that things are worse than they anticipated, there is another round of selling.”

But Wednesday was just one more bad day in what has been a horrible year for small and midsize banks. Their descent in the stock market has been remorseless, reflecting the economic pain in their own backyards. Weakening housing and construction markets in regions like the Midwest, Southeast and Southwest have hit lenders in those areas hard.

For the banks’ shareholders, the numbers tell a sad story: Wednesday’s decline brought the loss for the S.& P. bank index to 39.3 percent so far this year. Fifth Third’s odd name almost seems like a bad joke. Fifth Third has lost two-thirds of its value this year. Shares of two other banks based in Ohio, the National City Corporation, of Cleveland, and Huntington Bancshares, of Columbus, have suffered similar declines.

Banks based in the Southeast are hurting, too. The Regions Financial Corporation, the biggest bank in Alabama, has lost half its value. Standard & Poor’s predicted this week that Regions would cut its dividend to conserve its capital in the face of rising losses on real estate loans. The share price of SunTrust Banks, which operates across the Southeast, has fallen almost 41 percent.

Small and midsize lenders are in far less danger than they were during the 1980s and early 1990s, when about 1,600 federally insured institutions failed during a savings and loan crisis. But the breadth and depth of the current troubles have caught bank executives by surprise. Federal regulators are particularly concerned about the exposure of smaller banks to the commercial real estate market, which has softened in some parts of the country.

But another worry is that raising money will become increasingly costly for banks that need capital. In a report issued this week, analysts at Goldman Sachs said banks might need as much as $65 billion on top of the $120 billion they have already raised.

But so far the vast majority of investors who bought into financial companies in the hope that the industry was out of the woods have lost, and lost big. As a result, many investors are reluctant to sink more money into regional banks, fearing their investments will be diluted if the banks sell even more stock. While many regional banks are trading far below their book values — at $4.83 on Wednesday, National City fetched just a fifth of its book value per share — many people are simply afraid to buy.

“You are in this death spiral of dilution,” said David Ellison, the chief investment officer of FBR Funds, a mutual fund company based in Arlington, Va. “It’s this toxic math.”

The need for new financing highlights the trouble many banks are having in selling assets like mortgages and home equity loans. They are trying to offload these assets to reduce amount of capital they are required to hold.

But more than anything, the problems confronting regional banks underscore the extent to which the housing crisis has spread throughout the country. In the Southeast, Regions and SunTrust are reeling from loosely underwritten mortgages now that real estate values are plummeting in the region.

In the West, Washington Mutual, the nation’s largest savings and loan, is being hurt by loans that it made to borrowers with shaky credit. Fremont General, the parent of a big subprime lender and a bank in California, filed for bankruptcy protection on Wednesday. Customers’ accounts, insured by the Federal Deposit Insurance Corporation, are safe.

A handful of tiny banks have failed in small towns in Arkansas, Minnesota and Missouri. Rust Belt banks like National City and Fifth Third, in the meantime, have been stung by losses not only on their home turf but also in Florida, where they expanded in recent years. Initially, the push into Florida helped the banks increase growth rates as their hometown economies worsened. Now, these lenders are challenged on two fronts.

Bankers, who tried to assign innings to the credit crisis only a few months ago, are now resigned to participating in an extra-inning game. Several analysts now think that industry losses will not peak until next year.

“We have gone from shock and awe to blocking and tackling,” Mr. Ellison said.

And just to show you how the herd-mentality dominates Wall St; SunTrust Banks affirmed their dividend payout yesterday. Here's a graph of yesterdays trading action in the stock & I'll leave determining the timing of the news release as an exercise for the reader:

STI - 1 day. When did SunTrust Bank assure grama of dividend payment?

So SunTrust is an Atlanta based regional, but when they announced that they will be able to hang on to their 8.3% div yield for a few more months, well Wall St rallied the whole sector. Not just the Dukes of Hazard stuff in the SE, but all regionals, including our beloved CACB, got onboard the rally train.

This should tell you that many of these fund managers are driven almost completely by instinct.

Wow, if things are OK in Atlanta, they MUST BE OK in Florida! And if they're OK in Florida, then they're OK in AZ... and hell they gotta be OK in Cali. And even that Bend OR place my cousin told me about. Hey, maybe this credit crunch is actually coming to a close because some hick-ass regional down in the swamps is going to make one more liquidity-constricting payment to a bunch of mutual funds.

To date (ie, before the credit crunch), I have largely been mystified by the prescience of financial market participants. It's like they have crystal balls. Ahem. But something about this current implosion just seems to elude them. They will rally a regional in Central Oregon because of the cracker-ass decision of some nuts in Atlanta. Again, I don't get it.

And while the DJIA continues to fall, it isn't really suffering from massive collapse:

DJIA, 1 year

We're sitting near the lows of the year, down a little over 17% from the years highs. Financials, autos, airlines, home building, and just about anything involving leverage or having a gas tank getting killed.

But still, it doesn't really seem all that bad for the stock market. Is it exports keeping things alive? The dollar, after all, is trading like the peso. Buying our exports, and hell, our real assets, like bonds, stocks, and RE is cheap for just about everyone else in the World.

But things are going horribly wrong:

When will the market face reality?

Oil prices are soaring, inflation is raging, a recession is taking hold, and Wall Street continues to pretend the worst is over. But these problems won't just disappear.

By Bill Fleckenstein

Recently, I remarked that the stock market action has been echoing a familiar theme, whereby nothing seems to matter except the action itself. Some days, near euphoria on the part of bulls has trumped negative macro/corporate news and, more importantly, an economy that struggles as a result of the burst credit/housing bubble.

For a sense of that fantastical thinking, look no further than the recent spirited action in tech stocks. Their upside performance, as I have noted often, suggests a resurgence of the all-will-be-well mind-set.

Or, consider how all dips in oil inspire spikes in equities generically. Last Tuesday, as oil dropped a dollar to $134 a barrel, one would have thought -- judging by folks' giddiness for buying stocks -- that oil was closer to a six-month low than to an all-time high.

Eventually, though, reality will hit the stock market hard, just as it has hit the real- estate market, after much denial. When that happens, the market will head lower -- just how much lower is impossible to predict but certainly below the lows for the current cycle set in March.

Paper-trained bulls

Perhaps part of the strength in equities stemmed from folks' belief that the Federal Reserve will not tighten interest rates after all. (In last week's column, I noted that the chance of higher rates was essentially zero.)

No fewer than four newspapers ran stories midweek to the effect that the Fed is unlikely to tighten at its meeting this week -- unless, to quote The Wall Street Journal (subscription required), "the inflation outlook deteriorates considerably."

Of course, when you look not at inflation but the "spun" version of inflation that's championed by the Fed, you can always find a reason to avoid raising rates. It continues to boggle my mind how anyone can think the Fed is serious about fighting inflation. The central bank is trapped -- unwilling to raise rates even as inflation ratchets higher-- because it (rightly) fears what higher rates would do to a weak economy.

Likewise, I find it stunning that anyone would take any prognostication by Alan Greenspan or Ben Bernanke, on any subject, as worthy of consideration, given that the past and present Fed chiefs, respectively, apparently understand nothing about what has been the engine of the economy for more than a decade -- that is, speculation.

Muzzle the (never-wuzza) maestro

Just last week, Greenspan could again be heard shooting off his mouth. He now sees the reduced possibility "of a deep recession" and said, regarding the mortgage crisis, that "the worst was over or soon would be" (as paraphrased by Bloomberg).

What really made me burst out laughing was this headline (again on Bloomberg): "Risk managers should learn from market turmoil." What's so ironic is that the man who created the turmoil is the one person who has never seemed to learn anything.

Meanwhile, one can only wonder if any Fed heads (they, of the inflation-ex-energy-and-food camp) have gassed up their cars in the past several months. Of course, the bullish contingent still wants to believe that somehow the Fed will make inflation go away without raising interest rates and that somehow oil will trade lower -- thereby sustaining the fantasy that our economy will have a Goldilocks outcome.

Recently, a friend shared a noteworthy statistic: An oil exchange-traded fund is among the most heavily shorted ETFs in existence. In the first five months of this year, as oil rose 33%, the short interest soared 140%. Parenthetically, I might point out that another heavily shorted ETF happens to be SPDR Gold Shares (GLD, news, msgs).

I agree with Fleckenstein here. I think this country is going to undergo a fundamental transformation, where we "look" more like the rest of the World: Look at just about any BBC broadcast & you see about half the people on little scooters, not cars, and sure as hell NO SUV's. Little dinky-ass houses. A level of consumerism that is just quite a bit lower.

Everyday, I hear about these supposed "intelligent" & "informed" high-level financial types calling "The End" of this little financial hiccup. Huh? These Ivory Tower types are clearly out of touch. This thing is nowhere near over.

Why Real Estate Market Is Nowhere Near a Bottom: Caroline Baum

Commentary by Caroline Baum

June 18 (Bloomberg) -- Every time a housing statistic emits a faint heartbeat -- last week's 6.3 percent increase in the April pending home sales index, for example -- there's a flurry of pronouncements that the residential real estate market has bottomed.

Hope springs eternal. Housing has been down so long it looks like up, especially with the graph turned upside down.

New and existing home sales peaked in July and September of 2005, respectively. It took a while for homebuilders to catch the drift: Starts didn't top out until January 2006, leaving a huge inventory of unsold homes in their wake.

Single-family starts, which are the most sensitive to changes in interest rates, are down 63 percent from the January 2006 peak, easily topping the 38 percent peak-to-trough decline in 1973-1975 and 57 percent 1984-1991 dive, and vying for first place with the 65 percent plunge in 1977-1981.

No wonder homebuilders are glum. In a departure from normal practices, the National Association of Homebuilders elected to release its monthly builder survey to the media via conference call on Monday. I received so many advance e-mail alerts I was starting to wonder if the index had sunk to zero in June, and the NAHB wanted to soften the blow.

The quantitative results weren't that bad: The housing market index fell 1 point to 18, matching the all-time low of December 2007.

The qualitative context was awful. David Seiders, NAHB chief economist, called the ``persistence of the low level'' of the HMI, a measure of housing demand, ``pretty troublesome.''

Price Option

The index ``has been in a tight range for a 10-month period,'' he said, ``unlike the 1990s, when there was a quick rebound. None (of the news) is encouraging at this point.''

As downbeat as Seiders was on the June survey results, the builder responses preceded ``the run-up in interest rates,'' he said. ``I haven't factored that into the outlook yet. The risks are piling up to the downside.''

While homebuilders are pressuring Congress to enact a tax credit for first-time buyers, they are resisting the one thing that requires no legislative action to spark buyer demand, according to Thomas Lawler, founder of Lawler Economic and Housing Consultants in Leesburg, Virginia: Cutting prices. ``Builders are reluctant to do that'' to compete with the growing volume of distressed sales of properties in various stages of foreclosure, he said.

Forget the Granite

In Southern California, for example, one of the areas where the bubble started early and ended hard, median home prices are down 27 percent in the past year, Lawler said.

``If you look at observed transactions on distressed sales, you could make a case that we are closer to a bottom because prices have plunged so rapidly,'' he said. ``But that's no solace to non-distressed prices.''

In Florida, another epicenter of the boom-bust in real estate, ``sales are 20 to 30 percent below year-ago levels, but prices haven't moved very much,'' Lawler said.

Builders have been reluctant to slash home prices for fear of alienating previous customers and encouraging current buyers to wriggle out of their contracts.

``Once clearing prices are way down, you can't attract buyers with granite countertops and gold trim,'' Lawler said.

Foreclosures rose to a record 2.47 percent in the first quarter, according to the Mortgage Bankers Association.

Future Inventory

Using the MBA and other data, Lawler calculates that there are 1.34 million one-to-four family first-lien mortgages in the foreclosure process, which amounts to 27 percent of the inventory of existing unsold homes. A year ago, foreclosures represented about 18 percent of the unsold inventory, he said.

As scary as that number sounds, so far it's just on paper. It takes about a year for today's foreclosures to be dumped on the market, adding to the already-bloated inventory of unsold homes, according to Michael Carliner, a former NAHB economist and now an independent housing economist in Potomac, Maryland.

The foreclosure process varies from state to state and in the length of time it takes from the first default notice to the assumption of the title of the property by the bank.

A few relationships are constant. New home sales lead housing starts. It is starts (residential construction) that contribute to gross domestic product. Housing's drag on growth won't lift until builders whittle away their backlog. Lower prices seem to be the quickest means to that end. (At lower prices, the quantity demanded increases.)

``We are unlikely to see a sustained increase in nationwide new home sales until builders are willing to cut prices to match the plunge in the prices of existing homes in seriously distressed areas,'' Lawler said.

If and when they do, you might not have to turn the home sales graph upside down to see the improvement.

(Caroline Baum, author of ``Just What I Said,'' is a Bloomberg News columnist. The opinions expressed are her own.)

To contact the writer of this column: Caroline Baum in New York at

Finally, if you missed it, the perp walks have begun in the mortgage mess. Proving Yet Again, that the U.S. Government Regulatory System is totally powerless to prevent fraud, only to punish those involved when it is too late.

"Operation Malicious Mortgage" nets three in Portland area

Posted by bsherman June 19, 2008 11:43AM

More than 400 real estate industry players have been indicted since March -- including dozens over the last two days -- in a Justice Department crackdown on incidents of mortgage fraud that have contributed to the country's housing crisis.

The FBI put the losses to homeowners and other borrowers who were victims in the schemes at over $1 billion.

"Mortgage fraud and related securities fraud pose a significant threat to our economy, to the stability of our nation's housing market and to the peace of mind to millions of Americans," Deputy Attorney General Mark Filip said in a statement today.

In the Portland area, prosecutors highlighted three cases of alleged mortgage fraud, saying the defendants put together 200 or more questionable mortgage deals during the boom years.

A federal grand jury yesterday returned a 15-count indictment against Marty Folwick, of Portland. Folwick, 50, was charged with mail fraud, bank fraud and money laundering.

On the same day, prosecutors charged Lee Howlett, 45, also of Portland, with conspiracy to commit wire fraud, aggravated identify theft and money laundering.

And on May 27, prosecutors charged Jeremy Richardson, 31, of Ridgefield, Wash., with one count of wire fraud.

The three cases have much in common. All three of the defendants allegedly engineered a series of fraudulent mortgage deals with the help of straw buyers. They allegedly falsified loan applications to induce lenders to approve mortgage loans. Prosecutors claim some used bogus appraisals to justify higher loan amounts then the house was actually selling for and would then pocket the difference between the house price and loan amount.

Some also took kickbacks on each deal, prosecutors claim.

Folwick worked for Lighthouse Financial Group, a Vancouver, Wash. mortgage broker. He also ran his own company, MG Financial.

Prosecutors allege that Folwick took $180,000 in kickbacks for the five mortgage deals detailed in his indictment. Officials in the U.S. attorneys office in Portland are continuing to investigate Folwick and Lighthouse in the belief that he was involved in other questionable deals.

In a 2007 civil lawsuit, a lender claimed Folwick was involved in as many as 70 fraudulent mortgage deals.

Richardson alleged found his buyers on Craig's List. It is believed that Richardson did 100 or more mortgage deals. He allegedly used his clients' down payment money for various personal and business expenses.

Howlett worked for a company called Taylor Made Realty. His wife, Lisa Howlett, owned a mortgage company called Taylor Made Mortgage. It surrendered its license to the state in January 2007.

Since the beginning of March, 406 people have been arrested coast-to-coast in the sting dubbed "Operation Malicious Mortgage." Sixty people were arrested yesterday.

In a separate sweep, two former Bear Stearns managers in New York were indicted today, becoming the first executives to face criminal charges related to the collapse of the subprime mortgage market.

Nationwide, reports of mortgage fraud have soared over the past year as the subprime mortgage market collapsed and defaults and foreclosures soared.

-- Jeff Manning and Gordon Oliver;

And some believe that Cali, and discussions of its market are irrelevant, but that just reveals an ignorance about the ties between there & here. Things are going horribly wrong everywhere, but CA and, by extension, Central Oregon, will be decimated for Many Years to come:
State records biggest jump in unemployment

Saturday, June 21, 2008

(06-20) 15:25 PDT SAN FRANCISCO -- California's unemployment rate rocketed up by 0.6 percentage points in May - the largest one-month increase since the state began keeping records in 1976 - as the fallout from high energy prices and the depressed housing market rippled through the state's economy.

The state's jobless rate was a seasonally adjusted 6.8 percent, up from 6.2 percent in April, the California Employment Development Department reported Friday. That's the highest rate since November 2003, when California was recovering from recession.

Meanwhile, the total number of jobs in the state outside the farm sector declined by 10,900 in May, the third month in a row that payrolls shrank. Construction accounted for most of those losses, shedding 9,600 jobs during the month.

Economists cautioned that California's exploding unemployment rate may have been a statistical fluke that exaggerated the extent of the damage to the state's labor market.

The labor force showed unusual growth during the month, possibly because of large numbers of graduates leaving school and looking for work, they said. That could have skewed the jobless rate because the new workers would have been classified as unemployed until they got hired.

Still, there's little question that the job market has been contracting and that the state is on the edge of recession, if not actually in one, experts said.

"Some of (the jump in unemployment) was not real, but a fair amount of it was real," said Nancy Sidhu, senior economist with the Los Angeles County Economic Development Corp. "I am in the camp of people who say we are not in a recession yet, but we might be headed into one."

Payrolls in the state were down 49,600 in May from their level the year before, with the losses concentrated in construction, finance and manufacturing. That's a relatively small erosion of jobs compared with previous downturns.

"We haven't seen job growth fall off a cliff," said Ryan Ratcliff, an economist with the UCLA Anderson Forecast, which issued a report this week concluding that California's economy is weak, but not in recession.

In the Bay Area, which has been bolstered by technology and tourism, the job picture was brighter than in other areas of the state. But jobless rates rose throughout the region.

In the San Francisco metropolitan area, which includes Marin and San Mateo counties, unemployment was 4.6 percent in May, up from 4.2 percent the month before. In the San Jose area, the rate rose to 5.6 percent from 5.2 percent. And in the Oakland area, including Contra Costa and Alameda counties, unemployment was 5.7 percent, up from 5.3 percent.

"The Bay Area still is the best part of the California economy," said Howard Roth, principal economist for the California Finance Department. "But the bloom is off the rose."

Berkeley resident Phil Catalfo, 57, has been looking for work as an editor for almost a year, armed with a resume that shows experience as a top manager at such publications as Yoga Journal and Acoustic Guitar magazine. He has applied for several dozen jobs, but gotten few responses. One position that looked promising ended up getting filled internally.

"Companies I can tell are proceeding very cautiously," he said.

When Catalfo was looking for work three years ago, he was swamped with freelance jobs. This time, assignments are trickling in slowly.

"The air is definitely different," he said.

May's big jump in California unemployment was expected after the release of data two weeks ago that showed the national jobless rate leapt to 5.5 percent, up half a percentage point from April. Besides California, 17 other states had jobless-rate increases of 0.6 percent or more for the month, including five that had increases of a full percentage point or more.

Nationwide, only four states had jobless rates higher than California's, led by Michigan, where an ailing auto industry has pushed unemployment to 8.5 percent.

After release of the May employment report, Gov. Arnold Schwarzenegger issued a statement calling on the Legislature to move forward on bond measures to fund infrastructure projects, putting more construction workers in jobs.

"An economic slowdown caused in part by our housing crisis is clearly still affecting California," he said.

So far, most of the job market's distress has stemmed directly from the housing crash. Construction and finance, which includes mortgage, real estate and title companies, together lost 123,000 jobs over the past 12 months. Sectors such as government, education, health and professional services grew substantially during the year.

Now there are worries that the weakness is spreading as high food and gas prices put a crimp on consumer spending. Jobs in retail trade have been disappearing for four months and are more than 15,000 below their level of a year ago, according to Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto.

"The job outlook ranges from flat to lower job levels a year from now, depending on the consumer," Levy wrote in an analysis.


California's unemployment rate in May.


California's unemployment rate in April.


San Francisco metro area's jobless rate in May.


San Francisco metro area's jobless rate in April.


Number of lost jobs statewide in May (excluding farms).


Number of lost construction jobs statewide in May.


Michigan's rate of unemployment. Only four states had rates higher than California's.

E-mail Sam Zuckerman at

My Watchword: Change. This country is going to be transformed by this "thing". The Great De-Leverging, Credit Crunch, Housing Debacle, whatever you wanna call it. It's a Seminal Event in the history of this country, maybe The Defining Event of Our Lives.

Expect The Unexpected. What's been true for 100 years, is all of a sudden Not True Anymore.

I wanted to end with a snippet of how hick-ass STUPID some of our local media really is:

Bend Housing Market Second Highest in U.S.Jun 20, 2008

A new study released by a national real estate analyst group finds that Bend’s housing market was the second most overvalued market in the U.S., behind only Atlantic City, New Jersey, out of 330 cities studied and that as a whole the Pacific Northwest is “precariously overvalued and likely to be the next shoe to drop."

The housing valuation analysis, released by Massachusetts-based Global Insight, says the average home price in Bend runs about $290,500, which is overvalued by 49.5 percent, a slight decrease from first quarter 2007 when median home prices reached $319,900 and were overvalued by 65.7 percent, the study says.

In other words, the study claims a house in Awbrey Butte appraised at $500,000 is really worth only $250,000.

At least one local real estate observer says that is ridiculous.

Bill Robie, director of government affairs for the Central Oregon Association of Realtors, said the results of the study, and others like it that are released from time to time, are misleading because the methodology leaves out huge chunks of information that need to be considered when determining market prices – land permit fees, system development charges, the time it takes to build and the price of the land where the house will be built, to name a few.

“These kinds of statistics have come out before and they do not take into consideration the many local factors that contribute to Bend’s housing market prices,” Robie said.

Global Insight’s approach to determining the value of homes in Bend, and in every metro area covered by the study, considered the price of the house, interest rates, household incomes, population densities and any historical premiums or discounts exhibited over time by the city.

Global Insight examined those factors, accounting for 78 percent of all existing housing units in America and 93 percent of all related real estate value, to determine what housing prices should be, in this statistical sense, the study says.

Only eight metro areas, including Bend, were considered overvalued during first quarter 2008, down from a peak of 53 in 2006. Incidentally, California, Michigan and Florida continue to post the most severe losses, accounting for 45 of the 50 worst-performing metro areas, said Jeannine Cataldi, head of real estate services for Global Insight.

“The appearance of Northwestern states among the worst price performances vindicates our model performance, as we noted in previous reports that the Northwest seemed precariously overvalued,” Cataldi said.

A local news story that came out a few months ago highlighting a similar report used a similar index, but the problem with those studies is that the index used is inappropriate, Robie said.

“I don’t know the elements, or how they were put together, but I can’t imagine they apply directly to Central Oregon,” he said.

In fact, the methodology used by Global Insight does not apply directly to the Central Oregon market, Cataldi said. Rather, the results are meant to provide more of a general look at existing housing by examining housing density, income and mortgages in these 330 metro areas, among other factors.

“When you’re talking about the methodology of a study that looks at hundreds of metropolitan areas, getting into the specifics of each local area would take a long, long time,” Cataldi said. “Land-permit fees, the time it takes to build and other similar factors wouldn’t be taken into consideration because we are looking at existing home sales, not new construction.”

Bend traditionally has a lot of second home buyers and wealthy retirees in the market who can afford more expensive homes, which drives up the median price as well, and those factors are not figured into broad real estate studies either, Robie said.

And then there is the 800-pound gorilla in Bend’s real estate market – the city’s urban growth boundary, Robie said.

“Because we constrained the supply of available land, local prices can be very high,” Robie said. “There is very little land left to build on, which is why the city has been looking at doing an urban growth boundary expansion. From our perspective, in order to have any shot of mitigating a land price increase, we need to increase the UGB.”

For the past few months, the median price of homes for sale in Bend was above $300,000. It dipped down to $270,000 in April and then increased in May to $303,000, according to statistics released by the Central Oregon Association of Realtors.

In Redmond, the median sale price of a home increased from $225,000 in April to $245,000 in May. Sales in Redmond remained flat for most of the year, hovering somewhere between 30 to 40 sales per month and peaking at 50 in April.

In Crook County, median first quarter 2008 sale prices reached $207,000, up from $173,000 during the fourth quarter of 2007 and the number of sales declined from 45 to 20, respectively.

In related news, another report released on June 5 by the Mortgage Bankers Association, a Washington D.C.-based organization representing the real estate finance industry through the promotion of fair and ethical lending practice, finds that Oregon had the nation's sixth lowest rate of delinquent loans and the sixth lowest foreclosure rate during first quarter 2008.

Oregonians have about 635,000 outstanding mortgages, according to the report, and about 3 percent of those loans (19,000) are 30 days or more past due. Close to 6,000 Oregon loans, just less than 1 percent of all advances, are in some state of foreclosure.

The rate of delinquent mortgages in Oregon reached its lowest point in 1982 at 6.2 percent, which remains the highest recorded rate in 29 years. During the dot-com and telecom implosion of 2000 through 2001, the delinquency rate reached 3.7 percent.

State foreclosures were 2.2 percent in 1985, the highest on record, compared to 1.3 percent in 2002 just after the technology sector bust.

People holding adjustable rate, subprime mortgages, which are typically awarded to individuals with low credit scores or negative credit histories, remain worse off today than other borrowers. The MBA report finds that of the 32,000 subprime adjustable rate mortgages outstanding in Oregon, about 14.5 percent of them are delinquent.

I know. It almost gets lost in the obligatory Realtor-fueled insanity of Central Oregon Is Different (Completey Debunked Here), but the completely ass-backwards mathematics borders on the comical.

Pamela "The Incredible Hulce" Andrews, a math lesson: When a $500K home is over-valued by 49.5%, it is NOT "really worth only $250,000". THAT would be 100% over-valued. A $500K overvalued by 49.5% is "really worth" about $334K.

Bend is doomed if, for no other reason, than we have dumbfucks like Hulce with their finger on The Button.

And I'd appreciate it if you'd NOT bring up my litany of past errors. Thanks.

I'll end it (again) with some Before & After:

Before: A company with decades of ever-increasing profits. This one looks like a rocket ride to the moon! Can it be stopped by some puny housing bubble bursting? What about the future can you divine from this chart?
Mystery company seems unstoppable!
This blog started right there at Jan 2007. How bad could my timing be? AHH!

Flash forward to today! Mystery Company is Ambac, an insurance company basically that pays when investments go South on investors. Hows it gone for the past year?
ABK now. A small reduction in market value.

Yeah, from the mid $90's just last year, Ambac has suffered a small haircut down to $2. This company had a market value of around $27 billion last year. Now it's a penny stock, worth almost as little as our humble CACB!

Here's a little player in the mortgage market. Had a $44 billion market cap. Guess who?