Bend Godfather: "Doctrine of Bend Exceptionalism, Dead"

I think Bend reached a seminal point in it's collapse last week.

One of the Boss Hogg's of Bend, if not The Boss Hogg, declared Bend non-Exceptional.

Through the Looking Glass With John and Bill

In his Sunday column, Bulletin Editor John Costa talks to three of Bend’s biggest movers and shakers to find out why the Bend real estate market went belly-up and how to keep it from happening again. They offer a number of ideas. Some of them make sense; one is just crazy.

Developer Mike Hollern blames the Doctrine of Bend Exceptionalism – the peculiar notion that Bend is so special that it’s immune to outside economic forces. “We were overwhelmed by the amount of money pouring in,” Hollern told Costa. “We thought that we were different from the rest of the country. It turned out that we are not so much [different].”

This really is astounding. It's more or less a declaration that all we have done, all that we have thrown our energy, time, and vast, Vast quantities of money at all these years, is actually Harming Us.

The PR & Marketing Industrial Complex of Bend is Dead.

Now I don't want to say that I originated the idea that holding ourselves above all others was a bad Idea, but I'll admit that I mentioned it once or twice:

A Prayer for Bend

And speaking of bullshit pieces, thank you Baby Jeebus for the Bulletin piece basically printing that this place is a deluded bunch of drug-addicts, by printing this quote from Sandy Henderson, new head of the perennial money-losing BendFilm: 'You know what, there’s got to be Prozac or something in the water, because everybody is happy.’

It's called KOOL-AID Sandy, and it will soon render your mind whithered & useless...

Take off the Beer Goggles, and Start ta Chewin'

The Bulletin is a prime conspirator in Boss Hogg's little pump-n-dump scheme, but sadly it is too late for that, as the idiotic RiverWild "auction" proved.

NO ONE is buying the Kool-Aid anymore.

The ass-ugly imploding nature of Bend's RE market is clearly visible in high-relief for all to see, and no amount of bullshit shoveled into the locals gullets will change that.

They've done it a million times before to good effect, and the Bulletin still believes that we can "market our way out of anything", but obviously we cannot.

IT IS OVER.

Bends Mayor Arrested and Jailed For Embezzlement

"The softness in our real estate markets has worsened in the past quarter, putting increased pressure on cash flows of developers and builders of new homes and subdivisions," said Patricia L. Moss, CEO.

"While we are disappointed in reporting this action, we feel strongly that it is prudent to be assertive in recognizing the heightened risk in this segment of our loan portfolio."

She added, "Despite the immediate cost of these steps, Cascade remains a solidly profitable and well-capitalized institution serving some of the best growth markets in the nation.

I am confident that the long-term strength of our markets and our experienced management team will enable us to effectively navigate this downturn in the real estate cycle."

You see Moss, despite being slapped upside the head with Reality, is still is bobbing for apples in the Kool-Aid vat.

Extinct Species Found In Bend Oregon

Local banks, that only months ago declared themselves fit as a fiddle financially & almost completely IMMUNE from the collapse... LIED. They were firmly planted in some Kool-Aid fueled hallucination where they were exempt from reality.

The Cult of Bend

You hold an auction, that gets press coverage FAR & WIDE, you actually get a hard-core contingent of buyers to show up, they actually BID on these shithole, shoddy tubs of shit you call "homes", and you say they are trying to STEAL THEM?

This comes back to a point I've written about several times on here, despite it's unpopularity, the idea that Bend is a town that has been indoctrinated & brainwashed into thinking that WE ARE GOD'S CHOSEN PEOPLE.

Not the "Jew Thing", but that as a town we are better than "The Rest". We deserve better. Hell, we deserve THE BEST, and by God, we'll wait until our dying day to get it.

This is a mindset cultivated DAILY by ALL BEND MEDIA.

EVERYTHING IS BETTER IN BEND. ESPECIALLY THE PEOPLE. AND IF WE ARE GREAT, SO ARE OUR HOMES, AND THUSLY THEY CANNOT & WILL NOT GO DOWN IN PRICE. PERIOD.

Q1 2007 Numbers
There's also the acknowledgment that Bend is 75% overvalued... BUT, there's also floated the idea that What Applies To The Rest Of The Country Does Not Apply To Bend.

This is my Gods Chosen People thesis, an attitude reflected in Jonestown before they all killed themselves by pounding down a little Kool-Aid with an arsenic chaser.

So, yes, I think I may have mentioned it once or twice, that the worst thing that could happen to this place was this carefully cultivated & continuously reinforced idea that Bend Is Better. I, and others on this blog, have repeatedly said that Bend Is Not Better.

Bend is Not A Flint, MI. It's Not Cleveland. But neither is it Aspen.

Bend is a regular place. With regular people. Regular, if not low-paying, jobs. Regular.

But we were fed the Kool-Aid, and were made to think we were God's Chosen People, and what applied elsewhere, did not apply here.

And the Boss Hogg's, like Hollern & Smith, as well as all of Bend media did all in their power to perpetuate this myth, that we are better, that we deserve The Best.

And they accomplished this to fantastic effect. The Kool-Aid was drunk far & wide, and almost no one is immune.

So why is Hollern turning on his own?

He's turning on the very PR/Marketing Industrial Complex that he & other God Fathers of Bend helped establish. Why is he turning on COVA, Costa, the Bend Visitors Bureau, EDCO, Roger Lee, Alana Audette, and the vast hordes of minions that run this factory, all to the assumed benefit of him & others like him? Why?

Because, as I suggested 2 years ago, it is Killing Bend. It's killing this town. It's killing Hollern. It's killing his business. It's killing everything.

The Doctrine of Bend Exceptionalism is the worst man-made disaster that will ever afflict this town.

And Hollern is 100% responsible.

Well, that's not true. Costa is also responsible. The Incredible Hulce is responsible.

No. That's not true. The Incredible Hulce is actually retarded, and cannot be held accountable for her actions.

No, the blame lies with the vast hordes of Realtors, Hometown Newspaper Editors, RE developers, contractors, builder associations, and everyone else who lied to line their own pockets. And in this place, 2-3 years ago, that was almost everyone.

But Hollern has seen the light. Maybe he's seen this blog, who knows. But Yarrow & Ironhorse have to be some pretty unmistakable thorns in his side, that Exceptionalism does Not Sell Houses. Not in a downturn. Exceptionalism actually grinds the gears of industry to a halt.

Look at all the listings in Bend: Most are still Wildly Overpriced. Nothing is moving when credit goes away, and you then have to rely on local incomes to actually move product. And Bend has lousy incomes.

Bend IS Exceptional!

Look at these 2 graphs of national housing stats, and you see that Bend is exceptional: We are still Wildly Overvalued.

Nationally, prices have fallen back to 120 months of rent. I know that most Eastside Bend STD's are still well above 200X rent!

Nationally, prices have fallen to 3.2X median incomes. Even after the incredible 40+% plunge in local medians, homes in Bend are still almost 4X median family incomes, a level that was just barely hit nationally at the absolute top of the housing bubble.

In Bend, we'll probably fall back to 80-100X rent for homes. That means medians on the Eastside may go below $100K.

If we go back to 2.4X median family income, and incomes remain constant (a fairly dubious assumption), then Bend medians will fall to around $140K.

The End of an Era. The End of Exceptionalism.

To that end, here are the hard numbers:

National recession takes its toll locally

Some parts of the regional economy are stabilizing; others are not

By Jeff McDonald / The Bulletin
Published: February 22. 2009 4:00AM PST

Central Oregon’s economy took a severe hit from the national economic collapse in the fourth quarter of 2008, and as it moves forward there is no single remedy for recovery, according to a University of Oregon economist who authors a quarterly business index for The Bulletin.

The national recession hit Central Oregon in the form of skyrocketing unemployment claims, continued weakness in housing and depressed visitor activity, said Timothy Duy, adjunct professor of economics who authors the Central Oregon Business Index.

The index provides a seasonally adjusted look at the region’s economy based on nine economic variables, including Deschutes County building permits and Central Oregon housing units sold, Bend lodging tax revenue and unemployment claims.

The index dropped to 145, down 1.8 percent from the previous quarter and 7.2 percent from the same quarter in 2007, according to the report. It is the fifth consecutive quarter the index has declined.

The trajectory of the index, rather than its numeric value, is more important for understanding the health of the economy, Duy said.

Already, the last five quarters are showing a steeper decline than the recession at the beginning of the decade, he said.

The index weighs data from Central Oregon’s economy dating back to 1997. “Some things are stabilizing because they couldn’t get any worse,” Duy said.

“But I don’t think the employment outlook is stabilizing. I don’t think the forces of the national picture are stabilizing. I don’t think foreclosures are stabilizing.”

Tourism and the region’s employment were especially hard hit in the fourth quarter, bringing home to Central Oregon a national economic crisis that froze credit and tightened consumer spending.

Lodging revenues, adjusted for inflation, contracted to levels last seen in 2004, Duy said. Home sales appear to have stabilized at around the 200-homes-sold-per-month mark with 183 homes sold in Deschutes County on a monthly, seasonally adjusted basis during the quarter.

By comparison, there were roughly 250 monthly sales in the preboom era and a bubble high of 560 monthly sales in second and third quarter 2005, according to the report. Building permits remained depressed.

A monthly average of 56 permits were issued during the quarter, according to the data. “If you are an economy that is geared to build 600 homes per month and you are only building 50, you are essentially at zero,” Duy said.

On a brighter note, median days on the market declined significantly, likely a result of falling housing prices, he said.

“There is some evidence that home sales have stabilized at relatively low levels,” he said. “This suggests the possibility that some bottoming is occurring.

However, the reason that home sales are stabilizing is that prices are coming down to realistic levels.”

Also clouding Central Oregon’s economy was an increasingly bleak jobs picture.

Deschutes, Crook and Jefferson counties posted monthly unemployment rates that were among the state’s highest in the fourth quarter.

Deschutes, Jefferson and Crook counties reported 11.3 percent, 13.3 percent and 14 percent unemployment, respectively, in December, according to the Oregon Employment Department.

Unemployment claims for Deschutes County shot up to a seasonally adjusted average of 4,133 per month in the fourth quarter from 3,032 in the third quarter, according to Duy’s data.

Nonfarm payrolls, meanwhile, remained steady, which is unlikely to continue in the first quarter of 2009 due to the high number of jobless claims, Duy said.

Duy’s report was completed before revised data was released earlier this month by the Oregon Employment Department that showed a much gloomier picture of job growth in the region.

In previous reports, Deschutes County’s employment picture remained soft, with 0.9 percent job growth in 2008. But the revised data posted Feb. 12 on the agency’s Web site, www.qualityinfo.org, showed a 3.9 percent job loss in the county and monthly job losses dating back to December 2007, said Stephen Williams, the region’s economist and a Salem-based usability analyst for the Employment Department.

December 2007 marked the official start of the recession, according to the National Bureau of Economic Research.

Almost every industry in the county lost jobs in 2008, Williams said. “It shows the picture that people are feeling,” Williams said.

“This finally reflects the sense of what’s going on in the community.”

Construction was hardest hit in the county, losing 2,000 jobs in 2008.

The job losses brought the county’s construction employment down 25 percent, or down to 6,070 jobs, about equal with its 2004 numbers, Williams said.

Manufacturing lost 240, or 9.6 percent of its jobs, in 2008, while professional and business services lost 300 jobs, or 3.9 percent.

The only sectors to gain jobs were education and health services, leisure and hospitality, and government, Williams said.

The new data was “astonishing,” said Roger Lee, executive director of Economic Development for Central Oregon, which promotes business recruitment and retention.

He was skeptical about the state’s employment data, which changed from only one month of job declines in 2008 to every month showing job declines back to December 2007.

“When you go from modestly positive numbers to fairly severe ones, that’s a shock,” said Lee, who called the fourth-quarter economic collapse “historic” in its scope.

“It came down to the collapse of the credit markets, which trickled down locally to the aircraft industry,” he said, referring to layoffs locally at Cessna Aircraft Co. , which started to take effect in January.

“We had been projecting growth for 2009. But all of a sudden the credit crunch came along and Wall Street had its issues.

People did not feel nearly as wealthy as they once did.

Overall, the wealth of the nation has taken a … dive.”

Lee predicted a slow recovery, contingent upon a revival of the credit markets. “2009 is going to be largely a contractionary year,” he said. “But I think the region will start to emerge in 2010.”

Duy was not surprised by the revised data, saying job losses would be reflected in declining payrolls in the next index.

The region’s economy will stabilize with small increases of activity across multiple industries, he said. “There is no magic bullet for the region’s recovery.”

December was an “absolutely brutal month” for Central Oregon tourism, said Alana Audette, president and CEO of Central Oregon Visitors Association, which promotes tourism for the region.

Room-tax collections for the city of Bend and Deschutes County dropped 28.6 percent and 18.6 percent, respectively.

It was a wake-up call for the industry, which expected bad but got much worse, Audette said.

“We were doing OK and it’s not that we didn’t see it coming,” she said. “But December was the month where we learned that weather plays a tremendous role in our success as a visitor destination. The state was seeing a lot of layoffs, and combine that with brutal weather conditions … that made accessing our destination very difficult.”

Realtors are hopeful the region hit bottom in the fourth quarter.

2008 was a painful year for the region’s Realtors, builders and mortgage professionals and has resulted in a thinning of the ranks of real estate brokers, said Wendy Adkisson, principal broker with The Garner Group Realtors and Development LLC, in Bend.

Adkisson is on the Central Oregon Association of Realtors board.

The number of licensed Realtors in Central Oregon dropped from about 2,129 in January 2008 to 1,477 on Feb. 19, a 30.6 percent decline, according to Central Oregon Association of Realtors.

Those brokers who are still active are seeing sales pick up as prices decline.

The first quarter of 2009 is on pace to match the first quarter of 2008 in sales, Adkisson said. “We’re just excited to be even.”

Median sales prices, which were $396,000 in Bend in May 2007, have fallen to $227,500 in the first 1½ months of 2009, according to data from the Central Oregon Association of Realtors. That’s a decline of 42.5 percent.

“The truth is we have taken a huge hit from our highest price point,” she said. “I wouldn’t want to swear that we are at the bottom, but I think we’re at a trough.”

At least half the 2009 sales have either been short sales, in which a home is sold for less than the amount owed on it, or sales of bank-owned property, Adkisson said.

“We’re down inventory-wise because for the most part we’ve got sellers who are realistic about where they need to be if they want to sell,” she said.

“You can buy a nice house for $150,000. That may be a blessing for all of us.”

After the downturn, Central Oregon — and the rest of the country — will emerge looking very different, Duy said.

“There is a tendency for people to think that their boom was somehow unique, but the growth that occurred the last five to six years was fueled by credit intertwined with an asset bubble,” Duy said.

“We’re moving to the other side of that. You have to think what the world’s going to look like in the absence of that credit growth. Even when you get to the other side of this, you won’t have the factors that were responsible for this surge in consumer spending.”

Jeff McDonald can be reached at 541-383-0323 or at jmcdonald@bendbulletin.com.

The End of an Era

Pretty bleak.

But what's funny, is you can still smell a whiff of hope there. A whiff of, "We'll be back to bubble times again, if we just believe!"

Of course that's ludicrous. And Duy, for once, hit's the nail on the head in his final sentence: We're in uncharted waters here. Bend has Never, in modern history, faced an economic climate like it does now.

You can see why Hollern sees Bend Exceptionalism as the New Enemy. Exceptionalism doesn't sell houses. Exceptionalism doesn't sell anything. We're looking at the complete destruction & meltdown of this place, and The Doctrine of Bend Exceptionalism (ie Drinking The Kool Aid, We Are God's Chosen People) is the root primary cause.

RIP: The Doctrine of Bend Exceptionalism.

OK, some final ideas. I find myself over at Jesse Felders My Back Pages blog fairly often, and I think it's fair to say that he is Up on the stock market.

And maybe for good reason. For the First Time In Modern History, the DJIA is DOWN over 50% from it's peak. We came close in the 70's. But I don't think we made it to -50%.

Even some unquestioned dogma is starting to look shaky:

A Bigger Bargain Than Buffett Bought

One of the complaints people made about Warren Buffett's investments in financial companies last year was that regular investors weren't able to secure similar terms for their own portfolios.

In 2008, Buffett invested in companies like Goldman Sachs and General Electric receiving preferred stock that pays a dividend of 10% and warrants to purchase common stock at a set price. Well those people should take a second look. Right now, regular investors can secure terms even better than the Oracle of Omaha.

GE common stock currently trades at a 50% discount to the strike price on Buffett's warrants AND currently pays a dividend yield significantly greater than 10% (this may be reduced in the near future, however, to help maintain GE's AAA credit rating).

People are starting to question Buffett and whether he's lost his touch.

People are starting to question "Buy & Hold" as a philosophy.

This only happens after severe losses. And it has ALWAYS been a Great Harbinger of a Time To Buy.

And I largely agree with Jesse on a lot of points, and I actually do think that stocks can & will represent value someday.

But I'm starting to wonder just how long that will be. I think I'm a lot like Felder, in that I and much of the Vast Contrarian Stock Buying Contingent in this country, people that think they're smarter than the herd, just may have it wrong. Terribly Wrong.

I know I have. My IRA is a shriveling prune of investment crap at this point. And I bought well off the highs.

I think we're looking at our Black Swan moment. The time when we say It's Different, and unlike the past 20X when the herd all said this, this time it actually IS DIFFERENT.

Look at Japan. After topping out near 40K, the Nikkei today sits near 7,400, or down 81%.

Sometimes IT IS DIFFERENT. Sometimes Buy On The Dip is a TERRIBLE IDEA. Even when it's a historic dip. Even when it's a down 50% dip. Buying the Nikkei at 20K, 50% off the top, would have been buying a historic dip... and a TERRIBLE IDEA.

I'm wondering if my own predilection to buy in the DJIA 5,000's will be usher in yet another round of punishment. Because I agree with Felder: When compared to historical markers of value, the US Stock Market is plumbing historic lows.

But that's exactly the nature of Black Swan events: They blow away historic expectation. They're something you've never seen before.

And I've said it before: This will end worse than anyone thought possible, even me.

OK, I'll leave it on an Up Note, as always!

I believe in Exceptionalism!