Tuesday, April 28, 2009

Bend Oregon: 300 Days of Bullshit Every Year

OK, I'll do a little knick-knack post placeholder to break up the monotony.

1) As I live & fucking breath, it is snowing outside this morning.

April 28, and it's snowing.

OK, I don't want to hear this 300 Days Of Bullshit anymore. Central Oregon has some of the weirdest fucking weather in the World.

When I first got here, I remember getting snowed on near the end of May, on a sunny (but pretty cold) day.

300 days of sunshine a year, is 100% Grade AAA Bullshit.

2) 17% Unemployment.

OK, this motherfucker is taking on a Kevin Bacon ONE degree of separation. Everyone KNOWS someone who is unemployed.

UNEMPLOYED and In The Shit. I know people. I know almost as many who are "employed" but making NOTHING. Not nearly enough to meet their daily expenses.

We have 17% unemployment. And probably 25-30% EXTREME UNDER-EMPLOYMENT.

You can read about how unemployment is hitting home values at the Portland Housing Blog.

3) Yarrow down 75%.

In today's Bully you can see there is a piece titled, "Yarrow now offers ‘twice the land, half the price’".

Follow the link, and you'll see that Yarrow is essentially succumbing to the desert. And since they are MORE THAN cutting price in half, and doubling lots sizes, this approaches something like 80% OFF.

But you will see, this will only move a little property. To Madras locals. And a couple of prison guards new to the area.

No one moves to a place with 20% unemployment, no matter how cheap the housing. It's called "The Burns Manifesto".

4) Case Schiller is out today.

The big 10 & 20 city composites are off about 19% YoY.

I'm starting to think that my Dead Ass Hit Rock Bottom Date estimate of July 2010 might be early. This thing might go to 2011... or 2012.

Which means Bend will stretch out to 2014 till we crater at the nadir.

At sub $100K medians? It is looking more and more possible.

5) High End Homes Crashing in Bend.

My favorite "If I Had a Million Dollars" Bend neighborhoods is Deschutes River Ranch. Very nice, big fancy, schmancy homes overlooking a hay operation. Provincial and snooty as hell.

But click the above link, and go to bendeconomy.informe.com (ANON PROXY ONLY!), and you'll see that DRR has utterly imploded.

The above home haas crashed from $2.4MM to $1.15MM, or just over $200/sf.

DRR was holding the line at around $500/sf all through the implosion, and seemed pretty much immune. I saw Tetherow collapse, and still DRR held.

No more.

6) RE "Economist" gets ass kicked by Oregonian.

In this town of Kool-Aid Fueled "news" reporting, once in awhile it's nice to see a paper call out BULLSHIT on some dumbfuck Pie-In-The-iSky RE tout, who has YET AGAIN, called for the RE bottom:

Real estate life spotty for many in Oregon
by Colin Miner, Special to the Oregonian Friday April 24, 2009, 6:03 AM

At the association's December conference on the market outlook for 2009, Jerry Johnson, a real estate market and regional economic development consultant, predicted that "we have found the bottom" and that the "fundamentals are not likely to get worse."

The next month, things did get worse. According to the Regional Multiple Listing Service, January 2009 saw a 32.5 percent drop in closed sales from the year before. Pending sales dropped 26.1 percent, and the average sale price fell 13.3 percent.

Good one Oregonian. Take a page, Bully.

OK, I gotta go to work. I'll try to MAN UP and do an actual post this Sunday.
"I'm so lonely for a Real Newpaper to tell me about Bend RE!"

Sunday, April 19, 2009

Bend: The Mass Exodus Has Begun.

Downtown seems to have a grip on Bendites. Everyone thinks that if you have a spot downtown, you can't fail. Despite all evidence to the contrary, despite a sea of failures.

See who's moving in

“It is exactly the same food, same menu and the same staff — it’s just a new location,” said Cheri Helt, co-owner of Zydeco. “We are excited to be a part of downtown.”

“Visitors are absolutely going to come,” La Placa said. “The new downtown restaurants are very promising and positive news for our tourism industry and locals.”

The new restaurants could re-energize downtown, said Carin Cameron, owner of Cork, a fine-dining restaurant on Oregon Avenue that opened in 2001.

Always someone who believes They Are Special. "I'll make it, because I am better than the rest."

Sheeps to slaughter. Thanks Costa. Mission accomplished.

I have to mention again, one of the Bubbleliscious Busts of the week: Mountain Comfort.

Any idiot should have seen this coming. But as I am often told, I am not any idiot.

Mountain Comfort was one of those things that just had no exposure to any other time, except the Best of Times. They were never exposed to anything except a parabolic economy.

Things didn't just go well, while Mountain Comfort was alive, they were meteoric.

And there are so many places like that in Bend. All the lost restaurants, Merenda, deep, Bluefish, et al. But it goes far beyond that.

All the Cook-It-Yourself franchises. 75% of the area homebuilders. Most of the RE industry infrastructure. The Big Box retailers. Auto row.

It was really most of Bend. I know there are some long timers. Like the Porsche dealer.

They were here forever before the Boom. Then the Boom. Then they remade themselves in the image of the Boom. Same with the Mercedes dealer.

Same with almost everyone. Except maybe Dunc.

Everybody bought it.

You don't have to buy the boom to own it. You just have to "refi".

You just have to alter your plans for bigger & better things. Like Mountain Comfort.

They threw millions into their facility during the parabola. They didn't build, they just refi'd up.

Everyone looks at who built, but the refier's built as well.

There was huge capacity added by entrants, but there were a huge percentage that just traded up, or they feared they'd be left behind.

Look around. This whole town traded up. It's FULL of Mountain Comforts.

I found the Job Loss on Slate chart Dunc mentioned.

Very cool, and illustrates the heinous & sudden change in this countries economy. Millions of jobs have been lost.

And we found out that Oregon has taken it's rightful place on the economic extremes.

Odd dynamic propels Oregon jobless rate to No. 2

Layoffs alone don't account for Oregon's dubious distinction as the state with the nation's second highest jobless rate behind Michigan.

Instead of giving up or leaving, as they're doing in every other high-unemployment state, more people in Oregon are seeking work. Retirees, nonworking spouses and others are job-hunting alongside laid-off workers, together driving the state's unemployment rate in March to a 12.1 percent historic high.

Oregon business news has become a daily drumbeat of layoffs and bankruptcies, yet it's difficult even for experts to fathom how joblessness here could approach levels of Michigan, a state devastated by the auto industry's meltdown. Michigan, with 12.6 percent unemployment in March, sees its labor force shrink as job seekers give up and as laid-off workers move away.

Economists can't entirely explain why Oregon bucks the same trend of worker-exodus in Nevada, California, Indiana and the Carolinas.

"I'm left scratching my head about why is that labor-force growth going up," says Tom Potiowsky, Oregon government's chief economist. "Are we going to see that level off? That's my expectation."

Potiowsky also expects Oregon's seasonally adjusted unemployment rate to keep climbing, perhaps even overtaking Michigan to become worst in the nation. Oregon's rate rose in March by 1.4 percentage points, the nation's largest increase that month, the U.S. Bureau of Labor Statistics reported Friday.

Fifty-eight thousand more Oregonians entered the labor force during the year ending in March. The state lost 77,000 jobs during the same period. The 3 percent labor-force increase combined with a 4.2 percent employment decrease to produce the jobless rate equaled only once before, in November 1982.

In-migration accounted for less than 1.2 percent growth in Oregon's labor force, meaning most of the new entrants to the labor force were current residents. Michigan, by contrast, is suffering a brain drain as skilled, unemployed workers bail out.

"In some cases they've decided to move where they like to vacation," says Patrick Anderson, of Anderson Economic Group in East Lansing, Mich. "Oregon might be one of the beneficiaries."

Some Michigan citizens have lost hope, Anderson says, due to the auto industry's decline, the state's fiscal troubles and statements by former President George W. Bush and President Barack Obama that, he feels, have devastated consumer confidence in U.S.-made vehicles. Anderson predicts Michigan's jobless rate will rise higher.

"The president has essentially put Chrysler on a 30-day deathwatch that's going to cause a string of bankruptcies across the entire country, including Oregon," says Anderson, who expects many U.S. car dealerships to fold.

The recession is hitting the West especially hard, pushing regional unemployment to 9.8 percent in March, compared with 9 percent in the Midwest. The national jobless rate was 8.5 percent.

Oregon has lost major employers recently such as Monaco Coach and Joe's Sports, Outdoors & More. Managers of SpectraWatt, an Intel spinoff founded in Oregon to make solar cells, found superior government incentives in New York. Other big Oregon employers are cutting pay and laying off workers.

Instead of getting discouraged, however, many Oregonians are writing resumes. More Oregon college graduates are staying in state to job hunt.

"Generally when you get these economic downturns, you would expect people to exit the labor force, not enter it," says Tim Duy, a University of Oregon economist. He suspects out-of-state retirees who moved to Bend and elsewhere in recent years could be partly responsible.

"Maybe it's because we attracted so many equity refugees," Duy says, "people that sold their homes in California for some ridiculous amount of money and moved to Oregon expecting to never have to work again."

One solution, says Duy, who admits it's harsh: a free one-way bus ticket out of state, for anyone who wants one.

This is just classic. What created prosperity on the way up, is now strangling us on the way down: Cali-Bangers.

People who flocked here with equity, traded up paying half down, a HUGE cushion, never going to work another day in their lives.

Until houses got cut in half.

Now they all need to work again.

Duy says give them free bus tickets OUT OF TOWN. COVA is paying millions to get them to come.

A House Divided.

Oregon will break your heart. Bend will give you the fucking AIDS.

We've had a nice little reprieve from the downward onslaught of late. In fact, we've had the best 6 week run in the markets since 1938.

But don't get comfy. The tax refunds will soon be spent, the stimulus dollars will be revealed as just another AIG boondoggle, and Oh Yes... the foreclosure moratorium is coming to a halt:

US Foreclosure Filings Jump as Moratoriums End
16 Apr 2009 | 05:09 AM ET

U.S. foreclosure activity leaped 46 percent in March from a year earlier, hitting a record high as programs stunting the torrid pace of failing mortgages expired, RealtyTrac reported on Thursday.

A temporary freeze on foreclosures by major banks and government-controlled home finance companies Fannie Mae and Freddie Mac ended before President Barack Obama's massive housing stimulus, unveiled on March 6, could take root.

Filings, which include notice of default, auction sale or bank repossession, jumped 17 percent in March from February.
Filings for the quarter also marked a record high, jumping 24 percent from the same period a year ago.

The March and first-quarter totals were the highest since RealtyTrac began tracking them in January 2005, even as bank repossessions declined.
One in every 159 U.S. households with mortgages got a foreclosure filing in the first three months of this year, RealtyTrac said.

Filings were reported on more than 803,000 properties in the quarter.
California, Florida, Arizona, Nevada and Illinois accounted for nearly 60 percent of U.S. foreclosure activity in the first quarter, with a combined 479,516 properties receiving filings.

In the transition from industry freeze to new government rescues, the foreclosure filing floodgates reopened. After the moratoriums ceased, "we saw an onslaught of notices of default, which is the first stage of foreclosure," Rick Sharga, senior vice president at RealtyTrac, said in an interview.

The rise in filings suggests a backlog had built up due to the moratoriums. The success of the Obama mortgage bailout may not be seen until the autumn, Sharga added. Activity should peak near year-end. "

But unfortunately, these well-intentioned delays in the processing might have the unintended consequence of extending the housing downturn," and further dragging down home prices, he said.
"We still anticipate that we'll see upward of 3 million households receive a foreclosure notice this year, up from 2.4 million last year," Sharga said.

For all of 2005, the last year before the foreclosure spike started in earnest, RealtyTrac reported about 800,000 filings.
Loan servicers are overwhelmed with the volume of failing home loans and many are understaffed to handle modifications.

One national servicer that foreclosed on 2,000 properties in 2006 handled about 21,000 the next year with similar staffing levels, Sharga said.
The servicer expects a 50 percent spike in 2008, without approval to increase staff.

Unemployment May Trump Bargain Hunting

Nevada, Arizona and California had the highest foreclosure rates in the first quarter. Homes prices and sales soared in these states during the boom years earlier this decade, and now suffer the biggest losses on overbuilding and abandoned investment units.

Nevada led the ranks in the quarter, with one of every 27 households with loans getting a filing, more than five times the national average.

Everyday I hear people who are deciding to Walk Away and Not Pay. U-Haul is the only growth industry I see.

And you watch, the Mass Exodus of Bend is about to go into high gear. School's over, and I'll wager we are going to see the first innings of an outmigration the likes of which this place has never seen.

You can have 16%+ unemployment and not hemorrhage population. Crook & Jeff counties will be even worse.

They'll start talking about a rebound soon, but nature hates a vacuum, and homes will rush in to fill the void. The plummet in Bend prices will continue unabated.

But even so, now is basically the only time you can sell. And you have to want to sell.

Realtors are finally waking up to the New Reality, and that reality doesn't involve overpriced listings that sap their valuable resources.

You need to wake up & realize that if you bought in the past 5 years, you will lose.

If you bought in the 5 years preceding that, you might do little better than break even.

If you bought before that, simply realize that your gains will be muted, not astronomic like you thought they'd be 3 years ago.

That's the New Bend. A place where dreams are crushed.

Finally I want to go out with a little excerpt from The Economist.

One of heresy-ridden ideas I put out about 18 months ago was that home-ownership (The American Dream) would become the AmeriKKKan Nightmare.

People would actually look down on home ownership. Home owners would be seen as The Inferior Race. Not Renters.

Renters are just losing their monthly payment. Owners are losing everything.

Shelter, or burden?
Apr 16th 2009

The social benefits of home ownership look more modest than they did and the economic costs much higher

IN A scene from the film “It’s a Wonderful Life”, a happy couple is about to enter their new home. Jimmy Stewart, whose firm has sold them the mortgage, reflects that there is “a fundamental urge…for a man to have his own roof, walls and fireplace.” He offers them bread, salt and wine so “joy and prosperity may reign for ever”. That embodies the Anglo-Saxon world’s attitude to home ownership. Owning your own roof, walls and fireplace, it is thought, is good for householders because it helps them accumulate wealth. It is good for the economy because it encourages people to save.

And it is good for society because homeowners invest more in their neighbourhoods, engage more in civic activities and encourage their children to do better at school than do renters. Home ownership, in short, benefits everyone—not just the homeowner—and the more there is of it, the better.

Which is why it is usually encouraged by the government. In America, Ireland and Spain, homeowners can deduct mortgage-interest payments from taxable income.
Yet the worldwide crash was bound up in this supposed miracle of social policy.

The disaster began with defaults on American subprime mortgages, a financial instrument designed to spread home ownership among the poor.

It gathered pace after the failures of Fannie Mae and Freddie Mac, two government-sponsored enterprises that provide cheap home loans. As a result, the home-ownership rate in America has fallen for four years, the first time that has happened in a quarter of a century.

In 2008, 2.3m families lost their homes or faced foreclosure—double the average before the crisis—reducing the home-ownership rate from 69% in 2004 to 67.5% at the end of 2008. The number of owner-occupied dwellings also slipped in Britain in 2007-08 for the first time since the 1950s.

Subsidised castles

So attempts to expand home ownership have contributed to the wider economic crisis without succeeding in their own terms. How does that affect the arguments for supporting home ownership? Should it still be deemed a public good?

No, say several economists and commentators. “Given the way US policy favours owning over renting,” writes Paul Krugman, 2008’s Nobel laureate in economics, “you can make a good case that America already has too many homeowners.” Edward Glaeser, an economist at Harvard University, talks about “the madness of encouraging Americans to bet everything on housing”.

So far, policymakers are unmoved. In mid-February Barack Obama proposed a $275 billion plan to support America’s housing market. Outside the Anglo-Saxon world Nicolas Sarkozy, who campaigned for the presidency to turn France into a property-owning democracy, has expanded zero-interest housing loans for the poor.

The main economic argument for home ownership is that, in the words of Thomas Shapiro of Brandeis University, “it is by far the single most important way families accumulate wealth”. This argument now looks as weak as house prices.
In Britain prices have fallen 21% since their peak in October 2007. Prices in America have fallen more slowly but further, down 30% since their peak in mid-2006 (see chart 1).

This has reduced the total value of the country’s housing stock from over $22 trillion in 2007 to $19 trillion at the end of 2008. In the past few weeks, housing markets on both sides of the Atlantic have seen signs of life, but there is every chance that prices have further to fall before they finally reach their low.

The collapse in house prices matters most directly to two overlapping groups: those who bought property at the peak of the market and now face “negative equity”; and those (in America) who took out subprime mortgages.

Roughly 10m Americans are in negative equity—ie, the cost of their mortgage exceeds the value of their home. In Britain about 3% of households are in negative equity. For homeowners, negative equity makes houses more like a trap than a piggy bank.

Those who cannot meet their payments lose their house, their savings and (in America, usually) their credit rating for seven years.
The other area of concentrated distress is subprime mortgages, which increased their share of the American mortgage market from 7% in 2001 to over 20% in 2006.

According to the Mortgage Bankers Association, the delinquency rate was 22% in the fourth quarter of 2008, compared with only 5% for prime loans. Many people have concluded that, in Mr Krugman’s words, “home ownership isn’t for everyone.” However, a study by the Centre for Community Capital, part of the University of North Carolina, Chapel Hill, casts some doubt on that conclusion.

It compared a group of people who took out subprime loans with a group of borrowers from the Community Advantage Programme (CAP), a government-backed scheme that lends to the sort of people who might have had a subprime mortgage. The default rate for CAP borrowers was only a quarter what it was for subprime mortgage holders, even though the incomes and backgrounds of borrowers were similar.

Since the real problem lay partly in the mortgages, rather than the borrowers, this suggests the subprime crisis was a financial-market mess, as well as a housing one.
Does that also imply that home ownership has the economic benefits that its proponents claim? Two pieces of evidence seem to support such a view.

The first is that housing has fared better in the crisis than other assets. Share prices are around 50% below their peaks in many countries, so compared with shareowners, homeowners have not done badly. However, home ownership in a downturn has one big disadvantage: most people buy shares outright but homes on margin (ie, they put down a small stake, if anything).

If share prices fall by 10%, you lose 10%; if house prices fall by 10%, you may lose your entire savings. The value of American homeowners’ equity in their own houses has slumped from a peak of $12.5 trillion in 2005 to just $8.5 trillion at the end of 2008. This undermines one claim that homeowning is economically beneficial.
The other piece of evidence for home ownership’s benefits is that the house-price fall has so far spared most existing homeowners from absolute losses.

In America, for example, house prices have fallen back only to where they were in 2004. There were roughly 29m house sales in the United States between 2004 and 2007, compared with 115m households, and anyone who bought before then is probably sitting on a nominal profit.

However, as Harvard University’s Martin Feldstein points out, if house prices rise, people feel richer and borrow and spend more. If they feel poorer, they may cut back even if the price of their house has not fallen below what they paid for it.
Subsidies to home ownership have thus increased economic volatility.

They boosted consumption, as homeowners used their houses as collateral to finance consumption or investment. In America mortgage-equity withdrawals reached $9 trillion between 1997 and 2006—equal to more than 90% of disposable income in 2006. This gave homeowners more to spend in the good times but less in bad ones. In Britain home-equity withdrawals added the equivalent of 3% of post-tax income to households in the fourth quarter of 2007 but subtracted 3% a year later.

So changes to house prices aggravate the economic cycle. Recent research by the IMF finds that a quarter of the 100-odd recessions since 1960 have been associated with house-price busts and that these contractions “are deeper and last longer than other recessions do”.
Subsidies to home ownership have also weakened financial services.

They encouraged more people to buy houses (which was the point), but, logically enough, also encouraged lenders to take greater risks with housing. This was fine while house prices were rising, but the fall exposed how vulnerable banks’ balance sheets had become.
Moreover, if public policy aims to create wealth, there are other ways of doing it.

People could invest their savings in the stockmarket and rent their homes, for example. Had they done so in the past two years, they would have done worse than homeowners. But for three decades before that, equity prices easily outstripped property prices (see chart 2), so in the long run equities have been a better bet than houses. (Admittedly, this strips out the effects of share dividends and imputed rents, which favour property.)

Housing suffers from two further weaknesses as an investment. It sucks up disproportionately large amounts of money, falling foul of the idea that investors should diversify: in America the equity tied up in houses accounts for 45% of the net worth of the average householder.

And it is illiquid. If you need to raise money, you cannot sell a room or two, whereas you can always sell a few shares. It is hard to argue houses are the best asset for building wealth.
“Perhaps the most compelling argument for housing as a means of wealth accumulation”, argues Richard Green of the University of Southern California, “is that it gives households a default mechanism for savings.”

Because people have to pay off a mortgage, they increase their home equity and save more than they otherwise would. This is indeed a strong argument: social-science research finds that people save more if they do so automatically rather than having to choose to set something aside every month.

Yet there are other ways to create “default savings”, such as companies offering automatic deductions to retirement plans. In any case, some of the financial snake oil peddled at the height of the housing bubble was bad for saving.

Subprime, interest-only and other kinds of mortgage instruments allowed people to buy their homes without a down-payment and without building up equity. “Negative amortisation” (neg-am) mortgages even let people pay only part of their interest each month and to add the rest to the principal, increasing their debt, not their savings. Home-equity loans had the same effect.

Where the heart is

The main arguments for home ownership, though, are not primarily economic, but social. Home ownership, argue those who want to expand it, benefits society because it encourages stable, more law-abiding communities; it makes people more likely to vote in local elections and join clubs; and it benefits future generations because, it turns out, the children of homeowners do better at school and have fewer behavioural problems than children of renters.

On the face of it, the evidence for these claims is strong. In America homeowners are less likely to move than renters, so areas with a lot of homeowners are more stable. According to the 2007 American Housing Survey, homeowners stay where they are for about nine years whereas renters move every two.

More stable neighbourhoods are more law-abiding. According to a study of New York City, the home-ownership rate was second only to income as an explanation for different crime rates.

The link between ownership and political participation is stronger still. In America in the early 1990s, 69% of homeowners voted, compared with only 44% of renters. Homeowners are more likely to know who their representatives are; more likely to support local causes or parent-teacher associations and (this being America) more likely to go to church.

Perhaps the most surprising link is between ownership and children. One study in America found that, in 2000, the mathematics scores of the children of homeowners were 9% higher than those of renters’ children; reading levels were 7% higher.

This had nothing to do with income: the research controlled for that. In another study homeowners’ children were 25% more likely to graduate from high school and more than twice as likely to go to university. Their teenage daughters were also less likely to become pregnant.

These studies, though, are not the last word. They find a link between children’s education and homeowning. But is this because, as some suggest, home ownership requires parents to possess managerial or financial skills that they pass on to their children? Or is it because the people with those skills help their children at school and also buy houses? No one knows.

Nor is it certain that owners always take better care of their neighbourhoods than renters do. Some studies claim that the effect in fact depends on a few public-spirited people willing to set an example. Renters can be public-spirited too. In America areas with lots of renters tend to be transient because the typical rental period is short.

In Germany, though, people rent for years. Stable neighbourhoods and widespread home ownership can go together but do not need to. As Bill Rohe of the University of North Carolina, Chapel Hill puts it, “evidence regarding the societal benefits of home ownership is highly conjectural.”
Still, on balance, home ownership gives people a stake in the state of their surroundings.

Thriving streets increase the value of properties, giving owners incentives to improve them further. Renters get no such benefit; they may even have to pay more if the neighbourhood improves.
Whether stability is such a good thing in a downturn, though, is a different matter.

A decade ago Andrew Oswald of Warwick University argued that owning your own home makes you more reluctant to move, so labour markets tend to become more rigid as home ownership increases. He claimed that increases in the level of home ownership (though not necessarily the level itself) are associated with rises in unemployment. Ireland, Greece and Spain all saw large increases in home ownership in the 1980s and 1990s, and had relatively high unemployment.

America and Switzerland had stable ownership rates, and escaped the long-term rise in joblessness.
His argument remains controversial. Critics point out that many things other than home ownership might prevent people from moving (children’s schools, friends and so on).

Anyway, liquid housing markets should make it possible for people to move, if they want to. It is also possible that, even if people were trapped in distressed areas, jobs should move there to take advantage of the willingness of homeowners to accept lower wages.
All that said, Mr Oswald’s arguments seem especially powerful at the moment.

The recession in America is bearing down most heavily on two groups of states: Florida, California and Nevada, which had the largest house-building booms in the 1990s; and Michigan, New Hampshire, Delaware, West Virginia and Mississippi, which have the highest home-ownership rates.

People are not, in fact, moving as frequently as they used to: the share of those moving house in 2007-08—11.9% of the population—was the lowest since records began. So labour markets look less flexible than they were.

Negative equity exacerbates immobility because people are reluctant to move if it means selling at a loss. Researchers at the Wharton School reckon that people in negative equity are only half as likely to move as those who are not.

In all these ways, high home ownership may prolong and deepen a recession.
The problem remains of how to weigh the economic costs against the social benefits of home ownership.

There can be no easy judgment about this but the recent rise and fall of house prices suggests both that the costs are greater and the benefits smaller than once thought.
If owning were such a boon, you would expect neighbourhoods with lots of owners to have done better than those with lots of renters during the boom years.

That does not seem to have happened.
What has happened, though, is that above a certain level, foreclosures have done a lot of damage during the bad years. Recent studies of New York and Cleveland find that, if lenders foreclose on 3-4% of properties in an area, local prices fall even faster and further than average. Rows of For Sale signs almost certainly have the same effect in Britain.

In other words, ownership can sometimes be worse for a neighbourhood than renting.
A shelter—for your money Lastly, and perversely, the decade of obsession with expanding home ownership may actually have reduced neighbourhood stability.

Nicolas Retsinas, the director of the Joint Centre for Housing Studies at Harvard University, suggests that, until the crash in 2008, Americans were coming to see their homes as financial investments rather than as places to live.

That is true in other countries. Neg-am mortgages in America and buy-to-rent arrangements in Britain were based on the assumption that houses were primarily investments.
As a result, people seem to have started to buy and sell homes more frequently.

Between the mid-1990s and mid-2000s, the number of new houses sold almost doubled in America, from just over 600,000 to over 1.2m in 2006.
Perhaps that made labour markets more mobile, but it was certainly not what policymakers were aiming for when they set out to increase home ownership.

Their efforts in the past few years seem to have weakened, though not destroyed, the best arguments for treating home ownership as something to be encouraged: that it increases people’s savings and creates better neighbourhoods for everyone. But perhaps you should not be surprised by that.

As Adam Smith wrote in “The Wealth of Nations” two centuries ago, “a dwelling-house, as such, contributes nothing to the revenue of its inhabitants.”

You watch. Bend, and the USA in general, is becoming a serfdom. A smaller & smaller number of owners.

Great for those miniscule numbers on top, and a nightmare for the rest. No middle class. Just serf's working to pay debts, forever.

The bounce is temporary. We'll find out, just like GM, that the debts are coming due. Again. And put as many debt reprieves in the pipe as you want, they will simply come due again, and again.

This town is 100% doomed. If you trade up to downtown, you will fail. The Financial Black Plague is here.

Save, don't spend. List your house today for 30% less than you think it's worth. Or better, what your hungry Realtor thinks it's worth. I said this 1 year ago, and no one believed it.

Well, here we are. Again. It'll be even worse next year. 16%+ unemployment ensures that there will soon be NO ONE left to buy homes here at the end of this Summer. NO ONE.
"It's tough out there... time to tighten my belt!"
Momma Be MILFin!
Made & Installed In Bend Oregon!

Sunday, April 12, 2009

Dear Fellow Wage Slaves

Good Day Fellow RE Nutjobs,

I have managed to keep alive my 100% unblemished sterling record of wanting to pay my taxes on Feb 1, but not actually doing so until April 15.

So here I am, again, with a bowl of chocolate pudding in my financial underpants.

OK, so I am going to pay my F#$%*(&%$ing taxes today, and probably plotz out a empty-husk of a post when I'm done. It might be Wed before I get there.

Otherwise dear friends, please feel free to ridicule me and revile my lack of planning. Again.


I Hate To Baste Your Butterball.
Is my W-2 down there?

Sunday, April 5, 2009

A House Divided

On June 16, 1858, more than 1,000 Republican delegates met in the Springfield, Illinois, statehouse for the Republican State Convention.

At 5 p.m. they chose Abraham Lincoln as their candidate for the U.S. Senate, running against Democrat Stephen A. Douglas.

At 8 p.m. Lincoln delivered this address to his Republican colleagues in the Hall of Representatives. The title comes from a sentence in the speech's introduction, "A house divided against itself cannot stand," which paraphrases a statement by Jesus in the New Testament.

Even Lincoln's friends believed the speech was too radical for the occasion.

His law partner, William H. Herndon, thought that Lincoln was morally courageous but politically incorrect.

Herndon said Lincoln told him he was looking for a universally known figure of speech that would rouse people to the peril of the times.

Another lawyer, Leonard Swett, said the speech defeated Lincoln in the Senate campaign. In 1866 he wrote to Herndon complaining, "Nothing could have been more unfortunate or inappropriate; it was saying first the wrong thing, yet he saw it was an abstract truth, but standing by the speech would ultimately find him in the right place."

Mr. President and Gentlemen of the Convention.

If we could first know where we are, and whither we are tending, we could then better judge what to do, and how to do it.

We are now far into the fifth year, since a policy was initiated, with the avowed object, and confident promise, of putting an end to slavery agitation.

Under the operation of that policy, that agitation has not only, not ceased, but has constantly augmented.

In my opinion, it will not cease, until a crisis shall have been reached, and passed.
"A house divided against itself cannot stand."

I believe this government cannot endure, permanently half slave and half free.

I do not expect the Union to be dissolved -- I do not expect the house to fall -- but I do expect it will cease to be divided.

It will become all one thing or all the other.

Good Old Abe Lincoln. Smart bastard.

And, as usual, what is old is new again.

So what is this "house divided" crap? Well, it's us.

It's the U.S. Government & private industry, becoming intermingled at a startling rate.

So what's the big deal? The auto industry is imploding on itself. Everyone, government & auto makers alike want it to survive. Right?

Well, not really. Government doesn't want to lose the jobs. Specifically, the Dem's don't want to lose the Union votes. You lose the jobs, you lose the votes.

So they are shoveling money to the auto makers as fast as possible.

But strangely, the auto makers just aren't doing their part fast enough.

The entities being bailed out are still failing. Only vacuous idiots thought there would truly be another outcome.

GM & Chrysler face bankruptcy. Soon. Sooner than that.

Why? They are getting BILLIONS thrown at them. The leadership (auto & Union, alike) has to want to keep their perk-laden jobs, G5's & bimbo junket's, right?

Do you see why this is a House Divided?

The government wants survival.

Survival requires sacrifice.

Sacrifice is exactly what both sides do not want.

Sacrifice means plant closures, cuts & lost jobs. And neither the government, not the auto maker top brass, nor the union rank & file or leaders want that.

No one can possibly get what they want out of the auto bailout. The cure is exactly the poison that is killing the beast.

Bailout Nation U.S.A. can do nothing but fail. It is a House Divided. It will fall.

OK, on to truly terrible news....

Jobless rate bolts to 8.5 percent, 663,000 jobs lost

WASHINGTON -- The nation's unemployment rate jumped to 8.5 percent in March, the highest since late 1983, as a wide swath of employers eliminated 663,000 jobs.

It's fresh evidence of the toll the recession has inflicted on America's workers, and economists say there's no relief in sight.

If part-time and discouraged workers are factored in, the unemployment rate would have been 15.6 percent in March
, the highest on records dating to 1994, according to Labor Department data released Friday.

The average work week in March dropped to 33.2 hours, a new record low. Since the recession began in December 2007, the economy has lost a net total of 5.1 million jobs, with almost two-thirds of the losses occurring in the last five months.

"It's an ugly report and April is going to be equally as bad," predicted Mark Zandi, chief economist at Moody's Economy.com.

First, it bears mentioning again, that all jobless rates are wildly understated. There are all sorts of exclusions that reduce the number of "unemployed" persons in this country.

You can see it here, stated quite literally: The real unemployment figures are easily double what we are told.

We already know that Bend's stated 12.6% is actually 16.1%. And that 16.1% is already massaged as well, so the real rate is closer to 25%.

It's safe to say that the real unemployment rate in Bend is just about double what The Bully reports. Possibly more.

Even that 8.5% rate for the US is bogus. It was 8.9% in Feb. It is impossible to really know, because this is Kool-Aid bailout Nation, and it seems Job 1 is assuaging the population with lies, money & big boobs.

But despite all this lying, within the paradigm of the lies, you can see things are getting grim.

Worst Jobs Recession since the Great Depression

This is a chart from Last Month!

Things are still going from Bad to Worse. The markets are discounting the idea that this "recession" will be worse than others recently, but that things will soon turn.


There has been a fundamental shift in almost everything in our government & our "free" economy.

They are slowly evolving into some sort of unified blob, taking the worst of both, and making a monster.

Remember when Daimler Benz (the beautiful fairy princess) joined with Chrysler (the frog)?

Right. You got a monster.

I'm not telling people this to scare them, or anything else. It's just a warning, the same warning I've been giving almost every single day for 2 1/2 years:

We face financial Armageddon, as a country. Prepare.

This isn't going to be like the Last Time (2001), or the time before that (1991, etc). This is The Big One.

You should need look no farther than last weeks chart of Bend's unemployment, or the chart above of lost jobs. Things are still getting worse, not better.

OK, moving on....

OK, here's a shocking revelation:

Most of the "help" (financial assistance) that banks are supposed to give struggling homeowners (with OUR MONEY), is just hollow gestures.

What a surprise.

Loan modifications rise; many don't pare payments
by The Associated Press
Friday April 03, 2009, 8:55 AM

WASHINGTON -- Though lenders are boosting their attempts to curb record-high home foreclosures, fewer than half of loan modifications made at the end of last year actually reduced borrowers' payments by more than 10 percent, data released today show.

The report, based on an analysis of nearly 35 million loans worth more than $6 trillion, was published by the federal Office of the Comptroller of the Currency and the Office of Thrift Supervision.

It provides the most detailed and broad analysis to date of efforts to stem the foreclosure crisis, which President Barack Obama is trying to combat with a $75 billion plan to promote loan modifications.

The report helps explain why many loans are falling back into default after being modified. Many borrowers and consumer groups contend that the modifications offered by the lending industry aren't very generous, despite more than a year of public prodding from regulators.

For instance, nearly one in four loan modifications in the fourth quarter actually resulted in increased monthly payments.

That situation can happen when lenders add fees or past-due interest to a loan and spread those payments out over the 30- or 40-year period.

Perhaps unsurprisingly, the report found that loans were far less likely to fall back into default if a borrower's monthly payment is reduced by a healthy amount.

Nine months after modification, about 26 percent of loans in which payments had dropped by 10 percent or more had fallen back into default. That compares with about half of loans in which the payment was unchanged or increased.

Loan mod's are simply an attempt to perpetuate past over-consumption mistakes.

You consumed too much house, you can't afford it, but our new US Government-Banking behemoth wants you to pay and pay and pay, until you are beyond tapped out.

This is serfdom. You are a slave to property. You will spend a lifetime servicing your debt.

There is an incredible re-distribution of wealth happening. And it is not to the Top 50% (Whitey), or even the Top 5% (Buster), or even the Top 1%.

It's the Top 0.0001%. It's not people who have a million bucks. It's people who make a million bucks. Per month.

These people are having the full faith & credit of the US (that's us, our kids, and grandkids, et al), printed up & deposited in their bank accounts.

They caused this. Now they are reaping the biggest financial bonanza the World has ever known.

We'll be a country of vast serfdom with an almost impossibly small number of financial Masters ruling the place.

Loan mod's are nothing but an attempt to enslave you.

OK, next....

And just more proof that nearly all the goodness of this blog is in the comments...

Trends Signal Slowing Population Growth In Bend

For years, Bend has been the fastest growing city in the state -- and one of the fastest-growing in the country.

But in the recession, that development and growth has turned into a high number of foreclosures and job losses.

Now, a series of statistics have begun to trickle out that signal many people are leaving the region to find a better life elsewhere.

I'm not sure how many people read this blog (not really important, I guess), but it's little nugg's like this that I just love.

Because it is something Bend's local media would never run.

At Bend High School, the hallways remain crowded. But, a little less so than in the past few years.

The front office says the school has about 100 fewer students than this time last year.

The trend holds true at the district level as well.

There are about 250 fewer students in the system today, than one year ago, a drop of more than 1%.

Ron Wilkinson is the superintendent of the Bend-La Pine School District.

Ron Wilkinson: “Without any question, Bend is in a situation of flattened growth. And when you’ve been on this pattern of almost straight-up growth on the charts, it feels like a significant decline.”

Ron Wilkinson: “For us, it’s a matter that a lot of that construction industry is unemployed or has moved elsewhere. It’s certainly impacted the economy and the entire community.”

Ah yes. The old Flattened Growth. A classic Bendism. It now joins other classic Bend-oxymorons, "larger half", "rolling stop", and "only choice".

Flattened growth. This is Bend.

Finally, another priceless nugg from the comments (Sub req'd).

Cascade Bancorp asks shareholder to invest $25M
By Andrew Moore / The Bulletin

Published: April 04. 2009 4:00AM PST

Cascade Bancorp, the publicly traded parent company of the Bank of the Cascades, is seeking a $25 million investment from David Bolger, its largest single shareholder, that could potentially give Bolger ownership of more than 50 percent of the company, according to a filing Thursday with the Securities and Exchange Commission.

Bolger, of New Jersey, currently owns 21.33 percent of the company’s common stock, according to the company.

Bolger was the lone shareholder of Boise, Idaho-based Farmers & Merchants State Bank, which Cascade Bancorp bought in 2006.

Patty Moss has been reduced to begging!

She wants this Bolger guy, who has probably lost untold tens (hundreds?) of millions, to throw good money after bad.

I'm not sure how this will work out, but my guess is that we'll see an Obombifying of Moss similar to GM's ex-CEO Wagoner: Moss will be caput, with some ridiculous Golden Shower Parachute to keep her ugly lesbian ass happy at night.

Bolger will go for it, if MossCo is ejected. Could happen.

My own opinion is that he should just mentally walk away, not throw good money after bad, and try to get Moss blown out anyway.

Finally, just random nugg's to boggle the mind:

Financial Rescue Nears GDP as Pledges Top $12.8 Trillion

By Mark Pittman and Bob Ivry

March 31 (Bloomberg) -- The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s.

"Hey kids, here's why I can't send you to college! And you won't send your kids either! Bailout nation 2009!"

Yet another House Divided piece:

Finding the upside of the homes market

Government trying to make mortgages easily available while preventing foreclosures

Oy. This is what got us into this mess. Increasing mortgage availability simply increases defaults. We KNOW that now. Increase mortgage availability beyond a certain point, and you simply invite foreclosures. That's what is happening now.

Home Prices: Low, But Still No Bargain
Forget low mortgage rates and the buyer's market. Real-estate prices still have a long way to fall.

Homeowners are watching anxiously for any signs of housing market stabilization. So, too, are all those who believe the market may hold the key to the economy.

And yet the most recent data makes for more gloomy reading.

The closely watched Case-Shiller index, which tracks prices across twenty major cities, shows that through January the crash was getting worse, not better.

And yet, even after these declines, homes overall still may not be that cheap relative to wages. More on that later.

The headline numbers are grim enough. January's Case-Shiller index showed a 19% slump from a year earlier.

The usual suspects fared very badly: Phoenix was down a remarkable 35%. Las Vegas fell 32% and Miami 29%.

I encourage you to go read the original story on WSJ Online, if only for the cool Flash graph, showing Home Price with respect to earnings.

That index, which was at 91 in March 1997, zoomed to 200 in May 2006. It now stands at 128 (Dec 2008).

We're starting to re-enter the range of normalcy, but we are still historically high. Without the recent bubble to muddy the waters, our current reading of 128 would troublingly high. More excerpts:

But for the market overall the picture isn't as hopeful as you'd like.

Even today, prices overall have only reverted to levels seen in late 2003. Yet by that stage the bubble was already well inflated. You would expect a crash of this scale to retrace its steps much further. To find pre-bubble prices you have to go back to about 2000 – when values overall were about a third lower than they are today.

It's true that mortgage rates, now at 4.5% to 5%, are currently very low. But relying just on that is far too simplistic. Rates were also low from 2003 through 2005 – as many pointed out, disastrously, at the time.

Is there a bullish scenario for house prices? Sure. If all the government spending to turn around the economy reignites inflation in a year or two—as some predict—house prices could begin climbing again. But if the current price deflation continues, look for house prices to keep dropping.

Over the long term, average home prices have tended to track average earnings. And by this measure the market may have much further to fall.

I looked at Case-Shiller's index back to 1987 and compared it to federal data on average earnings. The result, rebased to 100 in January 1987, can be seen here. And it's alarming. By this (admittedly very simple) measure, today's home prices are actually more expensive, in relation to average earnings, than at the peak of the 1989 property bubble.

Equally noteworthy is that when the last property bubble burst, it took about eight years before the market showed really strong signs of revival. This bubble was far, far bigger.

I'm telling you, folks, this thing is still in the early innings. And if you've got any sense at all, you know Bend is far, Far, FAR behind the curve. We're in the 2nd inning, at most.

We've fallen almost 50% from our peak values. And we are still one of the most overvalued RE markets anywhere.

We'll hit $125K medians in Bend, and it will not recover peak values in any adults lifetime who lives here. EVER.
"A bra divided, I will not stand!"