Wednesday, December 24, 2008

We're Oregon's Biggest Kool-Aid Drunks

Pegasus Books owners and blogger Duncan McGeary spotted a fascinating graph on the Portland Housing blog showing that, while other Oregon and Washington cities also

Posted By on Wed, Dec 24, 2008 at 8:45 AM

Pegasus Books owners and blogger Duncan McGeary spotted a fascinating graph on the Portland Housing blog showing that, while other Oregon and Washington cities also experienced a real estate bubble from 2005 to 2007, Bend's bubble was by far the biggest and baddest.

The graph compares housing "affordability ratios" - the ratio of median home prices to median household incomes - for the cities of Portland, Vancouver, Eugene and Bend. Just before the bubble popped (summer of 2007) the ratio in Bend was almost 6.5 to 1.

Portland and Eugene hit around 4.5 at that same point, while Vancouver topped out at a bit over 4.

"It's amazing to think that people were paying 6.5 times their annual income for a home in Bend," writes the housing blog. "The historical ratio is usually between 2.5 and 3.0."

The blog notes that Bend still has by far the highest ratio - over 5, compared to about 4 for Portland and Eugene and 3.5 for Vancouver. "Home prices still have to fall 41% in Bend for it to be affordable but only 10% in Vancouver," it comments.

The graph "shows what I've always maintained," McGeary says. "We all drank the Kool-Aid, but Bendites drank twice as much. ... And don't give me the old line about Bend being 'special.' This graph is relative to local conditions, which makes that whole argument moot."

Meanwhile, McGeary and other downtown business owners have to be hurtin' extra hard because of the incredibly cold and snowy weather, which has put a crimp in local shopping as well as tourist traffic.

The bad weather "hit just as Christmas was ready to take off, 10 days before Christmas," McGeary wrote. "It ramped up just as the last weekend arrived. And it appears to be ramping up again for the last five days."

(Note: It did.)

"Of course, Murphy's Law being the bastard it is, it happened on a very challenged Christmas season, probably turning a 'bad' sales level to a 'horrible' sales level," McGeary concludes.

Nationally the picture isn't any brighter: The International Council of Shopping Centers is forecasting a 2% drop in November and December sales compared with last year, which would make this the worst Christmas retail season in at least 40 years.

Bricks-and-mortar stores can lay some of the blame on the brutal weather this December, but even Web retailers are hurting. CNN reports that on-line sales fell this shopping season - the first time that's happened in the seven years such sales have been tracked.

"Industry watchers say the ongoing recession ... has seriously stymied discretionary spending both online and in stores," CNN writes. "This, in turn, has put the 2008 holiday shopping season in serious peril, which could be catastrophic for many merchants since the November and December shopping months can account for as much as 50% of their annual profits and sales."

UPDATE: Spending Pulse, an outfit that does economic research for Master Card, reports that  November retail sales were down 5.5% compared with the same month a year ago and down 8% in December, through Christmas Eve. Sales dropped "by double digits in nearly all categories, including apparel, luxury goods, furniture and electronics and appliances," the New York Times reports today.

Oh well, if you need a little holiday cheer you can always watch the White House Christmas video starring Barney, the First Dog - probably the only member of this administration with a job approval rating above 40%.

Happy New Year -- it's GOTTA be better than this one.

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