Bend racked up another dubious distinction this week: As reported in The Bulletin on Wednesday, we led the nation in declining home prices between the first quarter of 2009 and the first quarter of this year.
Over that one-year period, home prices in the Bend Metropolitan Statistical Area fell by almost a quarter (23.3%). That was the biggest year-over-year drop among all the 301 MSAs in the country.
Elsewhere in the nation there were some signs of a turnaround. According to the Federal Housing Finance Agency’s latest report, eight states plus Washington, DC actually saw a rise in home prices over the year. Nationwide, the year-over-year decline was only 3.1% on a seasonally adjusted basis.
But in Bend the housing market still seems to be plunging toward the bottom – and God only knows when we’ll find it.
So much for the world of reality. We turn now to the current issue of Cascade Business News, whose top front-page story is headlined: “Planning Fee Hikes Issue to be Revisited.”
Last July, acting on the recommendation of consultants, the City of Bend decided to increase building permit charges and other “user fees” that support the operations of the Community Development Department. But now, in response to what CBN writer Simon Mather described as “a growing groundswell of concern,” the city is talking about rolling back the fee hikes.
On Page 5, CBN owner Pamela Hulse Andrews weighs in with an editorial supporting the rollback idea. “One thing is for sure: the builders have to receive some financial breaks if they are to keep building,” she writes.
In addition to rescinding the fee increases, she also seems to call for an “abatement” of SDCs – Systems Development Charges, which builders pay to partly offset the costs of serving their developments with sewers, roads, water mains and the like – “for a period of time to stimulate residential and commercial projects.”
I haven’t noticed any “groundswell of concern” over the fee increases. In fact, I haven’t seen so much as a ripple. But I don’t pal around with the Central Oregon Builders Association and Central Oregon Association of Realtors crowd like Ms. Andrews does, so I guess I don’t qualify as an expert.
However, after observing the bust of the 1980s and the recovery of the 1990s and the boom of the early 2000’s and the bust of the late 2000’s, I think I know something about how the real estate market operates around here. And I think cutting back the fees and/or granting an “abatement” of SDCs not only wouldn’t cure the market’s present sickness but in fact would be precisely the wrong medicine.
You’ve heard this from me before but you’re going to hear it again: The reason the Bend real estate market remains in the crapper is not that building fees and SDCs are too high – it’s that the supply of homes vastly exceeds the demand. The fact that prices here continue to drop, as described above, is proof.
Between the hundreds of houses that were built on spec during the bubble and never sold and the hundreds that were sold but are now in foreclosure, we have a huge glut of inventory. The market isn’t going to turn around until much of that inventory gets sold off and supply comes back into line with demand.
Under those circumstances, should the city really be trying to encourage builders to put up even more houses that nobody will buy?
But I’m trying to talk common sense, and I’ve lived in this town long enough to know that if COBA and COAR want something, common sense goes out the window. When COAR and COBA tell city officials to bend over their invariable response is: “How far, sir?”