You know the real estate news must be grim if even The Bulletin can’t find a way to put a positive spin on it. Bend’s daily newspaper reported this morning that a record number of notices of default were filed in Deschutes County in the first six months of 2010.
Happy Fourth of July, everybody.
Through June 30, The Bulletin’s Business section reported, 2,053 NODs – the first stage in the foreclosure process – were filed in the county. That was almost 18% more than in the corresponding period of 2009, and we all thought THAT was pretty bad.
As long as foreclosed properties keep piling into the market at fire-sale prices we can’t expect to see any rebound in local home values, which are continuing their relentless plunge toward a bottom that still seems to be nowhere in sight.
Zillow.com, a mine of information about real estate prices and trends, has a really cool interactive chart that allows you to visualize how prices have behaved in various cities across Oregon. The line for Bend looks like a ski jump, except it doesn’t show any little upturn at the end.
Four years ago, on July 1, 2006, Bend had the spendiest homes in the state with a “home value index” (similar to a median) of $349,000, according to Zillow. (Portland was Number Two, at a mere $287,000.) Then came the dive, and it was a frighteningly steep one: down to $320,000 by April 1, 2007, to $216,000 two years later, and to $168,000 on April 1, 2010. In less than four years we went from the highest home prices among the Oregon cities Zillow tracks to the lowest.
Despite Bend’s supposed super-desirability as a place to live, which we heard about ad nauseam during the bubble days, homes elsewhere in the state held their value much better – Portland down 5.9% over the year that ended April 1, Eugene 5.5%, Corvallis 5.4%, Salem 4.8%. The statewide median home value is $209,000, down 7.2% year-to-year; Bend’s value is down almost 22%.
And home prices in California, that alleged hell-hole that everybody supposedly couldn’t wait to escape to Bend from, actually WENT UP 1% over that same one-year period.
Bend appraiser Dana Bratton paints a somewhat rosier picture in the Bulletin story. According to him, “the median price for a single-family home in Bend has remained in a narrow range since January, perhaps signaling a bottom.” Of course this is the same fellow who predicted the Bend market would turn around on April 25, 2008.
According to experts quoted in the Bulletin story, we’re now experiencing the second, or maybe third, wave of foreclosures. The first wave was people who bought homes at grotesquely inflated prices that were far more than they could afford; those folks are long gone. Now we’re seeing defaults by “investors” (read: speculators) who bought houses at what they thought were bargain prices, only to see their value continue to drop until their equity first disappeared and then went negative. And we’re also seeing more and more people who walk away from their homes even if they can afford to make the mortgage payments – so-called “strategic defaults,” which may account for as much as 12% to 20% of all defaults nationwide and god knows how many here.
Is there any way out of this real estate death spiral? If there is, I can’t see it.
This article appears in Jul 1-7, 2010.
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Mr. Miller has hit the nail straight on…. Why is there such a high rate of foreclosures and NOD’s…well lets see… one reason. no jobs to substantiate the house payment.. 2, reading a sign along highway 97, that was put in place by ODOT says “Putting Oregon back to work” I find that sign misleading and false.. We don’t need to spend millions of $ building a new highway when the one that’s been there for years has worked just fine. Also the joke of the year is the “Deere Crossing Overpass” that was built just south of the Cotton wood exit. This is state spending out of control. why do you think the Wal-mart distribution center that was targeted for La Pine four years ago decided to move else where to set up house? Due to the City of La Pine & Deschutes county imposing way too many stipulations upon the giant retailer that over 500 jobs or more vanished.Enough of government stupidity spending. Create more jobs, more job training. Pretty soon Bend, La Pine, and the whole Deschutes county are going to turn into tumble weed cities.
Bruce: Your negative and critical approach on this subject of local Bend real estate will never garner you friends…professionally or personally. More people than Bendites read local news, so negativity will never create the return to better home values and pricing for those wanting or needing to sell.
“More people than Bendites read local news, so negativity will never create the return to better home values and pricing for those wanting or needing to sell.”
Gimme a break, Winston, the Bend real estate situation is not exactly a secret. In fact the name “Bend” has become a synonym for “bubble.” We’re a national joke today thanks to our delusional “positivity” during the bubble era, when we talked and acted as if the bubble would keep inflating forever because Bend was so damn special.
If there had been a few more “negative” (i.e. realistic) people around in those days, our fall would not have been so catastrophic.
I am always impressed when a Dale Carnegie alumnus decries negative thinking and commentary as though that were the source of the problem being discussed. Winston, if HBM were as Pollyannish as most of the Bend ‘Lifestyle’ promoters it would still not turn the real estate values around. In fact, that ‘positive attitude’ boosterism here in Bend led to the inflated values paid by homeowners, many of whom have lost their homes or are so far underwater they are likely to drown, and by speculators who wish now they had listened to the Cassandras with more reasoned voices who shouted warnings that the bubble was about to burst. Hindsight is twenty-twenty. Don’t pretend that a frank discussion of where we are, how we got here, and where we are going is the problem.
The problem is the problem. Those five words have a whole lot of meaning. We have to accept the fact that the local economic downturn was caused by greedy developers, lenders, realtors, and speculators. We have to accept the fact that the people who listened and bought largely were not innocent victims, but willing participants in what they hoped was a chance to get rich but ended up being nothing more than another pyramid scheme.
In the end, the politicians will bend to the will of the housing industry as they already have in part by bailing out the lenders. Locally there is pressure to defer or forgive development cost and expand the UGB to include developmental parcels beyond any reasonable need. It will come to pass because of the Golden Rule: the one with the gold makes the rules.
Finally, the people who lost their homes or their nest eggs or their future or their self respect (perhaps all) will continue to pay the price. Taxpayers pay the costs. We have socialized the costs of the mistakes while we privatized the benefits.
Keep up the critical commentary, Bruce. It needs some critiqueing.
If you build your economy on housing and tourism it’s destined to fall. It’s time for Bend to think ouside the box and diversify its economy beyond shopping and dining “experiences” and building houses for a town full of “tourist slaves” who don’t make the money to afford them.
Bend needs to think less “boutique” and more industrial.
I’m a 20-year Realtor and foreclosure specialist, and I’m amazed no one wants to point the finger where it belongs- the sub-prime mortgage market and Community Re-Investment Act, enabled by Dodd, Frank, etc. It was easier to get a mortgage than a car loan!
With the enlarged buyer pool, now instead of 20 potential buyers for a home, you had 40…the result: more buyers than supply of homes could keep up with, equalling higher prices.
When the sub-prime spigot was turned off, reality set in: smaller buyer pool = lower prices.
Folks that want to blame everyone from home builders, Realtors, mortgage reps are way off. The demand was created by issuing loans to people who could never pay them back.
Oh by the way, another big thanks to our government’s federal tax credit for killing an already slow market. Pull the credit out, the market tanks. If rates are getting no lower, what happens now when they go up, folks? It’s not going to be pretty.
Weekly Reader: “Bend needs to think less “boutique” and more industrial.”
Good idea — but what industries would want to locate here? With the timber gone we have no marketable natural resources, and we’re a three-hour drive or more from the nearest city of any size. With no universities anywhere near us we’re not a likely candidate to become a research hub either.
Karl: There were many culprits in the bubble-and-bust. The Fed (Greenspan) encouraged it with an easy-money policy, Wall Street encouraged it by bundling the sub-prime loans and offering them as “investments” (thereby letting the banks make bad loans without fear of consequences), politicians (of both parties) enabled Wall Street to do that by deregulating markets, appraisers cooked up phony appraisals, mortgage applicants lied about their incomes and bank officials (and, yes, some realtors) encouraged them to lie — it was a gigantic web of deception from top to bottom, by far the biggest Ponzi scheme in history.
HBM: I remember years ago the story about a small town in New Mexico that had a light industry that brought in balsa wood and laser cut it into chopsticks and on top of that exported them to the Orient. The little town of Tremonton, UT used to build Lazyboy recliners. ALL the cement used in construction in Bend comes in on the railroad, so can other commodities. Les Schwab never built a tire in his life. He bought them and resold them. Bend needs to think differently. The whole housing/lifestyle/climate/tourism thing is played out. Hate to sound cliche, but Bend needs more sustainable.
Chopsticks? That’s an intriguing idea. We don’t have many trees left that are good for making lumber, but we’ve got lots of skinny lodgepole pines that might be good chopstick material.
But how many jobs did the chopsticks factory in New Mexico provide? I wouldn’t think it was very many.