Although the real estate boom is now only a nostalgic memory, Bend remains one of the most overvalued housing markets in the country.
That’s the word from the prestigious economic analysis and forecasting company Global Insight, which released its third-quarter report on home prices this week.
Prices have been falling all across the country, according to Global Insight’s press release, to the point where the US housing market as a whole is now undervalued by 5.7%. But the Pacific Northwest in general, and Deschutes County in particular, apparently haven’t gotten the word yet.
“While the contraction in residential real estate value is national in scope, it is most severe in the Southeast and Southwest, areas which were among the most overvalued in the country three years ago,” the press release says. “According to the third-quarter analysis, extreme overvaluation is now ‘essentially nonexistent’ – only three metro areas met the definition of extreme overvaluation, down from a peak of 52 metro areas in 2005. Only the Pacific Northwest remains overvalued.”
The three “extremely overvalued” areas are Atlantic City, NJ, St. George, UT and good ol’ Bend, OR.
Bend’s current median household income is about $56,000 and the median home price is $292,000, according to the GoBend Realty site. Using the rule of thumb that a family can afford a home that costs three times its income, the median price in Bend should be in the neighborhood of $168,000.
Why are home prices staying so inflated in Bend even though virtually
nothing is selling? The only explanation The Eye can think of is that a
lot of people here haven’t yet figured out that the bubble has burst
and are still pricing their homes unrealistically high. They’re still
dreaming that some rich Californian will show up and pay half a
million dollars for their $150,000 house.
A bit less of that famous Bend smiley-face optimism and a bit more healthy realism might help us get out of this mess sooner.
This article appears in Dec 4-10, 2008.
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Well said Mr. Miller. Well said. Email your article to The Dalles and Hood River. They need to read your article too.
It must be depressing going through lfe as such a bitter old man!!!
My guard gated Broken Top home is worth $500/sq.ft. I don’t care what you say. It has fantastic views of the fairway and a montana rock fireplace. On the other hand my pals over at Pronghorn are really taking a bath now folks realize how far away they are from any sort of real world amenities.
A lot of us have known this for a while now, but Bend continues to be over priced. Maybe when the banks and REO’s have lost enough money they will bring down the prices to get rid of there surplus.
Not everyone in central oregon went out and bought a speed boat,rv, jet skis,cabin at the lake, vacations or took a shot at a few spec houses with the (imaginary) equity in their homes. The loans were easy, the though of building savings was tempting.
A lot of the people in central oregon used the money to get ahead, move up,and tried catching the american dream.
Invested in their business and there families.
They were mislead with bad information,predictions and out right lies.
spend ,spend ,spend.
Your not effecting climate change.
Your not in debt
You need five cars
You need a McMansion
There are to weapons of mass destruction in Iraq.
We can not produce a car that gets over 26 mpg.
No more lies please.
Now business are fighting for customers, almost inviting confrontations with each other , their pissed , their sick of
the system and the propaganda.
When all most people in central oregon want is a sustainable ,resource based life, thats good for them, their families the community and the planet, it is now becoming a limited few who trying to head the other direction, if you dont believe me just ask around.
Jed: “It must be depressing going through lfe as such a bitter old man!!!”
So because I report the facts I’m a “bitter old man”?
I have nothing to be bitter about. My wife and I bought our home in Bend (2,700 square feet on a lot of almost an acre) 23 years ago for a price so low I’d be embarrassed to reveal it. We have no mortgage. We have not invested in Bend real estate. And neither of us is in the real estate or building industry.
The people who have reason to be bitter are the ones who borrowed unreasonable amounts to buy homes at ridiculously inflated prices during the bubble and are now underwater on their mortgages. Are you one of those, Jed?
Jerry Golfer: “My guard gated Broken Top home is worth $500/sq.ft. I don’t care what you say.”
What I say or you say doesn’t matter. Your home is worth what you can get somebody to pay for it. No more, no less.
HBM writes: “The people who have reason to be bitter are the ones who borrowed unreasonable amounts to buy homes at ridiculously inflated prices during the bubble and are now underwater on their mortgages.”
How many of those people _really_ have reason to be bitter? Given that Bend was a speculators’ market rather than a homeowners’ market, one might reasonably suspect that these were crazy people with too much money in the first place. First rule of gambling: If you can’t afford to lose it, don’t bet it on a risky hand.
Put another way: They may _be_ bitter, but they probably are well enough off that they _shouldn’t_ be bitter.
HBM: I have been involved in the economy in Central Oregon for 35+ years and have seen the good times and the bad. I believe the area will recover. I would think you would be more positive now that your saviors, the Democrats, are more in control.
As an aside, I do not owe money to anyone but I worked long and hard for many years to get to that position.
Jed, you have no idea what bitter is.
It has been suggested the sub-prime meltdown can be blamed on The Clenis and policies opening mortgages up to minorities. Wrong. The problem is with bozos gambling with equity ATMs – borrowing against their homes again and again through refinance and re-refinance to buy de-engineered suburban assault vehicles and botox treatments for the bimbo. If they lose their homes, fak ’em.
And no, Jed, this old man ain’t bitter. I am in fact looking forward to this housing thing taking at least five years to bottom out, at which time even I’ll be able to do what could never before be done in fifty odd years of living in my hometown: buy a house. and if you lose you ass… fak ‘ya.
Still peddling the Kool-Aid:
The Bulletin picked up on this story this morning and got a quote from realtor Wendy Adkisson, who questions Global Insight’s numbers: “We have a quality of life that probably other areas of the country don’t have and people are willing to pay for that.”
LMAO!!! The old “Bend is Paradise” hokum!
Yeah, Wendy, our quality of frickin’ life is so frickin’ wonderful that EVERYBODY IN THE WORLD wants to live here! That explains why houses here are selling faster than we can build ’em! Quick, expand the UGB by 1,000 square miles so we can build more! It’s the only way we can keep up with the demand!
The real estate “community” in this town is terminally delusional.
Lyle, you’re right of course. But I don’t know if it’s a matter of stupidity so much as that after spouting BS about Bend’s “uniqueness” and glorious “quality of life” for so long, the realtors/builders/developers have come to believe it themselves. There’s no delusion so powerful as self-delusion.
Wendy is a moron. It’s obvious she doesn’t understand where they came up with their number because she can’t even calculate the number correctly. 43% overvalued means National City thinks the median should be $194k. $194k x 1.43 = $277k. This is clearly in their report. That shows me she has not read the report, or cannot comprehend it. Her quote also shows a severe lack of knowledge about historical affordability. Houses have usually been priced between 2.5 and 3x the median income of the town. For Bend, just based on that statistic we would see medians of around the $156k that she mentioned. If she had said something like “They are coming up with $156k just based on median incomes” I would think she doesn’t understand the report, but she understands the basic economics. The thing is… the report takes that $155k based on median income and knows that Bend is more desirable and can support higher medians than the income shows. That’s how they come up with $194k. It’s figured in.
NationalCity is smarter than Wendy.
Global Insight is smarter than Wendy.
My dog is smarter than Wendy.
The thing is, the National City / Global insight report calculates in Bend’s “Uniqueness.” They list the coefficients they use in their methodology report.
Bend’s “Metro Constant”: 1.86
More “desirable” than Bend (19 areas):
Bellingham, WA 2.22
Eugene, OR 1.89
Chico, CA 2.23
Honolulu, HI 1.95
Madera, CA 2.08
Medford, OR 1.95 (area must include Ashland)
Missoula, MT 1.92
Mount Vernon, WA 1.94
Prescott, AZ 2.30
Provo, UT 1.87
Redding, CA 1.99
Salinas, CA 2.29
San Luis Obispo, CA 3.13
Santa Barbara, CA 2.65
Santa Cruz, CA 2.66
Santa Fe, NM 1.98
Santa Rosa, CA 2.39
St George, UT 2.26
Wenatchee, WA 1.98
Less desirable than Bend: The other 310 in the report.
She didn’t read the methodology in the report. If she had she would understand where the number came from. She would understand that they already figure that Bend is in the top 6.25% of desirable places.
She may not be stupid. She may just be lazy. How hard is it to download a PDF and read through three pages that describe how they come up with their number, and one page with the “metro constants.”
Whether it’s stupid or lazy, the Bulletin should choose better when interviewing.
I can’t believe that Wendy didn’t say, “It’s never been a better time to buy.” They love to say that.
Note to Wendy: “Quality of life” is subjective and lots of places have it…….at a cheaper rate. Wake up and smell the latte (if you can afford one).
Lyle: Hard to figure out what criteria they used to determine that Redding, CA is “more desirable” than Bend. It always struck me as a hot, flat, uninteresting redneck shithole.
Like the Medford area including places that are much nicer than Medford, the Redding area includes places like Shasta and Shasta Lake.
The Bulletin idiotorial page outdoes itself in shameless sophistry this morning with an editorial pooh-poohing the Global Insight report:
“The latest report for the third quarter of 2008 says single-family home prices in Bend were 43 percent overvalued,” it says.
“What is that supposed to mean?
“It means that according to a manufactured statistical model, 43 is the percentage that popped out for Bend.
“‘On the whole,’ they explain, ‘this statistical model works well. It explains 76 percent of the variation in home price-to-income ratios across places and over time.’
“Of course, that means that it fails to explain 24 percent of the variation.”
The editorial concedes that the criteria used to determine whether homes in a given area are over- or undervalued “seem reasonable.” But then it argues that it’s only a “statistical model,” and “Statistical models and their results, no matter how gosh-darn accurate they are, are merely measures of probability. For this model to be 100 percent certain, homes in Bend would have to be actually overvalued by 43 percent. And the only way to determine the price of homes is to actually sell them.”
Well, yeah. But have you noticed, Mr. Costa, that hardly any homes have been selling here for the past 18 months?
Then we get this snarky remark:
“IHS Global Insight and National City Corp. put out the House Prices of America report for free. So you could snidely argue thatâ ™s what itâ ™s worth, nothing.”
The Bulletin editorial board endorsed George W. Bush twice. You could say that tells you a lot about what its judgment and credibility are worth.
If you wanted to be snide, that is.
It won’t surprise me if today’s Bulletin editorial is used as a rationalization for not reporting the Global Insight survey results any more. I’m sure COBA and CORA have been putting the screws to Costa & Co.
“I believe the area will recover.”
I believe it will too. But it will take a few years. And we’ll never again see the ridiculously inflated real estate prices of 2005 and 2006. That was just insane.
A more meaningful question for me is whether Bend can sustain its present population (over 75,000) with an economy based on tourism and selling a “lifestyle.” My hunch is it can’t. And we really don’t have anything else to base our economy on.
Sure sounds to me that Jed is a “bitter old Republican”. Living life that way – with Democrats in the majority – must be very painful for Old Jed. It’s sad that Jed appears to be unable to discover the insight necessary to move on and embrace change. Oh well, there will always be dinosaurs of some sort to complain that the “good old days” were the best. Rigidity is its own reward.