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?”
This article appears in May 27 – Jun 2, 2010.
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Absolutely right on the money!!!!!
Well said,the last thing we need is more empty homes.For once I agree with you.
So does that mean that we just let all the builders go bankrupt? They have to keep building – granted it is on a much smaller scale now – in order to stay afloat. If the construction industry in Central Oregon goes away, then so do jobs. And as home sales pick up (read the Yahoo article about Bend being the #1 place to retire because of our low prices) there will be more and more jobs in the construction industry.
If you want to blame someone for the glut of houses on the market – blame the banks that are selling their foreclosures for pennies on the dollar of what’s owed. They are causing whole neighborhoods to consider giving back their houses – because the other twelve houses on their street all just sold for $99,000, and they still owe $199,000. If the banks would have some sort of conscience about reselling the foreclosed properties, and stop wholesaling them at rock bottom prices, then the people who ‘can’ make their payments, but know that they will never in their lifetimes get back the $100,000 they are underwater, will think twice before giving their homes back. Sure, we should all be morally responsible and make our payments ‘No Matter What’ because we borrowed the money….blah blah blah. But, where is the Banks’ responsibility in not destroying the values in neighborhoods ‘just because they can’ – who is regulating them? Shouldn’t there be some sort of floor on what they can sell those foreclosed homes for? This mess is not going to slow down until the banks stabilize their prices, and stop devaluing neighborhoods and towns.
So, I say, give the builders a break. Let them try to maintain a living ‘until things turnaround’. Let them keep a few plumbers, framers, heating companies, electricians, carpet companies, cabinet makers, insulation companies, lighting and appliances stores, and even a few City/County Inspectors employed. God know they are competing with the ‘foreclosure prices’ to try to sell a house, but it keeps the wheels turning, allbeit very slowly…..
Lainie: I feel sorry for the builders, but unfortunately there are simply more of them than the current (post-bubble) economy can support. How long should the city be required to subsidize them until “things turn around”? We’re never going to see the construction pace of 2005 again. Maybe some of the builders will just have to go elsewhere to find employment or go into a different line of work. Plenty of other people have.
If the builders don’t want to fund the government services they use, cut them out. Then let them experience the consequences. Let them wait for their plans to be approved by a single plan checker. Let them wait for an inspection by a single inspector. There is plenty of infrastructure in developments that are sitting unutilized. If they ‘must’ build, why not build there until the current infrastructure is actually used up?
‘So, I say, give the builders a break.’ Lanie, they got their break–and then spent it foolishly.
‘So does that mean that we just let all the builders go bankrupt?’ No, just the ones whose business model doesn’t work.
For the last eighteen months my business has been month to month and halfway through every one of the last eighteen, I steeled myself for inevitable failure. I have cut–am essentially working for minimum wage if I’m lucky–and hope we make it until things turn around. I wish I could have kept everyone I laid off–but we–Bendites–are in the middle of a Depression, not a Recession. The very same people who helped put us there–and they are members of COAR and COBA along with the banks–haven’t learned anything. They just want another handout. They just don’t get it.
Bend has a problem–it’s like a five year old in a candy store. Everything looks good and they don’t know why they can’t have everything they want. Well, as George Carlin used to say: IT’S BAD FOR YA!!
An example, in another direction, is the new Miller’s Crossing(?) Park proposal. All we need to do is come up with another $1.5 million to fund the purchase–of land that developers no longer need because its market value has collapsed. Wow!! Another park sure would be nice and it’s a beautiful spot and the developers are so-o-o-o generous to offer it at such a sweet price. Hey!! People!! IT’S BAD FOR YA!!!
Listen, I don’t want the banks, mortgage brokers, developers, builders, contractors, and realtors to fail. I just want them to pay their way. I know enough of them to have spoken with them about the hard times of the last three-going-on-four years and they have had no trouble expressing their disapproval of goverment spending and waste, creeping socialism, out of control taxes, powerful special interest groups, etc. But when it comes to their own self interest. Then we hear the all too familiar refrain from the Mathers and Andrews of the Bend Business Elite: Help us–help us! We’ve fallen down and we can’t get up!!
I paid for their road paved with good intentions going into this catastophic ‘business cycle.’ Let them pay their own way out. Sorry, but I’m tapped out and just don’t want to donate to their cause any more!
Five years ago my husband and I decided NOT to sell our little old home, and instead try to find someone who would be willing to remodel it instead. I called 7 different contracting companies before I was able to talk to someone who was even willing to even discuss. The responses I received from the unwilling contractors were borderline rude. We finally found a contractor who was willing to work with us. This is now one of the only contractors that I personally know that is still in business. We will continue to use him, because he was willing to “do the little jobs.” I have a hard time feeling sorry for the builders who let themselves get caught up in the whirlwind, and overextended themselves. On the other hand, they do need to make a living, they have families. How about learning a trade such as solar panel installation or green roofing?
I’m not rooting for anyone to lose their employment (I already have), but we can’t keep living like there is no price to pay. Not all builders will survive, but artificial respiration isn’t the answer.
I’m with you on this one HBM. Supply,demand, timing. Enough said.
Subsidies, fee deferrals and the like aren’t free – they’re always at the expense of something else. I think that when the market’s there, builders will reappear. No problem with that. There’s nothing high tech about homebuilding, no danger that if there’s demand for homes in Bend, we won’t be able to find people willing and able to build them.
I’d rather save the incentive and subsidy money for high tech, manufacturing, higher education and other industries that have higher start-up costs and that we want to attract (and keep) in this area. I know the builders are hurting and I feel for them, but I’m not worried about homebuilding as an “industry” disappearing from Bend and not coming back, so I don’t think that, thinking big-picture, they’re a good investment of subsidy money.
The guiding Mothers and Fathers of the city of Bend have been so far behind the Eight Ball for the last 30 years; that i have lived here that it is beyond STUPID.
There has not been a short term out look; much a long term.
Enough said, just look at the track record of the city and the select few that have led this CITY for the last 30 years.
Paul C. Patrick
I find it hard to believe the builders would really be better off building.
Though, if they can build a new house and come in under-market (why else bother) that says something about how much of the bubble remains.