Bend has earned a high spot on a national list again, although this time it’s an honor that we probably would just as soon pass up.
According to a National City Bank economic report released May 30, the median price of a single-family house in Bend in the first quarter of 2008 – $290,500 – was 49.5% above where it should be, based on the area’s income levels, population density and historical patterns. Only Atlantic City, NJ was more highly overvalued, at 55.6%.
National City has posted a cool interactive map that shows each of the 330 metro areas it analyzed, marked as undervalued (brown), fairly valued (green), moderately overvalued (yellow) and overvalued (red). Deschutes County shows up as an island of red in the middle of Oregon. Portland and Salem are also red, while the Corvallis, Eugene and Medford areas are yellow.
The Pacific Northwest generally is the reddest corner of the map, and – rather surprisingly – most of California is now green. Only the LA-Riverside and Madera areas are yellow, and nothing is red.
National City cautions against reading too much into its findings: “Users sometimes misinterpret the valuation metrics by assuming that a particular degree of overvaluation implies that house prices are destined to decline by that amount.” In other words, saying that Bend homes are 49.5% above what the study considers “fair value” doesn’t necessarily mean the median price will drop down to less than $147,000.
Still, if National City’s analysts know what they’re talking about it looks like the Bend market still has quite a bit of correcting to do before we see a turnaround.
This article appears in Jun 5-11, 2008.
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Needless to say, this is news that you will never read in The Bulletin.
Prices are dropping still, and the indexes are bad. This is not good. But second home communities – despite exhibiting more instability than regular housing markets – do possess some ability to reach equilibrium outside historical bounds for things like wages vs. median home price. I think prices are still going drop, and perhaps by quite a bit. But I’d be astonished if they dropped another 50% while the national markets and other regional markets stabilize. If the national market continues to decline and perform poorly, we may see that, and that may still happen. I sure hope to God that’s not the case…
Of course, Bend could have avoided this either if the real estate and development community gave an honest sense of when the market was gonna peak (many in the industry have admitted to being overzealous here) and the overall state of the market (and the Bulletin and other shameless promoters took off its rosy glasses for a reality check) or Bend was able to successfully manage its growth. Ton of evidence that smart growth leads to stability in housing markets. Whoops, I just revealed my cards. Yuck! Smart growth! Socialism! Go back to where you came from you elitist prick!
/ True. But you’ll find an article in The Bulletin on how many awards The Bulletin won at some crappy journalistic thingy. Horn-tooters.
Observer: I don’t think real estate prices will fall 50% either and I sure hope they don’t — I have a house I’m planning to sell in a couple of years. It’s looking like prices in other over-hyped areas are starting to return to more realistic levels, viz. California and Florida turning from predominantly red to predominantly green on the National City map.
As far as the second home market grows, will it ever really be big enough in Bend to sustain the economy? I’m inclined to doubt it. Are there that many people who, having a million bucks or more to spend on a second (or third or fourth) home, would choose to buy it in Bend, Oregon? I don’t know. I know I sure as hell wouldn’t. Our glorious “lifestyle” is not really that “unique,” to use an overworked buzzword.
Re “smart growth”: Sounds good, but I doubt Bend will ever put it into practice. Our economy and our governments are addicted to growth. As a very smart lifelong Central Oregonian said to me a number of years ago, “Growth has become our only industry.”
Oops — should’ve said “as far as the second home market GOES”
Um… we’re actually #2, behing Atlantic City, NJ. That said, it is interesting that almost all Oregon cities are “over-valued”. Are they taking into account that people WANT to live in Oregon for the quality of life and will pay more to do so? I don’t like these high prices either, but 49% over-valued seems a bit steep.
First of all, 49% overvalued does not imply a 49% decline is required to return to fair value. It implies a 33% decline (146% of fair value to 100%).
Second of all, gotta give it up to the Bulletin for covering the story with one huge caveat: they included the silly “it’s different here” rebuttal spouted by irrational housing bulls:
http://tinyurl.com/5fdwkf
“we’re actually #2, behing Atlantic City, NJ.”
You’re right — I missed that little red spot on the East Coast. Good catch. As you can see I’ve corrected the post.
“Are they taking into account that people WANT to live in Oregon for the quality of life and will pay more to do so?”
I think you’ve swallowed too much of that “Oregon (or Bend) is Special” Kool-Aid, my friend. The so-called quality of life is NOT so spectacularly splendiferous that people will pay ridiculously inflated real estate prices to live here. Believe me, I have lived in five different states and visited most of the others and I know.
Jesse: Yes, some props are due to The Bulletin for at least acknowledging the story. I wonder if they’ve finally been embarrassed into giving the local real estate boondoggle at least semi-honest coverage. If so, the local bloggers (thinking especially of BendBubble.com) and guys like David Fisher deserve the credit.
More Bendbubble2, I’d say.