The Boot: Oregon’s Own Daddy Warbucks

Crash, what crash?

Some folks continue to look for a silver lining, or at least a light at the end of the tunnel, for the local residential real estate market. Witness the industry folks who say prices are holding steady even as sales volume has plummeted. (And even that is up for debate as one broker told Upfront, pointing out that the median sales price is down 13 percent for the first six months of 2008 versus the same period last year.) And despite the industry's loud proclamations that Bend's market is unique and unlike any other place in the country, immune to the storms that have nearly sunk the industry, the reality is that Bend and Central Oregon's real estate is tied to the health of larger markets - particularly Southern California as well as Seattle and Portland. And the prognosis for those markets isn't good. More importantly the overall economic picture for the nation has yet to brighten. According to the New York Times unemployment is at four year high and the manufacturing sector, particularly the automobile industry continues to tank with GM posting the worst year in the history of the automobile industry - the entire industry - with losses of $38.7 billion.
On the housing front, industry insiders are predicting that the mortgage crisis will only worsen as the collapse in the subprime market spreads to prime loans and near prime loans. According to the Times, evidence of the looming crises is already amassing. Delinquencies in alternative prime loans, which usually include a mix of adjustable rates and interest only components, quadrupled between April 2007 and April 2008. Meanwhile defaults for prime loans doubled during that same period as buyers struggled to keep pace with the mortgage payments amidst the softening economy and tightening credit market that has prevented homeowners from refinancing to more favorable terms.