patrick.net

Michael Anderson,

Your knowledge of our geography (and markets) is pretty impressive! To answer your question in a word, no. We can not continue on this path regardless of what transpires in CA. In addition to no longer being a bargain many of our city councils have already "run amok". In Bend NIMBYism is already banning alcohol (in all forms) on the river as it passes through town. This has been a long time trad. in Bend for young adults on floats and inner tubes. Only one councilman stood up. The rest appeased the wealthy homeowners on along the river. My guess is that they figured by banning alcohol the tradition would die and they would have the river to themselves. As far as I know, it's working.

>>Your knowledge of our geography (and markets) is pretty impressive!

I'll tell you why. After owning in Eugene for 14 years, I sold in November. Felt very "toppy" to me. Since then I have been paying very close attention to the Oregon RE markets. I now rent in Bend. For about 1/3 what a reasonable mortgage would be. Situation seems unsustainable.

All of the sudden we have an explosion of inventory, but no one seems to want to notice.

SP,

The only point that I was trying to make was with the LEGACY of lawlessness Molalla, OR enjoys who would know and who would care! It's a defunct logging town that died in the late 70's whose primary "export" is now drugs. Hell, people came out from Portland to score dope! It's getting better but for years it struggled with a real negative image. I do not advocate drinking and driving b/c it gives drinking a bad name.

In Bend NIMBYism is already banning alcohol (in all forms) on the river as it passes through town. The rest appeased the wealthy homeowners on along the river.

I'm guessing the next step are "quiet zones," forcing river-goers to whisper as they pass by properties--as they've done in CA gold country.

Alcohol was not banned until we had a drinking death on the river. But you're probably right; I'm sure the homeowners saw that as an opportunity to shut down the fun.

Michael Anderson,

"but no one seems to want to notice" LOL!

Renting for just 1/3rd! Outrageous! I simply must speak with your landlord. I hear ya. I can't blame anyone for wanting to depart Lane County but I'd heard that Bend is filled with realtors, builders. contractors, appraisers, mortgage brokers etc! Virtually ALL of their employment is based on RE for crissakes. Unsustainable? I think it's unbelievable.

Kurt S,

Would accidentally farting be considered an infraction in these "quiet zones" then?

I'm not trying to make light of someone's death on the river Michael but when we look at the stats there are several deaths on OR rivers and lakes every year. Can this ALWAYS be attributable to drinking? In most cases I've heard not.

My landlords are out-of-towners. They probably bought what is now a 700k property two years ago for 400k.

Here's the problem, to whom do they sell? They can't very well sell to another investor, can they? The rent would not be sufficient. (OK, they could sell to someone who believed the appreciation would continue.)

So, what does that mean, exactly? As I see it, all these 3,000 square feet houses that were bought by investors at a bargain now have to be sold to owner-occupiers, at a premium rate. That's right. Bend needs even more Californians than we've been getting so far. And they have to be wealthier.

Still, that's what we have to do. Bend now advertises for rich people in California. They simple MUST move here now--buying our houses isn't enough.

It's almost comical, if so many naive people weren't about to get slammed. I swear it's going to be a surprise. 9/10 people here think next year will be just like last year--we don't see what Florida or San Diego or Arizona has to do with us. Only if you have one of those thousands of houses on the market now are you sweating.

Soon we'll have over 200 of the $million+ houses. We've got to really ramp up to sell those too, because that's almost 3 years of inventory at last year's rate.

If some of you Bay Area people could move up here ASAP, we'd really appreciate it!

>>Can this ALWAYS be attributable to drinking?

Of course not. This one was. A strong young minor league baseball player, drunk off his ass, floating with friends. How this happened is beyond me. If you've ever been on the Deschutes in downtown Bend, well, it's no Willamette. I was in the Willamette in Euegen a few times and it frankly scared me silly. Two or three people die every year there.

The Deschutes is mostly slow and shallow. On warm days there's almost more people than water. There's kids and dogs and old folks floating. I can only assume that his friends were so trashed they didn't even know what was going on.

>>I’d heard that Bend is filled with realtors, builders. contractors, appraisers, mortgage brokers etc!

You can imagine how cocksure they are, too.

Man,

SF is my limit for cold and rain. Oregon is just a little too gray and rainy for me. But it is beatiful when it's not raining.

Anyone seen this from the washington post?

http://tinyurl.com/qnbd8

"Over the last six months, the biggest negative contributor to the leading index's drop has been declining housing permits."

So who says the economy will continue on an upward trend without housing? I think not!

>>For those claiming Oregon has CA-prices, that is laughable. I can still buy a good 2000sft house with a decent yard, great schools for low $300Ks.

Depends on the city. Remember that Central Oregon prices have been among the fastest appreciating in the country. Million-dollar houses are over 12% of the total for sale on MLS in Bend. Over $500k is about 40% of all houses for sale.

Heck, the duplexes overlooking the Old Mill are over $500k (per side). OK, not California prices, but closer than they should be.

CNBC...Camden Property CEO says that fewer apartment dwellers are moving out to buy houses. Sees rents going up as much as 10%.

Michael Anderson,

"Here's the problem, to whom do they sell"

That pretty much sums up my assesment of what's gone on in Bend (and neighboring areas) for the last several years! Yep, we need more CA's and not just the "nickel millionaire" variety too! These folks got to have have some serious cash to keep this thing going.

>>Yep, we need more CA’s and not just the “nickel millionaire” variety too!

Haha! Good way to put it.

I think our EXTREMELY rich developments will do fine. We have movie stars buying in Pronghorn, I've heard.

I think if the "nickel millionaires" keep buying in Central Oregon, it'll be in Prineville, Sisters, and LaPine, not Bend, Sunriver, and Redmond.

---

OK. Question. When do the masses switch from "loving" RE to "hating" RE? If ever?

Scott J,

"so who says the economy will continue on an upward trend without housing"?

Honestly I can't answer that, I wish I could. This much I do know. We will try to move forward with or without it. That's one of the things that has bothered me most about the bubble. An economic recovery based almost solely on housing. It's 2006! You'd think we'd have this whole "shelter" thing figured out by now! Why don't we just go back to cattle ranching? Why don't we base CA's economy on gold prospecting? Buggy whips anyone? It's just been such a total regression.

By the time Apollo 13 had launched American's were already taking space travel for granted (so few watched). How is it possible that we are still so "snake fascinated" with freaking real estate? Maybe when we're taking up collections for FB's and McMansions sit rotting we can move forward.

"nickel millionaire" was one of "mom's" favorites. We were from Cicero, IL (solid lower middle class) and anytime we drove through Chicago's more "posh" suburbs the folks would make sure to point out the bedsheets hung where curtains should be!

You know? It still applies today. That's why most McMansions have the windows up high and all of the furniture is "built ins". This way we can flip 'em to one another and move out by piling our sh@t into the SUV!

I just compared San Diego to Bend OR at realtor.com. About the same percentage of $1million+ houses in both (~12%).

San Diego has a 52% $500k+. Bend 44% $500k+.

Is it just me or is that crazy? I think Bend could fall a lot harder than San Diego.

"It’s 2006! You’d think we’d have this whole “shelter” thing figured out by now! ... It’s just been such a total regression."

Agreed. We're trying to relive an illusory American "golden age" through smarmy Kinkade paintings and malignanty swelling McMansions; expansive consumption without the historical American temperance. If home ownership is the defining American identity, g-d help us.

DinOR,

Well, I don't mean to presume either, although my post said otherwise. But no one really does know. Speaking to your point about American's facination with RE, it is INGRAINED into us that "owning" a home (at this point becoming an FB) is what separates us from the rest of the world and makes us better. We're taught this dream in elementary schools. All of us are taught that the structure of American society is to create a huge and unstoppable middle class and the foundation of that is for people to own their own home.

It feels like the middle class is shrinking, I see news about this in sfgate.com, nytimes.com and on TV. Why is the middle class disappearing? Are we NOT as hard working as we used to be? I know I've spent more than a few hours at work reading the news articles and info in this blog, but I don't claim to work any less hours than my father. In fact, I think I put more hours into my job. Has the middle class attained a peak regarding our standard of living that is so high that it can't break through to another level? Is "down" the only place left to go?

Out of curiosity what can America do to move forward? Create a society devoted to philanthropy? Considering that for the past 200+ years America has been the place to be for anyone who wants to strive for something when they have nothing, are we no longer the place to be? We're still a stronger economy than other countries even with our supposed transparency. We see weaknesses when they are made public and there are "corrections" that occur. I really hope the next correction isn't like the great depression.

Ok, this was sort of a rant...

>>Agreed. We’re trying to relive an illusory American “golden age” through smarmy Kinkade paintings and malignanty swelling McMansions...

I have a theory about that. I've read that American homes are 40% larger than they were.

Have you ever gone back to your elementary school? When you were a student there you were only maybe three feet tall. As an adult, the place looks as if it shrunk. The hallways are narrow, the chalkboards are lower, it's like a small reproduction of itself.

Of course what happened is you grew up.

I think we've built these huge houses out of nostalgia. We remember houses as huge because we were so little.

I'm always reminding myself that my kids must see this house we live in as a lot bigger than I see it. It's probably twice as big as the house I grew up in, and that seemed big enough to me.

So what's a guy to do to protect himself and his family from a shrinking middle class and less buying power for his dollar?

1) Put money in the bank?
2) Buy RE? (I just had to put that one in) lol
3) Invest in stocks? I don't even know where to begin on that...
4) Bonds/CDs?

Michael Anderson,

Are you serious? If that's true then Bend will likely fall a lot harder than San Diego. All that aside for just a minute, it's fine to say you can still buy a 2,000 sq. ft. 3/2 w/great schools in OR for under 300K but where are you going to work? It's the affordability level, not just the price! I'm not so sure OR public schools are all that "great" either.

Scott J,

Randy H and I agree on a number of things (just part of being mid-westerners I suppose) but one thing we are in absolute agreement on is having your own business! Start it as a sideline, moonlight, weekend whatever! What ever lessens your reliance on your employer (in the long run) enriches you. Like Nike's motto, "Just do it"!

>>We have completely stripped our nation of all it’s manufacturing base and sent it to other countries where it’s cheap to do.

Let's not forget that the US still has a huge manufacturing base--it's just not done with actual people anymore. If not for outsourcing, more would be automated.

I'm not disagreeing that it's a concern, but I don't know what you want to do about it. You force those jobs back home and it'll mostly mean buying a bunch of japanese assembly robots.

One of my favorite books on factory work is "Rivethead," by Ben Hamper. Just an amazingly well-written true horror story about working at GM.

You just can't win at manufacturing jobs. Remember when everything said "Made in Japan" or "Made in Hong Kong" or "Made in Taiwan"? As soon as wages go up, the jobs migrate or get automated. Eventually, we won't see "Made in China" any more. A guy I know that owns a business tried to go to China for manufacturing and came back having decided it's already gotten too expensive there in the last couple years.

What do you do with all these displaced factory workers? When I was a kid they made a lot more money than my white-collar accounting father. Those were good jobs!

Not everyone is cut out or wants an office job. And there aren't enough high-paying services jobs for everyone anyway.

Wages seem stuck, too. We have too many people sitting in jobs that should be filled just by teenagers and other "starting" workers.

Looks like we're about to suffer from just about every kind of inflation but wage inflation.

A puzzle.

>>All that aside for just a minute, it’s fine to say you can still buy a 2,000 sq. ft. 3/2 w/great schools in OR for under 300K but where are you going to work?

I'm sure there's a hell of a lot better jobs in San Diego than Bend. I think Bend's plan is to cater to California retirees exclusively. We're like a big-ass old folk's home.

Scott J,

What DinOR said. The financial-geek-speak is "owning a piece of future free cash flows". It just means that your company makes you money. The more of that company you own, or the more pieces of other positive companies you own, the better. It isn't different than owning stock in a public corp., except that you have a lot more information and a lot more impact on the outcome, and usually a huge amount more stake in the profits.

Better to own 50% of a small, private cash-flow positive company than to own 0.0001% of a huge, massive, profitable company. The downside is that small ventures are usually riskier; but that is usually overblown. Big corps are pretty risky too.

T Lynch,

The Financial Times recently ran a piece about world manufacturing output position. I ran a thread on this blog .

The notion that the US has no manufacturing is false babbling by a clueless mainstream media. In fact, the US has dramatically increased its share of total global output while Japan and Germany have fallen. China is but a mere fraction of US output.

Don't head for the hills yet. It takes a real real real long time for empires to die, even today.

"I think we’ve built these huge houses out of nostalgia. We remember houses as huge because we were so little."

Interesting theory; certainly many of these homes have a cartoonish appearance.

"I’ve read that American homes are 40% larger than they were."

Here's some stats I found on the growth of the American home:
Average home size 1950: 983 sqft
1970: 1400 sqft
2004: 2349 sqft

It's true that the US has a huge manufacturing base, but it's also true that tons of high-paying manufacturing jobs have been lost. I just don't think there's any way to fix that.

T Lynch,

We all consume misinformation, no matter how hard we try not to. It is impossible in today's environment to not be consumed by hyperinformation.

If you can understand the front page of the Wall Street Journal or Financial Times then you can at least try to figure out what to believe and what to suspect. Nearly everything you read in other mainstream press, and absolutely everything else you hear/watch is either purposefully spun, ignorantly misreported, or simply lacking in essential context.

It's like this: Median Income in Santa Clara County is (I'm guessing here, so don't jump on me) $72,000 per year, the blond talking head reads from the teleprompter. That's up from $67,000 last year. Big smile.

What the hell does any of that mean? I'll tell you. Nuttin'. But, a report that says something like: A county survey of 1,000 residents with incomes assumed to be normally distributed reveal a median of 72K with a standard deviation of 15K, and a confidence interval of 95%. While this number is up from the previous median of 68K, the previous standard deviation was lower at 8K. Further, researchers at UC Davis dispute that income is not normally distributed and instead bimodal in nature.

That just isn't as sexy, even if it is useful.

We all consume misinformation, no matter how hard we try not to. It is impossible in today’s environment to not be consumed by hyperinformation.

I love misinformation. Use it well. Use it often. :twisted:

Santa Clara county, income distribution, 1993 - 2003:

http://www.jointventure.org/publications/index/2005index/progress/innovative/graphs/21a.html

Looks like even the 80th pencentile is making less than 1 HaHa.

One thing though, the distribution is definitely skewed, so the median does appear to underestimate the earning power of potential house-buyers.

KurtS,

I've seen that data before and frankly (it's embarassing). Mind you all this time the avg. family size is shrinking! Before we can even break a sweat getting into the sociological impacts let's just look at the data by itself. Hmm? Total freaking waste. I'm not even an environmentalist for crissakes.

>>Don’t these self-important buffoons realize how truly insignificant their Petunia Ordinance of 2004 is, in the grand scheme of life? [Not to pick on Bend, per se, I am sure it is a charming town, but it is just an example]

Bend is trying to maintain a mystique.

The long-time locals seem chagrined or miffed or something. I think they were sort of rugged people before all the effete outsiders moved in.

I asked the local moving guy how he liked Bend. He said he liked it OK before all the new people moved in. Not something I expected him to say to someone who was just moving in.

This all just sort of simmers. It's a beautiful place (not rainy like the valley) and all the sunshine tends to keep everyone a bit more cheerful than is normal in the Northwest. People seem, overall, less cranky about Californians in Bend than in Eugene.

A mixed bag. It's hard to know what to think of the Californians when they are simultaneously making things unaffordable and creating all the employment.

I think some people may rethink the concept of "waste" as they tally long-term heating and maintenance costs. Many of these McMansions were sold to people who are now just covering their monthly nut; deferred maintenance anyone? How easy to compare long-term maintence for a 4000sqft vs 2000sqft home? I don't think many buyers work out the numbers beforehand, Given our stormy coastal winters, I'd never consider anything over 3000sqft here.

>>Yee, I know I’m evil, but I plan to be on the right side of that bimodel distribution.

I hate to see anyone suffer, but when an inlaw complains to me about how I live in a nice house while they live in a trailer, I think back to all the late nights I had teaching myself programming while they were toking on the Mary Jane. My wife and I were putting money away while they were getting knocked up by random guys out of wedlock.

Not only did I have to burn the midnight oil for me and mine, I ended up writing these people checks when they got into impossible scrapes.

I feel for the people who had genuine bad breaks. I don't feel for the people that made their own lousy bed.

Who is greedy, the guy that works his ass off to get ahead, or the people that are lazy and then beg for loot from the "more fortunate"?

SP,

The Mighty Columbia takes it's share of victims every year. Seems more often than not it's kids, too small a boat and no life preservers. Even in August the water is cold and swift. But we do have our share of drunks doing swan dives into the Clackamas that are found "face down" a week later and miles down river.

>>I don’t what the difference is between 1950 and now that makes that me so different from the Mom’s back then.

It's amazing to me some of the houses that had 7 kids raised in them. Seems like it must have felt like an Atlantic crossing.

the people that are lazy and then beg for loot from the “more fortunate”?

AKA, the Boomers?