Wednesday, August 22, 2007

I wanted to take a step back from the news headlines and the bubble bloggers and try to logic out what I think is going to happen here in Bend.

The liquidity crisis, while perhaps the mechanism that pops the bubble, is to some extent beyond the point. That is, whatever the Fed does to stop bank runs and reassure the stock market isn't going to change the housing bubble.

Here's what I really think: If the most optimistic real estate agents were right, and we have an endless flow of well-heeled baby boomers and yuppies who want to live in Bend, we STILL had a bubble. We STILL had too many houses to absorb.

Too frakkin many houses, which had risen too high, too fast in price. Never mind the Fed, the housing market in Florida, or the stock market.

Bend built too many domiciles.
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7 comments:

Anonymous said...

We could use some of Bend's houses over here in Corvallis. We have low supply and high prices. We have maybe 250 houses for sale in a town of 55,000.

You have high supply AND high prices. That doesn't sound sustainable. The question is whether your prices will swing too much the other way -- eventual "fire sale" prices to offload all that inventory.

August 22, 2007 at 9:18:00 AM PDT
Duncan McGeary said...

I think it's going to take a decade to work through all these houses in Bend.

Supply always catches up to demand. Just wait.

It was always a pretty ridiculous argument in Bend that we had 'limited' space. If you check out 'density' statistics, we run about half of Eugene, Corvallis, and Salem.

Too many builders jumped into the pool at the same time here in Bend...

August 22, 2007 at 9:39:00 AM PDT
Duncan McGeary said...

Some of those surplus builders are probably headed your way, Jeff.

August 22, 2007 at 9:41:00 AM PDT
Anonymous said...

The Willamette Valley would never allow the kind of 'get rich quick' speculation that occured in Central Oregon.

Here in Bend during the past five years it was known that the cost of infrastructure for a single family home was over $60k/home. To date developers only had to pay $12k/home.

Infrastructure is schools, water, sewage, storm, and roads.

The failure to force developers to pay the true cost will eventualy create a complete collapse of Bends over-loaded infrastructure. In many ways the easy-building, and low cost fueled the over-building that we're stuck with today.

In Prineville estimates are from 25-80 years of inventory, and current sales rates, Madras, ... same problem. Even today in Bend the builders are getting new permits quicker than housing are selling every month.

All this speculation would end tomorrow if developers were forced to pay actual cost of infrastructure.

A familiar BIG-LIE in Bend is that is the place of the rich. The fact is Bend is a town of poor people who refused to pay the true cost to flush their toilet.

In Wilsonville Oregon, the highest per capita income in the state, all new homes MUST pay $90k/home for infrastructure, the true cost today for a new home. Thus there really are places where real-rich people live, and plan, and desire that their toilet flushes in the future.

Bend Oregon, is simply a place of get rich quick, and move on people, so called "non-placement-bound" to quote boss hollern. Nobody intends to stick around, so nobody cared if you can flush your toilet tomorrow.

Bend is NOT the home of the rich, but it is a way-station for the dumb and miserly.

August 22, 2007 at 10:04:00 AM PDT
Unknown said...

Not only did we build too many houses we built too many real estate jobs. As we work off this bubble many of these jobs will be lost. As there is no other local industry to absorb these jobs I think we will likely see a significant reversal of the growth we have seen over the past 5 years. Bend benefitted from the real estate bubble much more than the average town. It will now suffer much greater from its popping. The old adage will hold true: "when Oregon catches cold, Bend gets pneumonia."

August 22, 2007 at 10:04:00 AM PDT
Anonymous said...

Good real estate info. Thanks for the read!

As far as the real estate bubble goes, it looks worse in San Diego.
I came across a San Diego real estate broker's blog post that is to be the only one I've seen that does not spout the 'industry line: "It's always a good time to buy real estate." This broker calls it like it is. No it's not PC, but it is amazingly informative and insightful.
Bob Schwartz, the San Diego real estate broker who publishes the blog, wrote a great article back in 2005 that predicted today's huge home deprecation. You can read this article at: San Diego real estate the url is:
http://www.brokerforyou.com/brokerforyou/?p=11

August 22, 2007 at 10:25:00 AM PDT
Duncan McGeary said...

I agree, Jesse. This could be a downward spiral. I wonder how many of these people who were building and selling houses also own houses? If they have to leave, it will only add to the inventory! Which will worsens the problem, making even more people who build and sell houses leaving town, and so on.

August 22, 2007 at 11:25:00 AM PDT

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