The OB. (Original bubbleblogger.)

Since I don't have much today, I thought I'd reprint the comment by BEM yesterday, which, as usual, I thought was very astute. And my not so astute comment at the end. But, yeah, what HE said.

Bend Economy Man said...

There was a phrase bandied about a lot on the national Housing Bubble Blog that inspired me to create my blog: "revert to the mean."

I understood this to mean that once the excess credit leverage was eventually gone from the economy, you'd see the pre-boom economic situation establish itself (in housing, for example, there would be a correlation between median income and median house prices).

Bend is/was a highly leveraged place. You saw the terms "upscale" and "affluent" used all the time to describe newcomers to Bend but media outlets like The Bulletin and KTVZ could never seem to give an adequate explanation about why the median income in Bend did not reflect the new "affluence."

The Occam's Razor explanation of how a large number of "affluent" people could move to Bend and yet have a relatively small effect on median income numbers would be that the money was borrowed. Borrowed money doesn't show up as income. But The Bulletin ran stories attempting to reconcile the inconsistencies, where local economic boosters said that Bendites were, in effect, big capitalists rather than big earners: they had a lot more stock, real estate investments and other ASSETS, i.e., WEALTH, but not necessarily assets that spun off a lot of income, I guess.

Well let's assume for the moment that The Bulletin was right - that we had a lot of newcomers who were asset-rich but cash-poor. Aside from people who've lost their jobs and have NO assets, those are exactly the people who have taken the biggest hit. There's been huge losses of value in just about every asset class you can think of. You hear "I'm heavily invested in stocks and real estate" nowadays and think "ouch!" rather than "wow!"

So to me, "reverting to the mean" in Bend means that people are needing to live on the money they can earn working at a job. There's not a lot of money to be made wheeling and dealing right now.

The people who are sitting the prettiest right now, other than the TRULY rich who can lose large portions of their wealth and still be wealthy, are those with steady, high-income jobs. And Bend is notoriously short on steady, high-income jobs (a problem which should be priority #1 here to fix).

In short, all rambling aside, whether Bend's "affluent" class was (1) living on borrowed money or (2) asset-wealthy but not high-earning, it ain't good for those who cater to the upscale Bend customer in today's economy because either way those folks are hurting.

Bend has a small high-earning professional class (like doctors and lawyers) that is doing just fine. Other than that it's hard to imagine that there are a lot of people around here who would describe themselves as "affluent" today.

December 5, 2008 1:57:00 PM PST

Blogger Duncan McGeary said...

You always make sense to me, BEM.

That's what I read into too.

I had a nice tourist lady in the other day, and she said, "I shouldn't say this, but...parts of Bend are really ugly."

So much for Bend being exceptional.

Sure, it is. And so are lots of other places.

I just automatically suspect that when someone says we're different -- richer, smarter, cleaner and blonder -- that it's mostly B.S.

December 5, 2008 3:03:00 PM PST