Friday, March 27, 2009

What's to be done?

This comment about the store vacancies downtown really caught me.

What's to be done?

What's to be done about anything, really? What's to be done about global warning, about the homeless, about health care?

What's to be done?

It's enough to make you just stop reading the paper, watching the news, or peruse the interwebby thing.

I'm sure you're all pretty tired of the housing bubble story here in Bend. But every once in a while, something someone says, or some statistic catches my attention.

The Bulletin story below has a couple of comments that just leapt out at me. I'm not trying to pick on the person I'm quoting, just trying to figure out her thinking.

Cindy O'Neil of SolAire Homebuilders has a custom-built home in this years Tour of Homes.

"Last year, I was optimistic we were heading toward the end of the downturn in terms of pricing pressure, but I was wrong." O'Neil said. "Now, I definately think we are scraping bottom because it's all anyone talks about. When all you see is how bad this is, I'm pretty sure we're at the bottom."

So...if I'm getting this right....because it so bad that it's all anyone talks about it must be the bottom?

Why?

I'm pretty sure that people were talking about how bad the economy was in 1930, and 1931, and 1932, and 1933, and 1934, and 1935, and 1936, and 1937, and 1938, and 1938, and 1939, and 1940. I was around in 1980, and they were still talking about how bad it was in 1988 here in Bend.

"Bend's median home price is now lower than at any time since 2004..."

True. But lower prices don't mean they can't get lower still. Indeed, with all the REO's and Short Sales out there, they are almost bound to.

"Further signaling a bottom may be near, a U.S. Commerce Department report released Wednesday showed sales of new homes jumped 4.7 percent in February when compared with January sales."

I've been trying to point out from the beginning of this blog the uselessness of comparing one month to the next. What counts are same month comparisons, and February was well south of last year's numbers. Not to mention, sales ALWAYS rise from January to February. (Hint -- they'll rise through the spring from the winter, too.)

"Short of a national disaster," (O'Neil said) "I can't see any other shoe to drop...."

Well, that's the thing about dropping shoes. You don't see them coming.

"We've been in this downturn for almost three years, and that's usually how long a down economic cycle lasts."

For normal run-of-the-mill recessions, maybe. But housing drops like this, which have happened in places like California and Texas in the past, have normally taken up to 7 years to play out on average.

"Homebuilders, we're among the first the get hit, and I think we'll be among the first out."

Again, why? Other than optimism, why? That overhang of housing isn't going away fast, not to mention the dark matter, and especially because of the foreclosures and short sales. Shouldn't we sell a few of those before we build more?

I have no more evidence than O'Neil about when this will happen, but my instincts are the opposite -- I believe housing will be about the last segment to emerge from the Big Recession, and that Bend will be one of the last area's.

Anyway, all of this is preamble to the statement that really caught my attention:

"O'Neil said the couple almost built a spec home for the 2006 Tour of Homes but chose not to. If they had, O'Neil they would likely still be holding it.

"We're still standing now because we didn't build it, so we're proud to still be standing but feel bad for the builders that got blindsided by the market...."

Blindsided? Who could have known? There was no warnings! Everyone was caught by surprise!

Arrgggh.

But, here's the thing -- she's says they're still standing because they DIDN'T build a house in 2006. So the lesson is what -- to build a house in 2009? Huh?

And the statistics that really caught my attention were these two rather contradictory results:

1.) "Only 269 building permits were issued in Bend in 2008, down....80% from 2006."

2.) "COBA's membership, which is open to builders and other related home construction trades, numbers 840, dwon roughly 10%. That retention rate compares with...." 30 and 40 percent drops elsewhere in the U.S.

Which says to me, that the kool-aid drinking is still going on around here.



THE TOUR MUST GO ON

Bulletin, March 27, 2009.

The local housing market may be slow, but it’s not stopping the Central Oregon Builders Association from proceeding with its annual Tour of Homes in July.

A showcase of new and often custom-built homes, the 21st annual tour has attracted 30 registrants for the event, to be held July 17-19 and 24-26, according to Mike Jensen, COBA’s director of communications.

That’s down from prior years, but registration is still open and organizers expect more, Jensen said. COBA expects this year’s tour to feature about 50 homes, compared with 53 in 2006, 82 in 2007 and 73 last year, he said.

“It may not be quite as big as in previous years, but I think the homes showcased on the tour will have the same quality and will be as spectacular as in years past,” Jensen said.

The show comes after a painfully slow year in the building industry.

Only 268 building permits were issued in Bend in 2008, down roughly 60 percent from 2007 when 676 were issued and down 80 percent from 2006, when 1,348 were issued, according to the Bend-based Bratton Appraisal Group’s monthly Bratton Report, which analyzes local real estate sales. 2009 also has gotten off to a slow start.

The show is providing hope for local builders, including Mike and Cindy O’Neil, who own and operate SolAire Homebuilders in Bend, which specializes in custom-built green homes. The O’Neils registered a custom-built home in Bend’s Awbrey Glen neighborhood on this year’s tour. The company normally registers a home on the tour every year, as it’s an “excellent” marketing tool for their business, said Cindy O’Neil.

“People like to touch and feel the homes before they commit to a builder, so the Tour of Homes is a great way for builders to promote themselves,” she said.

But this summer, it’s all the more important, according to O’Neil. She believes people will be paying more attention than in years past, as pent-up demand and low prices will motivate would-be homebuyers to jump back into the market.

“Last year, I was optimistic we were heading toward the end of the downturn in terms of pricing pressure, but I was wrong,” O’Neil said. “Now, I definitely think we are scraping the bottom because it’s all anyone talks about. When all you see is how bad this is, I’m pretty sure we’re at the bottom.”

Bend’s median home price is now lower than at any time since 2004, according to the Bratton Report. The report listed Bend’s median price for a single-family home at $215,000 in February.

Further signaling a bottom may be near, a U.S. Commerce Department report released Wednesday showed sales of new homes jumped 4.7 percent in February when compared with January sales.

Much of the decline in housing prices can be traced to the rise of housing inventory, which has increased as foreclosures have accelerated. However, those low housing prices, coupled with interest rates at record lows and government homebuying initiatives, such as an $8,000 tax credit for first-time homebuyers, are making the market appealing again, O’Neil said.

“Short of a national disaster, I can’t see any other shoe to drop,” she said. “The bank part is unwinding, the pricing problems with overinflated prices for homes and land in Central Or-egon has unwound substantially, so I’m pretty optimistic,” she said. “We’ve been in this downturn for almost three years, and that’s usually how long a down economic cycle lasts. Homebuilders, we’re among the first to get hit, and I think we’ll be among the first out.”

O’Neil said that despite the economy, she and her husband have three separate custom-home projects under way, as well as two remodeling projects.

That’s not to say things haven’t been tough for the couple during the downturn, but they are benefiting from a business decision they made long ago to only build houses that have been paid for in advance rather than building a house on speculation, or the hope that it might sell.

O’Neil said the couple almost built a spec home for the 2006 Tour of Homes but chose not to. If they had, O’Neil guesses they would likely still be holding it.

“We’re still standing now because we didn’t build it, so we’re proud to still be standing but feel bad for the builders that got blindsided by the market,” O’Neil said.

Jensen said COBA’s membership, which is open to builders and other related home construction trades, numbers 840, down roughly 10 percent from 2007-08. That retention rate compares much better with other building associations around the U.S., some of which have seen drops in membership between 30 and 40 percent, he said.

Andrew Moore can be reached at 541-617-7820 or at amoore@bendbulletin.com.

15 comments:

Jelement said...

But it has to be the bottom, it just has to!

This magic theory that when everyone is talking about how bad things are that means they can't get any worse is pretty damn amusing.

BTW Dunc, got any good survival books in the store? I just read the new Neil Strauss book "Emergency" and it just left me wanting something that might have more useful information in it.

I grew up in an anti-gun non outdoors family and I'm trying to go back and learn all the important things I missed so that when the real bottom comes I'll be more prepared than these clowns who just want to whine about everything.

Duncan McGeary said...

I'm 99% fiction.

But I got some nice post-disaster books.

The Postman (forget the movie.) Canticle for Leibowitz.

This just reminds me, I need to get Alas, Babylon and some others...

Duncan McGeary said...

I think that 3 year time line is a little off, as well.

It's more like 3.5 years in places like Cal and Fl, but only maybe 2 years here in Bend, and only 1 year since it became obvious even to the builders.

Her quote: "Last year, I was optimistic..."

Duncan McGeary said...

Actually, when you think about it:

"Last year I was optimistic...."

Well, this year SHE'S OPTIMISTIC!

I think this is just the usual Spring Push on the part of COBA, which the Bulletin seems to be willing to go along with without too much skepticism.

Jelement said...

Yeah, I saw an article earlier this week about how sales of Atlas have picked up recently.

You probably already have the Emberverse books, I haven't finished the series but they're kinda fun, with a little local flavor too.

And don't tell me you're all fiction, I know I saw the Zombie Survival Guide last time I came in, and we all know that's no joke.

tim said...

To builders, realtors, and mortgage brokers, the "bottom" is always just around the corner. They'll be calling it quarterly from to to when it happens in 2012 or so.

tim said...

>>I'm 99% fiction.

Aren't we all.

Duncan McGeary said...

>>I'm 99% fiction.

Aren't we all.<<

I KNEW you were going to say that!

RDC said...

Actually I think that you were closer to being right the first time. California peaked in 1992, prices did not hit bottom until 5-6 years later. that 5-6 year peak to trough is pretty much the norm for the CA market. Same amount of time on the upside.

Bend needs to drop to 2002 prices just to return to the long term trend line. That would also be more in line with incomes and other comparisons. Since drops tend to over shoot a bottom at 2002 numbers might even be optimistic.


I always did like reading "Alas, Babylon", Don't forget "On the Beach". Though its conclusion is much less positive.

Duncan McGeary said...

Yeah, I had those on my list. Earth Abides, as well.

Jason said...

If you liked the The Zombie Survival Guide, you might try World War Z: An Oral History of the Zombie Apocalypse. My girlfriend swears by those two books (though she still thinks Wal-Mart will be a good place to nab supplies in the event of a full-scale "zompocalypse" ... eesh, as if you don't see enough zombies there already).

Tim said...
>>I'm 99% fiction.

Aren't we all.


You beat me to it, sir!

Oh, yeah, Dunc, I utterly -loved- Trans-metropolitan. I think I'm hooked. "Up a goddamn mountain" ... now that's how to start a story.

MissTrade said...

Totally more telling on the size of the realtor/homebuilder/mortgage grinders that are still trying to cling to the ledge in this town. Until we go to 100 realtors there are too many of them. We sure don't need 500 "mortgage professionials" and 840 COBA members to build 280 new houses next year. People still will be moving out of this town as the "gold rush" that was housing is over for a generation here unless we get 5k jobs from GOOG or MSFT or QCOM or someone we can't imagine, until then, we remain a tourist town first with a good retirement community.

Pedro Hemes Valdes Ortega said...

We sure don't need 500 "mortgage professionials" and 840 COBA members to build 280 new houses next year.

*

This figure of COBA members is quite alarming, cuz we were just told by elections that COBA got over 1,000 people to pony up $50/each to provide more than $50k via the COBA/COAH ( affordable housing PAC ) to elect our most recent city-hall, now we're told there are only 800? That means $40k, so where did the other $10k come from??

Especially confusing cuz were supposed to believe that all 800 made a volunteer contribution to this PAC.

Something reeks in Bend.

tim said...

I read Earth Abides last year. On the Beach I've read 3 or 4 times. Despite the ending, I don't feel that it's a "downer."

All those are on lists of the top 100 scifi books. You should make sure you have the whole list. Maybe even post the list in your store.

Pedro Hemes Valdes Ortega said...

>>I'm 99% fiction.

Aren't we all.

*

"Truth in Bend is stranger than Fiction, as Fiction has to make sense" - Mark Twain