Friday, July 9, 2010

Implications for Bend.

What a difference a few years makes.

When the Bend Bubble Blogs first popped up, one of the arguments used by the real estate promoters was that we were getting wealthier inflow, and these -- dare I say, rich?-- newcomers wouldn't be affected by a pesky little thing like a Recession.

There is a new article in the New York Times that, in fact, the rich are walking away and defaulting from mortgages without a glance backward....

"Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.

More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent…"

I was always doubtful that we were getting quite as many "rich" folks as all that; I felt there were more aspirational overreachers than really wealthy. My joke was, if you saw a real estate agent and a millionaire at a downtown restaurant, guess which one paid the bill?

I've actually changed my mind about that -- I think we have indeed attracted a wealthy group of people to Bend. Driving around town, looking at all the mansions and the fancy cars -- it seems pretty clear, though I'll hold to my contention that many of them are living an illusion.

Will they stay?

Most of them, of course. But if we do indeed have an abundance of 'second' homes, it doesn't bode well for the future of housing. If rich are walking away from underwater homes, who's more underwater than Bend? Who has more second homes than Bend?

But Bend was immune, right?-- especially the West Side; ah, yes, the West Side, where 100K former mill houses were turned into 500k 'bungalows.' No danger there. Where every vacant lot was filled with a new house, shaped to fit the triangular or octagonal or whatever weird shape the lot was in. Where expensive houses were built next to each other like townhouses.

My doubts about this came from what I've seen in small business. Over the years we've gotten plenty of outwardly 'wealthy' people opening businesses downtown. My observation was that not only didn't they last, they usually were the first to go.

I've always thought there were two sturdy legs to a business -- profit and motivation. They aren't always the same thing -- you can accept a small profit if you have a strong enough motivation; and you can accept a lower motivation with a higher profit. But they are equally important, and eventually they merge -- lower motivation will bring about lower profits and vice versa.

Anyway, what I noticed was that those of us who actually DEPENDED on our businesses to make a living were much more likely to hang in there in good times and bad.

I was sometimes astonished by the caviler way another business owner would fold up his tent. "Oh, it wasn't fun anymore. " "I want to move to Montana, Bend has gotten too busy." "My former boss offered me more money."

O.K. Good. See you.

I'm here to live in Bend, thick or thin, inconvenient or not. You're out for....a good time? An easy life? Hell, I don't blame you.

But not a completely dependable, reliable motivation, in my eyes.


blackdog said...

The Times story also mentions there are indications that the rich are walking away from homes even when they can afford to make the payments because they see them as bad investments. Of course that leaves everybody else holding the bag.

"The rich are different from you and me. They're bastards." -- apologies to Scott Fitzgerald

BTW there are no real "mansions" in Bend. Tastelessly ostentatious houses for the nouveau and pseudo riche, yes, but not mansions.

Duncan McGeary said...

Well, they look like mansions to me!

Pedro Hemes Valdes Ortega said...

HBM at $40M, and an underground athletic center that can't be seen, do you really think that Bledsoes property at Highlands@Brokentop is not a 'mansion'. Of course HBM comes from the era of Hearst. Yes there are no mansions, but let's be honest here, when a home costs more than a 100 times the going income, .. what exactly is a mansion.
Any student of the 'great depression' can tell you this is a "I told you so", the reason is the burn rate, to keep a home worth over $5M in our economy, means a burn-rate of $10k/month, something that NOBODY has, ... well accept an NFL quarter-back. The costs to keep the paint up, and the yard,.. etc is what we mean by 'burn', during the great-depression the 'rich' walked away from their homes because they couldn't afford the servants and staff that are required to service 'LARGE HOMES', here in the Bend desert, its even more hideous, the sun destroys all.

FYI there are dozens of property's that meet Bledsoes up there, ... I rally think HBM don't get out much, ... or again, he's so used to Princeton, that Nigger-Rich ( $100M a year athlete ain't rich ).

HBM is and has always been WHORE for TEAM-HOLLERN aka BULL&SORE. To suggest there are no 'mansions' in Bend is a denial of reality.

Pedro Hemes Valdes Ortega said...

Yes, I was tickled by the Times story, but rather meaningless. 'Walking Away', .. must be nice to declare BK, and walk, and not fear the IRS. Not to worry about 'other assets'. Truth be told nobody ever gives the real story. A big part of these story's was about 're-invention'. Who cares about a 'Bend-Loss' (tm) when you can re-invent yourself and be mayor in the same town tomorrow? Everybody gets a clean slate.

Pray tell we can ask? What is an honest man? All played a positive sum game, and when their bet went wrong, they fold and walk, but stay if the game goes well. Don't fear about fucking the credit, cuz there will be a ton of BEND RE shit for sale on contract, and anybody will be accepted at the bottom. So hell yes, walk now, save your money, for the down payment and pay the SHIT at the bottom on contract, its the Amercian way. So who does pay?

The SAD fuck is that the USA is about everyone fucking everyone, .. now 'fucking your neighbor' is systemic. The USA is BEND FUCKED (tm) as a nation. No place in aggregate to go but DOWN.

But hell yes, the man said "Cut your loss and let your profits run", when in Bend, simply don't pay, and wait. No problem to walk into a 'nice' rental for $500/month.

Trouble is wait for fucking what? Live in a hell-hole for 10 years for a turn? Smart folk have already left Bend, and gone places where they can make money.

blackdog said...

Pedro, this is a real mansion:

And this is a Bend-style mansion:

Anonymous said...

Blackdog, that is hilarious.

"My joke was, if you saw a real estate agent and a millionaire at a downtown restaurant, guess which one paid the bill?"

Ummm, call me stupid, but I don't get it.

Duncan McGeary said...

Some joke....

Well, it wasn't the millionaire.

I just felt an awful lot of the spending being done in Bend was being done by the guys selling, furnishing, financing, roofing, etc. etc. to the 'rich' people moving here, not so much the 'rich' people themselves....

Unkle J. said...

Hello Duncan. This is John Hansen. A name from your very distant past. I just thought I would see if you still had the book store and got this treat with the bargan. Very interesting article. Well stated. Just thought I would say Hi. I am going to be riding from Eaglecrest to Mt Bachelor if this cold doesn't set in too bad. I will look up your store and stop by if you are open on Monday. You can email me at (2 n's so as not to be a #) if you feel like it. Good to see you are still in business. John