Wednesday, August 22, 2007

So based on the idea that we built too many domiciles, I'm going to make some predictions. You can tell me how far off I am when they do or don't happen.

While the rest of the country, thanks to the Fed and a -- can't kill it stock market --, shakes off the effects of the 'bubble' in a year or two, Bend will see a decline that will continue for 3 or 4 years, then stagnant for another 3 or 4 years (a few rich people will begin quietly buying up property), then see a slow improvement (that won't be noticed at first, because by that time we will be so beaten down) for another 3 or 4 years. Somewhere around 8 to 12 years down the road, someone will announce a modest sub-division and we'll all be amazed.

Projects currently being built will be abandoned -- landscaping unfinished, houses half-built, turned into rentals. Many more projects will be quietly dropped without comment. There'll be a couple of spectacular bankruptcies, and Bend will gain a reputation as a place that really screwed up.

Rich people don't move to towns that screwed up. Rich people move OUT of towns that screwed up. Some of the major events will run out of capital, others will just cease. Les Schwab theater will start getting B and C acts, instead of A and B acts, etc.

Our population (our army) of real estate agents, title company workers, mortgage agents, bankers, builders, sub-contractors will start to drift away to greener pastures. Bend will actually lose population for a few years down the road.

But before that happens there will be a steady drumbeat of; "why can't you be positive? If we were all positive, everything would be o.k., we just need to be positive....which will turn into anger. It's all you negative peoples fault this happened. None of which will have the slightest effect on reality.

Housing prices will drift down. In another 3 or 4 years, prices will be about 1/3rd lower than the high.

New retail buildings in downtown Bend and the Old Mill will sit half empty, and then start to fill with the kind of businesses that don't normally go there. Restaurants and high-end stores will open and close on a constant basis. 3 close, 3 open, 2 close, 2 open but it takes longer, 4 close, 2 open and two sit empty for a noticeable time, 5 close, 2 open but both of them are 'antique' (i.e. junk stores....). Rents will start to drift down, eventually you can get a 'deal' with hidden incentives, even if the rents really go down only 25% or so. NO ONE will be kicked out.

Bend will slowly but surely become livable again. The jerks will leave, cause they were only here because it was cool.

For the vast majority of Bendites, who have jobs in schools and hospitals and so on, the traffic will get better, the snobs will become more humble, the fancy restaurants will be glad to seat you in your working clothes.

We'll have our poverty with a view paradise back.


Edited to add a couple more:

A couple of the better designed and capitalized 'destination resorts' will come on line and have modest success. (Phase 2's will be postponed). I expect them to be the Bauhofer and (despite BendBust's hard-on for Hollern) Brooks Resources. A couple of others will never be built. And a couple others will be part of the 'spectacular bankruptcies I mention above.

The west side will gain a 'toxic' reputation. Too many badly built immediately falling apart look alike faux craftsman crap built too close together. Your neighbors (five feet away) won't be other rich or middle class, but whoever the landlords can rent to. The bungalows on Columbia will revert to being huts. People will stop bragging about living on the west side.

10 comments:

Anonymous said...

We'll have our poverty with a view paradise back.

...

Paradise, your bringing tears to my eyes.

The thing is if you eliminate ALL the RE,MTG,TITLE,... in The old mill and downtown, then you have knocked out 1/2, especially the old mill, it seems like there is ONLY RE,MTG,&TITLE.

I still say make the Old-Mill Univ of Oregon @ Bend, and make downtown like it used to be.

The old-mill would make a beautiful campus on the river, all those restaurants and shops should be out at the I97 strip-malls. What's the point of making the old-mill retail into a bunch of low-end outlet stores? This is valuable RE, let's use it for a college campus.

Anonymous said...

Let's review where we are today, too many sub-divisions with failed promises. Lots of parks and schools that were never built.

The fact is in Central Oregon, the promises never come, and the dilution of value ( over-building ) always comes.

The over-building is about one thing, the builders ( BROOKS ) didn't have to pay the true cost of infrastructure, and thus made a ton of money ( PROFIT ), had they paid the fair cost of actual/real infrastructure there would have been no easy profit, and most of these project would have never been built.

Thus in effect ALL Brooks profits from the past years are in effect to be paid for by the taxpayers of central Oregon, in the long term.

Today we sit with a future bill in the Bend area alone of 1-2 Billion dollars of needed infrastructure costs to pay for the most recent building boom. Who will pay? How will this effect future spending on parks and the arts?

Had the City forced the builders to pay the $60k/home that of actual infrastucture requirements we would neatly today be ahead over a billion dollars in city revenue, instead the city charged only $12k/home.

I hate to say this, but unlike prior boom/bust cycles, we weren't stuck with the humongous bill that we're now going to see. There is no such thing as a free lunch, and very politicians who gladly subsidized the bend bubble boom with taxpayer dollars will soon have to justify their past decisions.

Yes, we know the growth would in effect bring wealth and pay for everything, well it didn't work out that way, how could it?

Anonymous said...

I expect them to be the Bauhofer and (despite BendBust's hard-on for Hollern) Brooks Resources.
*
The reason for the harp on Hollern is simply for a historical basis. I know you have been around for a long time, but even you may not have paid real close attention to the history of UGB and its relation to Mike Hollern and JD Gray.
UGB is a big deal right now, and the context of how its been run in Central-Oregon by Hollern during the last 30-40 years needs to be repeated and repeated.

I agree, I think that Brooks projects in Bend are pretty much dead, for no other reason than the day of getting a free ride, e.g. maximizing profit by not having to pay true cost of infrastucture is over in Bend. Thus the BIG-BOYS aka boss-hoggs are doing what they do best these days up in Madras & Prineville.

The history of Brooks-Timber to Brooks-Resource, the relationship with SB100 ( UGB ) is too important to ignore.

Virtually everything that happened in West Bend is because of 'smart-growth' something that was 100% paid for by Brooks-Resources. They opened the flood gate and made conservation and moratorium a bad word years ago.

All the NWXC crapsman shacks and their clone are all 100% hollern-hotel legacy spawn.

Anonymous said...

A couple of the better designed and capitalized 'destination resorts' will come on line and have modest success.
*
You ask for comments how about elucidation.
Hollern/Brooks has NOTHING going on big right now in Bend, they're trying to ram-rod a HUGE Shevlin size development in behind Summit High School but that seems to be going no where with planning and council. There big projects right now are up in Madras and Prineville, but those have largely been reduced to selling lots.
Bauhofer/Tetherow is also been completely reduced to selling lots, all the infrastructure plans seem to be on hold, major hotel, condos, time-share,... It's now become Highlands@Broken-Top with a golf-course. Trouble is there are TOO many golf courses, most people up at Highlands@BrokenTop where they got 10 acres for $500k just 2-3 years ago think that what makes their gated community 'special' is there is NO golf-course.
Tetherow can hardly be considered to make it even to phase-I if all they have is a 9-hole course, and sell a few lots. The whole point was a major self contained resort city.
Bauhofer got $100M for developing Tetherow, he's at war with Brenneke and Broken-Top owners. It doesn't look like a good time add golf-holes to the region. That said thats what these guys do is add golf holes.
I think the model to look at his BANDON, note the same bend PR firm that runs Bandon runs Bend (DVA). Bandon 'golf' is VERY successful with a private airport, but they are a self contained city, with their own private airport for the rich.
Bandon is notorious for making the taxpayers pay for the private golf-airport. The only way Tetherow can begin to achieve Bandon like success is to have a world-class 18-hole strip and private flights to and from Bandon/Bend. Now how can we force the Bend taxpayers to pay for the private airstrip @ tetherow?

My point is-was here for YOU to name these Baufhofer and Hollern projects that were well capitalized and going somewhere. Both require borrowed money which is NOW dear and difficult.

In my mind the current activity in Bend is low-income housing, lots of it as quick as you can. The REIT for commercial are still doing fine, thus money is still flowing to those REIT-FUNDS that buy commercial and develop in Bend. That's going to be the BIG project in Bend for sometime. Outside of Bend its going to be low-cost low-income housing.

The golf thing has been way over-played, too many golf-resorts chasing too few golfers. With the loss of the HELOC very few can pay for maintenance, witness the war at Broken-Top and this is just one course. ALL 24 Bend area golf courses are in this problem today.

Tetherow might be different with DVA marketing it as comparable to Bandon, but the problem is Tetherow doesn't exist, its going to be several years and then what? Golf in a basin a few miles from Bend? It's not like being on the beach, note that Tetherow MUST be a world-class golf resort to even come close to Bandon as planned. People aren't going to want to drive from Redmond through the traffic and strip-mall canyons to get to a little basin golf-course with NO amenity.

With 24 area golf course resorts ( EDCO website ), what in the hell are these people thinking by adding more? Basically to get around UGB ( hollern/gray SB100 1972 ), you must have a resort to develop, and a golf resort is upfront the cheapest kind ), most of the guys are developers only trying to SELL LOTS as quick as possible. Long term GOLF maintenance always gets dumped on the HOA of lot owners, whether they golf or not.

In summary like the richest in Bend up at Highlands@Broken-Top say, "Sure glad we don't have a golf course, makes us special".

Unknown said...

John Templeton, who made over $100 million by selling tech stocks short in 2000, has said that in a real estate bust land prices always go to zero.

Bubbles cause massive overbuilding that results in literally zero demand for raw land - why build when you can buy an existing home for less money?

Templeton's father bought a 1,000 acre farm in Tennessee during the great depression at an auction where he was the only bidder. He paid $1.

If you had told me five years ago that people living on Mirror Pond would be asking $5 million for their homes I would have laughed you out of town. Five years from now, the stories of Bend real estate hitting bottom will be just as surprising...

Duncan McGeary said...

Back when I had four stores, the entire edifice was built with two premises.

1.) sports cards were a bubble.

2.) but that they would never drop more than half.

My wife finally said to me, why can't they drop to zero?

I dropped from 1000.00 a day in sales in 1990, to 400.00 A MONTH in 2002. In effect, zero.

Prices never dropped that much in price guides. Real estate listings, like price guides, are meaningless if there are no buyers.

dkgoodman said...

I see your prediction coming true when the following conditions apply:

1) People stop having babies,

2) People stop immigrating from other countries,

3) Land and houses become more expensive than in California,

4) We lose our tourist attractions, like snow and water,

5) We start making more land.

Until those happen, our growth may slow, but I'll bet you a twenty we never hit zero, unless we lose a good percentage of the population to war or disease or other natural disaster.

Duncan McGeary said...

I hope you're right, D.K. I hope I'm wrong. I guess we'll know in about 3 years.

Meanwhile, we have over 2000 real estate agents selling 109 houses in one of the peak months. Meanwhile we have a credit crunch. Meanwhile, we have people moving here without jobs.
Meanwhile new housing permits are also in the low 100's, and there are that many contractors and sub-contractors.

I just don't see how this can have a good result.

Anonymous said...

Sorry Guys I couldn't pass this one up, yes of course we all don't want to see harm to Bend, but I think that harm has been happening in the past five years.

1) People stop having babies,
(india,china,africa,...poor doesn't stop sex, it actually encourages it, rich people don't breed)

2) People stop immigrating from other countries,
(yes, our mexicans are going to solve the problem, I predicted this a year ago, yes the mexicans helped the bubble buying buying sill-plate RE from white-trash, the mex is NOT our cure all )

3) Land and houses become more expensive than in California,
( Bend will never be santa-barbara no matter how many PR, RE, marketing people we put on the city payroll - DVA )

4) We lose our tourist attractions, like snow and water,
( H2O in its various thermodynamic states is NOT why people have been blowing up the RE bubble. )

5) We start making more land.
( We have an infinite amount land, in fact that is essential are downfall in the RE speculation racket, we're surrounded by an infinite desert )

At the end of the day 40-60% of the masses will own their own home, and they'll pay what they can afford which is 4X of household-income, which now is $40k, what it will be 2-3 years I cannot predict, but given with certainty that we're headed into one of the most major economic credit-crunch since the great depression I can with confidence that its highly likely that +25% of the public will be out of work. Given that SO many of Bend's good jobs are government, but with NOBODY to tax they'll be let go. PERS will go un-funded, a lot of things are going to change.

Folks its really time to study the great depression in detail.

Bend Economy Man said...

our growth may slow, but I'll bet you a twenty we never hit zero, unless we lose a good percentage of the population to war or disease or other natural disaster.

Why can't the population growth ever be zero in a small, geographically isolated town, in a country where people are free to move wherever they want whenever they want, when the jobs market drops off a cliff?

Clearly it can. When the jobs disappear, so will the people, no matter how much snow and rivers there are or how many kids people have. There's no place to commute to from here, so if the jobs market goes south, the choices are (a) move or (b) go on welfare.

I think really where you and we bubble-talkers disagree is about what the jobs market will look like in Bend in a year-two-three. Unless you really squint through the rose-colored glasses, it's hard to see how it won't be shitty.