Dana Bratton Day

Well, according to the prediction of Bratton Appraisal Group principal Dana Bratton, today's the day the Bend real estate market will turn around. 

5 Things Bendites Should Do Now

As they say in Alcoholics Anonymous, 

"God grant me the serenity to accept the things I cannot change, courage to change the things I can, and the wisdom to know the difference."

The whole town of Bend needs to say the Serenity Prayer right now, because the real estate market and local economy are tanking, and are going to keep tanking for some time to come, and there's nothing anyone in Bend can do to stop it.

People like "Mr. April 25" Dana Bratton and the coalition of local real estate forces behind the "Best Buyers' Market in 20 Years" media intimidation campaign think that with The Power of Positive Thinking, the local real estate market (real estate being the only industry in Deschutes County history ever to achieve $1,000,000,000 in one-year sales) can recover.

As has been said a million times, the housing bubble is way bigger than Bend and actually even bigger than the United States.  There's nothing Bend can do to stop housing prices from tanking and tanking big.

What can Bend do now?  Well, maybe we should put the question a little differently: what should people do when they're stuck in the middle of nowhere with no money?  The answer is to protect their own interests, make their little corner of the world the best possible place to live, and band together to prevent outsiders from coming and taking their stuff.  Because life's not going to get easier around here for a while.

1. RAISE TAXES.  That's right.  Bend needs money.  For deferred infrastructure and maintenance, for police and other essential services, for schools, for public transit.  Revenues are already down, but the big whammy's yet to come: reduced property tax assessments due to falling property values.  Bend needs to resist the urge to cut taxes, and actually needs to increase revenue this year and going forward.
2. INCREASE FUNDING FOR ESSENTIAL SERVICES AND PARKS.  Especially police.  Bend needs to regain its reputation as a safe, relatively drug-free, violent crime-free town if it's going to keep residents and attract new ones.  What's the point of living in a small town if you can get carjacked in the Costco parking lot, same as Compton?  And parks too.  There's no point in living in small-town Oregon if there's no place to push a stroller or walk a dog.
3. SUSPEND MASTER-PLANNED PROJECTS.  Forget about Juniper Ridge.  Forget about the Third Street Corridor.  Pay off whoever's owed, terminate the consultants' contracts, stop buying new land, stop land grants, stop all city-funded development activity.  No more Lava Court or whatever it's called.   Keep the land for the future (a university, for example) or sell it to the private sector at market prices, with restrictions if necessary.  Maybe in other cities, the local authorities have the vision and competence to carry out big-concept projects.  Not in Bend. 
4. CUT THE DESTINATION RESORTS LOOSE.  No matter what they say in public, not one of these destination resort subdivisions around here is "penciling out" the way its sponsors thought it would.  Soon the destination resorts will come calling to city and/or county and/or state governments asking for property tax breaks, regulatory exemptions and other goodies, and they should be told "NO."  I'm not an anti-destination resort activist.  Some say that their drain on services and infrastructure exceeds their economic benefit.  But let's assume for sake of argument that they create jobs and are generally a net benefit to neighboring communities.  It doesn't matter - they don't deserve a handout. They should be treated like any other business.  Either destination resorts make economic sense or they don't.  In a county where almost every business besides Trader Joe's is hunkering down for tough times, 5,000 homeless people are living in the woods, the desert, motels, vacant homes and the streets, and 19% of the population (including kids) has no health insurance, luxury golf course developments don't deserve any subsidies or breaks.  And making them nicer does almost nothing to make Bend or other Central Oregon communities nicer.
5. LOBBY FOR A FOUR-YEAR UNIVERSITY.  And don't let up!  The best way to secure Bend's future is to get a 4-year university here.  Natural resources is gone.  Real estate is gone.  But Bend is an excellent candidate for a 4-year school.  OK, so far it hasn't worked out.  But that's because these fool good-old-boy local business interests have been put front-and-center.  Bad idea.  Those guys' money should be welcome in the effort, but all these fat, white local artifacts should be kept safely out of sight when we're selling this area as a site for a new 4-year university.  It might take another 5 or 10 years.  It might take longer.  But it makes sense.  Bend would be a great college town.  We just need the right people to plan our approach and the whole community needs to be on board, like what happened in Merced.

Some Big Problems

Summing up recent developments:

• Moving companies in Bend say that the number of outbound moves has exceeded inbound moves since the start of the year by as much as 2:1
• 25% of the kids at Summit High School, the "rich snob" high school, are on the subsidized school lunch program for low-income families
• 19% of the population in Deschutes County are uninsured, a number so high it made national news
• Bend's budget is running a $20,000,000 deficit and the city has cut fire services and is looking at cutting transit and road maintenance
• Knife River, Pahlisch Homes and other local construction-industry businesses announced layoffs
• Downtown vanity businesses have been going under at the rate of about 1 a month
• The Canadian-owned mill in Gilchrist, which basically represents the whole town's economy, has been mothballed
• Foreclosure proceedings have begun on Randy Sebastian's Renaissance Ridge subdivision in Bend (that's right - the entire subdivision)
• Lenders seem to have taken over ownership at Becky Breeze's "The Plaza" development
• National City Corporation named Bend the town with the most overpriced residential real estate in the country
• Wells Fargo declared the Bend metropolitan area (Deschutes Co.) a "soft" real estate market where increased down payments apply
• Deschutes County has been included on mortgage insurance industry "blacklists" for increased down payments and documentation requirements
• The local real estate industry publicly announced a plan to extort positive stories from local media with threats to withhold advertising dollars
• When confronted by Oregon Public Broadcasting about whether his newspaper gets pressure from the real estate industry, The Bulletin's editor-in-chief said that he is "perfectly happy to take calls" from advertisers
• A Bulletin reporter was fired after complaining about the "hack job" (removing negative quotes) editors did on his article about a pep rally for the Bend real estate industry

And of course there's all the grim national news about the near-collapse of the financial system, all traceable back to the housing bubble.  

And now look for Bend to be portrayed in the national news as a backward, intolerant part of the country for the latest scandal, where Bend High student achievers were handed teddy bears with fundamentalist Christian prayers on them at an in-school assembly.

So there are some problems.   Everyone should know by now that there's nothing Bend can do to make the economic boom come back.  The Central Oregon housing market?  Not coming back.   Vanity businesses?  Going under.  Commercial real estate?  Huge glut in office and retail.  City finances?  Don't even ask.

Reporter fired after criticizing Bend Bulletin's RE coverage

Read about it on BB2, The Source and On The Bright Side.  The story's already been picked up by Patrick.net via BB2 and it deserves to go national. 

Listen, The Bulletin, Bend RE industry: if history has taught us nothing, it's that taking increasingly desperate measures to prevent the inevitable always backfires!

The Bulletin and the $498 million

Yesterday The Bulletin had yet another article where they referred to Central Oregon's "$498 million-a-year" tourism industry. Not "estimated" $498 million or "about" $498 million or "approximately half a billion" or "around $500 million," just $498 million.

On the BendBubble2 blog we've been noticing that this a-bit-too-precise unsourced figure has shown up in The Bulletin a bit too often. As you'll see below, I've found that The Bulletin has been using the $498 million number at least since last July.

My Google research has shown that the first time the $498 million figure was used was in the article "More praise heaped on Bend" from last July. It's an article about the DVA advertising firm and its success in placing articles about Bend in national publications.

What's interesting about this first article is that in it, where The Number first appeared 230 days ago, The Bulletin said that the Central Oregon tourism economy is "estimated at" $498 million per year. Doesn't say estimated by whom (probably DVA). But in later uses of the $498M number The Bulletin dropped the "estimated at." Why? Don't ask me. It's a totally inexplicable, irresponsible editorial decision.

Why does this matter? As a Bulletin reader, I'm insulted and you should be too, if this is representative of the standards that The Bulletin uses to inform us of events in our community. No conspiracy theories at work here though. I don't think that The Bulletin meant any harm by dropping the "estimated" qualifier and using the number over and over again for 7 1/2 months without mentioning the date or source of the figure. It may or may not be inflated; for all I know, the real number is closer to $800 million or a billion dollars. I just think that The Bulletin's editors figured their readers weren't the type to notice the pattern and figured it wasn't worth the effort to use better-researched figures.

Or, if you really want a conspiracy theory, especially given that The Number first appeared in an article about how under a Central Oregon Visitors Association contract, DVA Advertising & Public Relations has "worked with" the writers and editors of Outside magazine and other publications to get favorable articles about Bend placed, how about this? Maybe DVA has been "working with" the writers and editors of The Bulletin too.

Since the number was an estimate in the first place (probably by DVA, which is a marketing firm, not a reliable source of statistics), it should not have been so ludicrously precise. And even if it was spot-on 230 days ago, it is without a doubt inaccurate now. So why does The Bulletin still use it? Why did it stop referring to it as an estimate? The New York Times would never have referred to a number as "estimated at" in its first appearance and then dropped the qualifier in later appearances. The Washington Post would never use the same ridiculously precise unsourced number for 7 1/2 months straight. The Oregonian would probably never use an unsourced figure in the first place.

Try running the Google search site:bendbulletin.com "$498 million" and you get results going back to the July 2007 article on DVA (some of them are subscription-only, but try the Google cache in the search results).

• More praise heaped on Bend - July 10, 2007

• Hotel planned in north Redmond - July 29, 2007

• A history in Bend, a future at Bachelor - August 28, 2007

• Tackling Bend transportation - September 5, 2007

• Old West, new brand - September 13, 2007

• Economic concerns won't deter travelers - October 25, 2007

• Marketing inspiration - October 31, 2007

• Lights, camera, financial action - November 7, 2007

• Hotelier takes it up a notch - November 11, 2007

• All area has to offer, in movie-trailer form - November 25, 2007

• Ski areas waiting for a blast of winter - December 14, 2007

• Selling Sisters - January 1, 2008

• At Mt. Bachelor, mixed reviews - February 6, 2008

• Area tourism feeling a pinch - February 21, 2008

• No quick recovery seen through 2008 - February 24, 2008
  

A transitional period

As you've noticed, the site now redirects you to the Bend Economy Bulletin Board. I think it's a better forum type, but I will say that its format doesn't lend itself to the kind of long-winded essays you became accustomed to seeing here.

Soon enough this blog will be shut off. Not because I'm less interested in Bend's economy, but because the level of attention I was paying to it was unsustainable.

So what do we have today? We have a couple of economy articles in The Bulletin:

Area Economy Cools After Run-Up

Recession Risk Is Low, Experts Say

The second article has some comments by Bill Valentine on Bend's "high-beta" characteristics. Yes, Paul, we know that's your theory. Valentine says:

"If anything, I think we may be the complete opposite in that we react faster (to national markets)," he said, noting the region's heavy reliance on the tourism and real estate sectors.

"We'll do really well when things are good, and we'll feel it very quickly when things dip," Valentine added. "That's because our industries aren't too diversified. If consumption spending from other markets dries up, we may feel it more than other places because we depend on it."

He's right. There is precious little in Bend or made in Bend that people need. A lot that people want - vacation homes, recreational opportunities, cute boutique wares, casually elegant cuisine. But not so much that they need.

The president of Prineville Bank is quoted as saying: "You can't tell the people that are retiring to not age ... and many of them will continue to move here. The housing market just needed to stabilize, and we feel the current inventory can be absorbed through the region's normal growth. It'll just take a little time."

It will take a while before people stop with the "Baby Boomers Will Save the Day" stuff. They may yet save the day. But our local economy, the way it's dependent on real estate, needs people to move here every single day. If they eventually move here, that's great, but we've already seen a 60% drop in sales. People's finances are withering on the vine like a grape in a Terrebonne frost. My prediction? The collective decision to move to Central Oregon to retire has been put off for a year or two. The theory that retirees will preserve the market peak is flawed - what kind of idiot wants to purchase a retirement home at a market peak? The whole thing about retirement is that you're on a fixed income the rest of your life. The reason why, in the past few years, so many people bought the houses in Bend that they'll eventually retire to is because they thought prices would just go up and up and up. Not too many people think that any more.

Except one of the local Realtors quoted in the article "Area Economy Cools After Run-Up." "He expects most of the housing inventory will be absorbed by the first half of 2007 and as Central Oregon's population increases, more housing demand will result. 'We'll see a dramatic upspike in the (beginning) of 2008 in terms of (the average sale price of homes),' he said." OK, can't blame him for trying to bring back a little of the urgency that drove the market over the last couple years, but predicting a "dramatic upspike" in 2008 is just a wish, pure and simple. There's no basis to predict that. None whatsoever. Although I think it's safe to predict that if the housing inventory gets absorbed in the first six months of 2007, it'll be at "dramatically reduced" prices.

Why I Blog Less Lately

Since my most recent blog-wipe, I've realized that a lot of people have come to count on this forum as a source of, well, not unbiased commentary, but at least differently-biased commentary on our local economy. There seems to be genuine concern that this won't continue forever. The concern is well-founded.

The reason I started the blog, as those who've read it from the beginning (prominent representatives of the local media included) know, is because growth-mania and, more specifically, real estate-mania had reached such a level that in the backyard barbequest of 2005, when my previously pregnant suspicion that the local housing boom was precariously dependent on a predicate housing boom in California and other places gave birth to a full-blown conviction that our entire local economy was becoming so oriented towards building and selling houses and creating amenities for a population that hadn't even moved here yet that as a community, we were risking a serious economic day of reckoning if the particular economic conditions that drove people to move here, flush with equity, ever changed.

I kept hearing the drumbeat of "this is a desirable community" over and over again. Friends and relatives put all their cash, and borrowed more money, to invest in local real estate. And people made money. Many put that money right back into the game. It reached a level, at least in my circle, that if you brought up, ever-so-subtly or gently, that the party might end someday (not even soon - just someday), people just didn't want to hear it. And I'm not talking about newcomer carpetbagger-types chasing a growth opportunity. I'm talking about people who've lived here 20-30 years. People who were born here. People who went to school here. They didn't have a "big picture" view of what was happening. They thought, quite honestly, that the outside world had finally figured out that this is the best place in the world to live, and that now that the word is out, it'll be a perma-boom forever.

And it's interesting that if you look at the people who are trying to stop development and change, like the Broken Top people trying to stop a development between them and the mountains, or the Overturf Butte people trying to stop cellphone towers from being built, or people downtown who are trying to find a "permanent solution" to the Mirror Pond siltation problem, or the people trying to stop canals from being piped, it's the people who moved here recently. They bought a product - Bend 2003, or 2004, or 2005, and that's where they want to stop the clock. People who've been here most or all of their lives have stopped caring about "preserving" Bend because if you've been here that long, Bend looks nothing like the Bend of their youth. If you're, say, 30 years old, and you grew up in Bend, the one constant has been drastic change. Let the Deschutes run its natural course through downtown? Sure. Chain stores instead of "unique," "whimsical" shops? Whatever.

Anyway, I digress. A big reason why I wiped the blog is because many of the things that have been predicted here are coming to pass, and will come to pass. I don't want the attention that comes with being right. And I don't think that talking about an end to the boom is taboo anymore. It's the talk of the town. Sure, there are some folks around here who have their convoluted theories about generational demographics, telecommuters, Bend becoming the "bargain Aspen" and so on, that justify the Perma-Boom idea. But in any town with as many Realtors and builders as we have, and with a 60% year-over-year drop in sales of homes, there are plenty of people who know exactly what's going on. And they may have not known what was going to happen, but they know what's HAPPENING, and they aren't idiots.

I don't want to be the chronicler of the downturn. Am I immune to Schadenfreude? No, sure, a part of me likes to see those who were SO sure that taking out home equity loans to buy bare lots and multiple homes in subdivisions, as well as cars, snowmobiles and overseas vacations, now somewhat humbled by the downturn. But if you're in way over your head in debt and poorly-timed investments, the hassle of dealing with that is punishment enough.

And as far as being a foil to the local media is concerned, I think that they themselves are figuring out what they want to be. Are they serious news organizations serving a metropolitan area of over 150,000 people with an obligation to serve the news straight, or are they resort-town mouthpieces for the Chamber of Commerce with an obligation to keep up the appearance of a prosperous, safe, growing community in case a tourist picking up the paper or flipping on the TV in his hotel room might be thinking of buying property here?

We're Becoming Redundant

One post that resonated with me, and perhaps best expresses one of the reasons why I wiped the blog, was one by "P", where s/he said "When you're a bear in a collapsing market, you're redundant."

After we beat up on KTVZ for its sunny-side-up piece on the local residential RE market, I thought to myself, "why?" The story won't have any real effect. It's a local broadcast. We have something above a 70% homeownership rate locally. Pretty much everyone locally who can buy a house here has one. KTVZ was just trying to make people feel good during the holiday season, not pump the market. Not even the most bullish bulls think that we can unload our inventory buildup on locals and maintain prices (because, umm, that means people would have to be able to afford their homes on local incomes).

It used to be that the bubble blogs, be it national or local, scoured the Web for juicy quotes about trends in RE, looking for cracks in what was perceived as a media whitewash. Sometimes there would be a telling quote buried deep in a story with an innocuous headline. Now the L.A. Times and N.Y. Times have stories right on their homepages every 10 days or so with headlines as bullish as it gets. "Median Prices Mean Little." "Nationwide Home Prices Fall." BusinessWeek put an illustration on its cover a couple months ago with a snake constricting a house. You don't have to go looking for bearish RE stories anymore - they're right there in the supermarket checkout or the coffeeshop.

So what are we trying to do here? The public-service aspect of bubble blogs has more-or-less fallen away. You'd almost have to isolate yourself deliberately from all media outlets but KTVZ and The Bulletin, or from anyone else who doesn't get their news just from these two outlets, to think the boom is going to continue. By the looks of the inventory and sales figures, the target markets of Bend real estate don't need any extra convincing not to buy - they're NOT buying in droves.

So what about our local media? Frustrating, right? I think we just have to accept that Western Boosterism isn't just some temporary approach that KTVZ and The Bulletin have put in place to try to keep the party going. It's just the way they always have, and always will, report on local economic developments. Even if Bend median home prices fall back to 2000 levels and half of downtown is boarded up, they'll find a silver lining. Guaranteed. How do I know this? Because this is how they reported on the local economy back in the '80s when half of downtown really was boarded up.

So forgive me if I don't have the fire in my belly that I had before - it's just that I don't think there's much of a point now, and even more so in the very near future, to beating this dead horse.