Builders ‘Cool Their Jets’ In Oregon
Even in Oregon, the familiar signs of a slowing market are apparent. “Builders are easing back on the record-breaking rate of new home construction in some of Oregon’s hottest real estate markets. Take Medford: The city issued roughly a third of the permits for new single-family houses last month as a year ago.”
“‘And that’s good. Because this market was overheated,’ said (builder) Randy Jones of Medford.”
“Statewide, anecdotal evidence from title companies suggests that builders aren’t recording as many new lots, said Scott Barrie, government and political affairs director of the Oregon Home Builders Association. ‘It could signal a shortage of lots for the future, and it could mean a slowdown for the future,’ he said.”
“In Bend, nobody is slamming on the brakes yet, though builders apparently have started easing off the accelerator. While the number of permits issued by the city jumped 42 percent in the first 10 months of fiscal 2004-05 from the previous year, they have grown by just 3 percent so far this fiscal year.”
“At one point last year, Bend was approving about 10 times the number of new single-family homes than was San Diego, a city twice its size.”
“In both Bend and Medford, builders cite the lack of availability of bare dirt as a limit on new construction, though rising interest rates and cooling housing markets also play a part.”
“Jones estimated that new home construction is down 30 percent from last year across the Rogue Valley. That corresponds with statistics from Jackson County showing home permits down nearly 25 percent so far this year.”
“‘We’re actually finishing a few houses before they sell,’ said Jones, whose company builds high-end homes and residential subdivisions. ‘That hasn’t happened in a couple of years.’ The same is true in Central Oregon, Tim Knopp, director of the Central Oregon Builders Association said.
“The number of homes sold has dropped for 13 months in Jackson County, said Medford appraiser Roy Wright, who compiles monthly real estate statistics. Countywide, housing inventories, the number of homes for sale at any time, are up about 169 percent.”
“‘The home sales start dropping off first, and then it takes awhile before the construction people get wise,’ Wright said. ‘Once the inventory starts getting down to a reasonable amount, then you’ll start to see the building go back up.’”
“Outside of Bend in rural Deschutes County, the building boom continues. It’s the same for Hood River County, where permits were double what they were for the first four months of last year. ‘They are still building every place they can put a house,’ said Kim Salvesen, board member of the Mid Columbia Association of Realtors.”
‘At one point last year, Bend was approving about 10 times the number of new single-family homes than was San Diego, a city twice its size…’They are still building every place they can put a house.’
To my knowledge, the Oregon press is clueless to the underlying causes of their boom. With the exception of the coast, I don’t see any limit to building. With the prices of homes being what they are, these builders will almost certainly create an oversupply, if they haven’t already.
Can’t let this one slide…
Oregon homes for everyone!
Woohoo!
Inventory for Long Island:
03/31/05 15,524
02/19/06 24,691
04/03/06 27,143
05/03/06 29,196
05/11/06 30,089
05/21/06 31,048
05/24/06 31,272
05/27/06 31,489
05/29/06 31,595
Bend? Over!
Excellent. Hall of Famer, that one.
The better areas of the Oregon coast are still doing very well. Inventory is still very low. These areas are still a relative bargain and should weather the storm much better than cities such as Bend and Ashland which are completely Californicated. The Willamette Valley cities should also hold up pretty well. All of these areas continue to grow and are very desirable places that still offer a reasonable value. Think about it, 300K for a house in Oregon or one in Fesno? Yuma? Reno? maybe a condo in San Bernardino, Pheonix or Las Vegas?
What does that $300k house rent for?
Probably about $800/month
Exactly Ben. And until that $800 per can carry a property the price is too high.
Excellent point, Ben. The Oregon economy is horrible, and rents reflect this.
But the California boomers are retiring there, so I guess affordability won’t matter there either.
Yesturday a friend of mine mentioned that his sister-in-law works in the finance dept. of Intel in Hillsboro, OR. She said that there is currently a hiring freeze there and that there are large layoffs planned there in the next 90 days. 20,000 cuts company wide, a large part of them happening in Hillsboro. Intel and Nike are the major employers here and so that could be a huge blow to the economy here. It will be interesting to see what happens.
No doubt,
Retiring Californians fuel the largest bubbles in Oregon.
Here are some data from Forbs “affordability list of 299 from August 2005 (prices up about 5-10% as of May 2006, but not selling well):
Rank City State Mean %Overvalued
??? Ashland OR ~$415,000 (8/05) ?????
10 Medford OR $268,400 69.70%
11 Bend OR $256,200 68.40%
53 Eugene OR $207,900 38.60%
55 Portland OR-WA $258,600 38.30%
82 Salem OR $181,400 27.40%
117 Corvallis OR $224,700 18.00%
Medford and Bend are just out of the top ten (all cities in California and Florida) and Ashland (not rated) is a good $150-200 k over either. I can assure you, it is hard to find a job earning over $30k per year in Medford or Ashland. I think much of Bend’s economy is driven by the building boom. Most of the recent construction is high end stuff in Ashland ($600-$900k) marketed specifically to the Bay Area. As you can see, the bubble is strongest in Ashland, Medford, and Bend. Also very high along the southern Oregon coast. None of these areas has any enonomic draw, rather they are considered good places to retire. I actually hope some of the runup is due toe active flippers or second home buyers. They may crash and burn. Retirees pay cash for large homes, then die (but unfortunately take their time about it).
It might be obvious, but I should clarify that the list above is the “most overvalued”list, NOT an affordability list. Late night post IPA post….
I suppose they may see a boom in senior citizen care, such as health provider, home care… at least as long as Medicare and Social Security hold out. After that, the picture of thier economy is unclear.
Yes,
Senior care and health care in general are growing in S. Oregon at least. The most robust element of the economy so far. There was some talk about the “Silicon Orchard” (Medford-Ashland) in the late 90s, but don’t think we are as high tech as we hoped to become.
What areas of Oregon will fare the best in your opinion Mateo?
I’ll take Reno over rainy/gloomy Oregon anyday.
Ditto! Over the Willamette Valley and points west, anyway. Central Oregon (i.e., Bend & environs) has a climate like Reno’s.
Bend isn’t rainy — it’s in the two-thirds of Oregon which is desert because the Cascades block all the rain. It’s also on an active volcano.
They call it high desert. My daughter used to live there.
my parents built a 3 story cabin south ofthere on fall river.mostly retired folks and great fishing there.i like the 20lb rainbows in crane prairie and the great fishing on deschutes.the deer sleep on their front lawn.
Does anyone know the population of Bend. I drove through there once while I was living in San Diego, and it did NOT seem like half the population of San Diego, and at the time I’d be surprised if it were even a quarter of it. That was around 1998 I’d guess.
I’d be surprised if Bend is 1/40 the size of San Diego. Last time I checked Bend was around 50K and San Diego was 2Mil?
Yeah, SD is 2 mil.
2 mil legal? Being right on the border, you can add a few extra.
Bend is almost 80K now and nowhere near 1/2 the size. Maybe it’s a typo and he meant 1/20?
I wrote the story quoted above. The “city twice its size” comment came from an error in calculation made in haste, and we will run a correction. To see for yourself how many single family housing permits Bend and San Diego have approved in recent years go to censtats.census.gov and click on Building Permit Data.
I have relatives in Oregon, and when they prepared a house to sell a few years ago, they met with the Realtor and went over their situation. The Realtor said in a semi-surprised way: “Oh, you’re current on your payments!” As if, that’s something not encountered too often with a seller….
She said nearly everyone in Oregon buys 80/20. This is not a state and economy where people have a lot of their own scratch to work with.
I sold my house in Grants Pass in 9/05 in preparation to move back to Portland. $382K to $479K in 10 months. Incredible. When I’d decided I’d had enough of small town life I’d resigned myself to having to take a hit at closing (being old fashioned I’d put 20% down). While I was pleasantly surprised to get a large check, I also realized that this was a sign of systemic imbalance. So I’ve educated myself and come to see that the RE market is essentially a rerun of the 1920’s stock market, ie, buy on margin everybody makes money until they don’t.
So I took my cash and now I rent while I wait for the music to stop. My instincts tell me to wait about a year or two for the ARM reset squeeze to work it’s way through the system to the foreclosure auction stage. I’m new to the real estate scene so can someone post a link to tools that I can use to monitor that? My other option is to build new. While that may seem like a strange thing to do in a bloated market, there is good reason to do it in my mind. First, builder will be begging for work. Second, I want to live in that home for a long time and I think that most new houses are build like crap. All the rain here will mold a leaky house in no time flat. I would also make it out of concrete. Anyone used these interlocking forms from href=”http://www.quadlock.com” ? Looks damn near bullet proof, mold proof, and earthquake proof to me.
Go to http://www.foreclosureforum.com and read every response Ward makes. Also keep an eye on Jim V and Rick Harmon. These guys are the real thing, buying distressed property for decades.
I had forgot about that site. Thanks for posting that link
That looks pretty cool. Quadlock saves 40-70 percent energy - that’s impressive. The builders are building as cheaply as they can. I remember seeing a house where the molding under the stucco was actually styrofoam.
You didn’t know about the styrofoam?
Problems with stucco and styrofoam
You guys should limit your comments to the housing market/bubble where your thoughts are generally spot on and quit knocking how cheap the homes are today and that nobody builds with quality. When people keep repeating the same old crap (homes today are poorly built) without knowing the facts, soon everybody starts believing it as the truth. By and large, the building industry wants to build a quality product, lawsuits being what they are and lots of builders, small and large, actually take pride in their work. The good old days where everybody “built quality” weren’t actually all the good. Codes were lax, knowledge was poor, and products were spotty in terms of performance. If you’ve ever done any remodeling (and I’ve done plenty), you’ll understand that houses of the past were generally poorly designed, both in terms of use and performance. I doubt there’s a single product being used today that isn’t better in terms of performance and efficiency.
Techniques and products change over time. Things that you became used to seeing and took for normal will be replaced as technology changes. Get over it and embrace new and different ideas.
As for the “Quadlock” system, it’s a forming system known as an ICF which is a brilliant way to build. You can use an ICF either as just a foundation or as an above grade wall system as well. The house will be quiet, strong, and perform well thermally. Another system that you may want to take a look at is known as an ISP (insulated structural panel) which is much stronger than a conventionally framed home, performs better thermally and is quick to erect. Using an ISP roof system with either of these wall systems will give you an amazingly thermally efficient home. Both these systems will cost more than a conventionally framed home but will perform better over the life of the building. Be aware that because these homes won’t “breathe” like a leakier conventionally framed home, you will need to provide an adequate ventilation system to the home.
When you get into building yourself with an architect or possibly though one of the really interesting prefab companies/architects that are coming on line, that’s a whole ‘nother discussion, albeit a very interesting one.
You might want to look at the Dwell Mag forums for good ideas. Google Gregory LaVardera, who is an architect doing prefab designs that are very interesting and affordable.
Also, this is an interesting company
http://www.h-haus.com
More on this interesting topic
http://www.livemodern.com/Members/lavardera/lamidesigndevblog
ewwwwwwwwww. Those are awful.
It’s all a matter of taste, now, isn’t it. I’m sure that I would think what you like is “awful” too. I can only imagine . . . and shudder doing so.
30 day build? Steel construction? Prefab has come a long way. That house will be standing for a long, long time.
It’s not my style, either. But the concept is one that should put the ‘custom’ builder on notice.
the concept is one that should put the ‘custom’ builder on notice.
A very timely sub-thread. Business Week puts the cookie-cutters on notice too:
Prefab Gains Signal Housing Pain (Business Week)
(That said, I’m out of my HOV short today. Looks like I’m gonna get only a buck out that Barrons’ article, which is no worse than it did twice in the last five days anyway. Plus there are too many and varied sources for a pop out of nowhere the next couple of days: end-of-month 401K money being put to use, FOMC minutes being released on Wednesday as I mentioned already, HOV earnings Wednesday night (if there’s nothing substantially worse than their May 2 pre-announcement, there could be a sharp relief rally), JP Morgan toutfest June 5. Never mind the very climactic looking two-day bottom I mentioned in my post with that Barrons article, gap at 38.82, a 0.618 Fibbonacci retracement of the drop from 54 would put it right into that gap, and, and, and…)
TXC, I’ve been shown a couple of the Dwell type prefabs by a relative interested but the $ / sq.ft are kinda high from what I’ve seen. Don’t mind the box / modern look in the right setting but damned if I’m paying someone a premium for “designing” a box.
Oh it’s a box alright. I guess some like contemporary, but it’s not me. I’m more old world or traditional.
Unfortunately, this is not the old world. Those houses are an eyesore/
this spreadsheet may help you find an entry point during the correction:
http://www.files.bz/files/11251/RealEstateValuationMethods.xls
Funny thing about building new. 1) I agree that in the immediate future, prices of a custom built new home will be much cheaper than an existing home or a cookie-cutter-crap in a subdivision built today. 2) I am currently in college obtaining my Architectural Engineering degree, and my goal is to design homes and/or additions that don’t require waste. Basically, if you design an item with measurements that utilize the measurements of a piece of lumber from the store (Home Depot, Lowes) and keep it that way. So basically, no cutting, and therefore the cost is much lower. Also, the space being built ends up larger rather than smaller (and at a cheaper cost).
I’m not a building engineer, I’m a circuit board designer, so I was planning on finding a general contactor that was experienced with the technique. Let’s just say that I know not to bite off too much all on my own. I was also planning on using a set of stock plans (or only making minor mods to a set of them). I imagine that there has to be a cottage industry that services people who want things done properly and are willing to spend the time and money to do it.
I imagine that, reduction of waste, is one of the benefits of using steel. in addition to the pieces being made to spec, any unused parts can be completely recycled.
Those are technically called ICF’s, short for insulated concrete forms. There are dozens of brands out there. I’m not familiar with that particular one but they’re all basically the same-drystack them, brace the wall, and fill with concrete. Talk to a couple of local builders about all the different options. There are some advantages to using them, and some disadvantages. It just depends on your project. In my area they are used primarily for foundations, although they make pretty stout walls.
So true. When towns like Grants Pass are pulling prices like that, something is definitely broken. It is an interesting town, scenic rivers nearby. Like much of rural S. Oregon, GP attracted southern loggers in the 1930-50s who introduced “Sundown Laws” stating that African-Americans had to be out of town by sunset. Even though there has never been more than 0.01 percent African-Americans in the region. These southern fried racists were Oregon’s version of the Grapes of Wrath. Now Meth is rampant among these folks. Charming.
It think Grants Pass will fare a lot like Sacramento area, but perhaps a little better because it is still considered a good place to retire. However, I should add that Californians retiring there to buy $500k McMansions and protest timber sales can expect to be loathed by the many poor residents who can no longer afford a trailer at the edge of town.
I live near Hood River, about 45 miles east of Portland, on the Columbia River. HR is the “center” of the Gorge, kind of like a mini-Bend, north. The skiing, windsurfing, hiking, biking, camping, etc is truly world class. Lots of Calf money here, and they buy with cash.
Real estate is “flat”, and very limited, between huge holdings of public land, orchards, etc. Over $300K for 1400 sq ft pieces of sh_t on 5000 sq ft lots. Three years ago, these were $170K. Rent is $1K for this, roughly 1/2 what a mortgage would be, with all the tax, trimmings, etc. The houses are selling, number of houses on the market is maybe about 1.5 times what is “normal”, selling prices are pretty flat.
Something has to give, either prices come down, or rents go up. Probably will be a mix of both, but I think prices might come down alot more than rents go up. Can’t complain, the rent is right, but it feels weird renting, instead of owning. I won’t buy at these stupid prices, and can wait a long, long time.
Prices are down all over the U.S. market, but you cant let anyone know or the NAR will kick you out, so just give a rebate. this way the sale price looks good and it wont change the outlook, Check this one out
http://www.news-press.com/apps/pbcs.dll/article?AID=/20060101/NEWS0106/601010395/1001/ARCHIVES
So moving to Florida is a dream come true? I don’t think so.
Hurricanes for everyone.
Rents won’t move anywhere in Hood River.
I am a kayaker and skier and spent 2004 in Portland and skied Meadows quite a bit.
You can’t borrow (much) to pay the rent.
Yup, I agree. It’s either higher rents or prices come down, maybe both! Don’t have a clue, and will wait to see what happens. Maybe start looking at r/e, fall of 2007? That should be a hoot.
Sorry wrong link
http://www.nbc-2.com/articles/readarticle.asp?articleid=7296&z=3&p=
$10,000 in incentives? - I like the $100,000 discounts better.
Thanks for the link to the story.
I think the “incentives” game is merely an attempt to delay the inevitable. Prices will have to drop.
People are beginning to become concious in a mass level to the games realtors are playing.
What are the benefits of a buy taking incentives over a price cut?
Los Angeles Friends In Deed
Read about Napa home sales slow, but above a year ago.
“DataQuick reports the “typical” Bay Area buyer has an eye popping $3,048 per month mortgage payment. That tops March’s $2,948 figure and the $2,659 payment reported in April 2005.
Those figures don’t unnecessarily alarm Bolen. “We’re still at extremely low interest rates. I don’t see any cause for panic.”
“Silvas doesn’t believe the market is in a bubble. “Baby boomers remain in their peak earning years and stand to inherit a tremendous amount of wealth from their parents over the next decade or two,” said Silvas.”
Jesus, now we’re hoping our relatives die off to hold us up financially? What’s next?
Ha. I’m a boomer and the huge wealth I will inherit is max $100K. Of course that’s assuming my mother doesn’t fritter away my inheritance on herself — which I wish she could (she has beginning stage Alzheimer’s). Most likely the few $100K she has left will go to end-stage life management services.
That’s going to be true for a lot of people. Personally, I think this “trillion dollar inheritance” thing is a bunch of bullshit. My parents are already gone and I didn’t get anything worth writing home about A house in Nova Scotia, a condo in Montreal, one in Wimbledon, U.K. (already sold) and a small amount of cash. My parents pissed away their money and I’m glad they enjoyed themselves doing so.
Same here, txchick. My folks were frugal tightwads when I was growing up (going to McDonalds was a big deal); now they piss away money like crazy, filling their house with useless crap. My mom, bless her heart, has three Cuisinarts. In fact, she has three of a lot of things. Last year, she bought my dad a $6500 barbeque grill. That’s not a typo — sixty five hundred dollars. As far as I can tell, she goes shopping just about every day, for several hours.
LOL… ditto! My how times have changed. They are so excited their house in BFE has tripled in value since 1990 when they got it that now they are assuring me that real estate is always the best investment and “prices never go down.”
the trillion dollar inheritance is not bs. it is real. but it is for the super rich only. maybe for the top 1% or so.
I’m a boomer and the four of us siblings split $30,000 apiece. I also inherited another $58,000 from my uncle. That was in 2000 for both inheritances. I think it’s a fallacy that boomers will get a lot of money. I think $100,000 or less will be common, particularly because they have to divide the money with siblings, which are usually more than 2 other siblings. I doubt if that money will prop up this R.E. bubble. My dad used to dabble in real estate (he was a land developer) in the 1960s. He had wisdom to tell me that it’s foolish to have a vacation home vacant unless you rent it out. Why have something empty 49 weeks per year and spend 3 weeks in it? I think he told me that everytime I told him (when I was in my late teens and early 20s) my dream is to have a beach house in La Jolla and a ski Chalet at Incline Village. My dad never considered renting out to others. I think property management is fairly recent, far beyond the years when my dad got out of Real Estate.
Now that’s a dream come true. I could not think of a better combination but then I haven’t traveled extensively.
I have been receiving reports of people going to hospitals for what appears to be fairly minor treatment and ending up as a “ward of the state” and with all their assets siezed by the government. And in some of these reports, the person had living relatives whom could have acted the legal guardian of that person.
It was reported that these occurances would happen within about two days of going to the hospital.
So if these reports are trure, then those living relatives looking for a relatives inheratence may have to stand in line after the government and the hospital and their people milk their relatives assets dry.
Los Angeles Friends In Deed
Read about Risks Close In on the Fed.
“Compared with Greenspan’s first crisis, the economic landscape that Bernanke faces seems downright orderly. Less than three months into his term, Greenspan was hit with the stock market crash of Oct. 19, 1987, when the Dow Jones industrial average lost 508 points. Greenspan responded by pumping money into the economy, a step widely seen as crucial in preventing a recession or worse.”
Bernanke’s choice may make the difference between growth and stagnation, between price stability and inflation. Several years into the economic expansion, growth is inevitably coming down from its immediate post-recession highs. Policymakers want to prevent the slowdown from turning into another recession and do it in a noninflationary way.
That outcome — called a soft landing — requires a delicate balancing act. Thanks in part to a burst of productivity growth that accompanied widespread adoption of improvements in computer technology, Greenspan’s Fed pulled it off in the mid-1990s. The economic expansion of that decade was the longest ever.
But right now, both growth and inflation seem to be moving in the wrong directions.”
Now that someone has started the off-tangent Non-Oregon thread (sorry) … I have to pose this question:
Will the Fannie Mae settlement be the final nail in the coffin of the bubble? On the HousingPanic blog, people are saying that part of the settlement is that Fannie must cap their loan volume at Y2005 levels.
OK…. if that’s true, they wouldneed to find buyers for the junk they’re holding, or they may end up having to sell the performing loans (if that’s all the players will buy) and end up keeping the crud.
If they do neither, there would be a liquidiy crisis because Fannie Mae buys so much of the secondary market…
Anyone agree? Are the other bloggers overstating the impact of this?
I totally agree. As I said before this will be the straw that breaks the camel’s back.
Why would they have to sell off anything? There’s constant run-off from a portfolio of mortgages through prepayment. And Fannie might be capped, but Freddie isn’t, and neither are the Home Loan Banks. Why wouldn’t they just buy the stuff that would otherwise have been bought by Fannie?
The only nail that will burst the bubble by itself is some large, unexpected event. The FNM situation, while a big problem. is no bigger than, say —
ARM resets & rising interest rates
Toxic loans
Huge oversupply
Unaffordability
Rising energy prices
Worldwide credit crisis
We are seeing the bubble deflate. It would take a big event to pop it.
I was up in Folsom CA above Sacramento on Sunday for a BBQ. Inventories are high enough that Realtors no longer want new listings, they mostly would like some buyers. And a new storm cloud is on the horizon, Intel is a major employer in the area and rumors are circulating that layoffs as high as 1,100 could occur in what is a relatively small community. I’ve seen 1st hand what happens when a “Company Town” gets hit and it isn’t pretty. In San Jose we wait for Sun Micro to finally start shedding people under the new CEO, the numbers could also be quite bloody.
Wow, that could be a problem. I used to like Folsom but they have overgrown Sacramento and the vicinity so much, it’s not what it used to be. I have friends that said the crime has gone up and that there’s atleast one homicide a day. Whoa, that’s unbelievable. The drive to go downtown (13 Miles) takes over an hour during commute.
I liked it when it was small. I think it should be a crime to build homes/structures unless you have the freeways to warrant it. What a concept.
Ok, time for a glass of wine.
LOL
One homicide a day in Folsom??? Ty ONE all last year and ZERO so far in 2006. Folsom, along with Davis is by far the most desirable places to live in Sacto Valley, and probably all of the CV. Very low crime, very highly rated schools, 75% white.
Overpriced? of course, and they will/are correct by 15%-35%. Probably more in Folsom if the Intel rumours are true.
Sorry, did not mean Folsom, but Sacramento in general.
Crime is indeed on the rise in Sac as well as all of CA, but Sac “only” had around 45 homicides last year.
You bring up a good point with crime. Crime is up nearly everyplace in CA and Metro areas in the US.
Economics 101: Rise in crime rate normally indicates a recession. I believe we are in a recession now, at least in CA.
I guess my son and best friend were exaggerating. So I should state it that it has risen… not daily?
Read about From Sacramento Police.
Read about From Feds.
Year 2000
Murder
Feds 75
Sac 39
Rape
Fed 428
Sac 148
Now I understand. You have the sheriff’s and the police in one city. With both of those the stats would probably be close.
Don’t you just love stats. Am I reading it wrong? Ironically, I used to work with Lou Blanas at the State Lottery. What a small world.
crime is up in CA also because of the lack of police officers. a lot are in tour of duty as reserves/national guards. the other reason is budgetary. my goodness, in a non-injury car accident they would not even bother to check the incident. they’ll just tell you to file a report because they do not have a manpower to *waste* with such incidents, which is true.
Not enough manpower. That’s what Prop 13 does - everybody is bragging they are house millionaires, but come tax time everybody pretends to be the poor middle class. Californians are full of it.
Look, if you don’t know how Prop 13 works or what it does, don’t troll by blaming it for every imagined slight. Crime is up in CA urban areas because of density, demographics and economics. Two of the three safest cites in the entire US and many of the top 20 are in CA but those are the cities with low densities, traditional community makeups and high incomes.
Those FBI stats are for “Sacramento County” and the other is for the City of Sacramento.
Sorry. Chico kicks but all over those towns. Also overpriced.
I love Chico..used to live there. Chico is right there IMO….problem w th Chico is a near bankrupt county, serious problems with meth, and lack of high paying jobs….or any jobs outside the service sector for that matter.
Yea,
I spent a year there in the 90s, swimming in the creeks with the hippy girls, listening to great music, and trying to find two nickels to rub together. Sierra Nevada pale ale flowed up through cracks in the sidewalk. Alas, had to leave eventually for lack of work, but found my wife there. Not a bad deal. May the flippers leave that friendly town alone.
Chico is nice but I have had extensive bubble conversations with a couple people up there.
They know it is one and hope it doesn’t burst before they retire.
Chico is a wonderful town, but will it be toast or not? The million dollar question. I can attest there are very few good jobs to support inflated prices. I have no data, but I suspect Chico has had more than its share of flippers in the last few years. On the other hand, like Nevada City, Reno, Ashland, Bend, Tahoe, Redding, Mount Shasta, etc. It is a nice place to retire that is “on the radar screen” for the legions of Bay Area boomers, so may be part of a larger demographic / diffusion process from urban centers to attractive rural towns. We’ll see about a bubble soon I guess.
Here is a response I put in the ocregister’s blog
cj,
Slightly exaggerated I will admit, but look at this. Here is a classified from the register:
H.B. OPEN SUNDAY 1-5 6641 Crista Palma Dr Remodeled Gorgeous Spacious 1 Sty Hm on Huge Crnr Lot Nr. Central Park/Library, Grt Neighborhood $879,997 Agt Yolanda 714-847-8075
Here is the zillow link that shows what they paid
http://www.zillow.com/HomeDetails.htm?city=Huntington+Beach&o=North&state=CA&zprop=25292145
Go ahead, but this house and let these people have a profit of $334997
Spacious is 1464 square feet? 7420 square feet for a lot is huge? I guess these days. Aw come on, go buy this house. A little over 2 years for a 335,000 dollar profit. NICE!!!
I used to live in the OC. Yes, 6000+ sf is considered a large lot.
Read about Here is the listing.
Once the inventory starts getting down to a reasonable amount, then you’ll start to see the building go back up.’”
-Keep dreaming, inventory is only going to keep going up at this point. Maybe in 5-10 years will the above statement work.
He’s a builder… what else do you want him to say?
Returning to Oregon:
My buddy who I’ve talked about on this blog who moved to Bend from San Diego had an interesting run in with the builder of his house. He bought in a new development and rented nearby while it was being built. As he visited the job site from time to time he noticed some rather shoddy work and possible code violations. The electrical was a joke as was the plumbing and he saw railings that were not plumb or level and drywall put up in very ‘creative’ ways that he knew was wrong.
He was so concerned that he drove down to city hall and asked about any inspections and construction codes that should be looked into at that development. All of sudden this ‘official’ comes charging out of a back office and starts in on my friend like he’s an idiot and tells him that there is nothing to worry about.
Well the very next day lo and behold, he gets a call from the developers office and some woman informs him that they are canceling his contract. Apparently there is a clause in there that says they can do so for no reason according to my buddy. He had already acquired 60K in equity while it was being built and is basically SOL. I wish I could remember the name of the developer. He’s seems to build in Oregon only and was once a Portland city council member. Anyway the silver lining is that he found a new house that is built better and thinks that the first house will not last 5 years.
Wow, I would post that on /www.ripoffreport.com/ so others will know. Atleast he got out while he could. My daughter was going to buy a house there, but nothing looked like the picture so she bailed.
So how many inspectors look the other way?
I remembered his name: Don Morissette
http://dmhomesbend.com/skyliner_summit.jsp
Based on my friends account of his dealings with this guy I would aviod buying one of his houses at all costs.
Here’s a link to an article with his pro McMansion views:
http://www.portlandtribune.com/archview.cgi?id=32702
An excerpt:
“Kids need lots of room and backyards to play in,” said Morissette, who owns one of the region’s oldest, largest and best-known home-building companies.
It’s the sort of thing the 49-year-old Morissette has been saying for much of the 32 years he’s been building homes in the Portland area — including his term as the only home builder to serve on Metro, the regional government responsible for managing growth in the tricounty region, in the 1990s.
Now, Morissette is voicing a new rallying call: He is publicly calling on government to help save traditional subdivisions in the region. Morissette has been talking with local and regional officials about the need to invest millions of dollars in new streets, sewers, water lines and other infrastructure improvements necessary to support thousands of new single-family homes throughout Clackamas, Multnomah and Washington counties.
Morissette said the investment is needed because there’s not much vacant but fully serviced land left within the urban growth boundary — the dividing line between urban and rural land administered by Metro.
“Something has to be done, or we’re going to completely run out of buildable land,” said Morissette, owner of Don Morissette Homes Inc. and its land development arm, Venture Development.
Not everyone believes single-family homes should be such a high priority, however. Metro Councilor Robert Liberty thinks Morissette is out of touch with the way people live these days.
“Ozzie is dead, and Harriet is a working mom,” Liberty said. “What we need are homes for single-parent families who want to live near where they work, shop and go to school.”
Morissette does not apologize for what he calls his “pro-growth” views, however.
“Families have certain needs that my homes meet. I don’t build anything that people don’t want to buy,” he said.
Someone here is conveniently confusing support of free enterprise with support of a specific enterprise.
They need a Mello-Roos law to have the new developments pay their own freight.
If you think the government is there to protect your interests, you’re wrong. When you have a home built hire your own inspector.
Probably good advise, but the point is that we shouldn’t have to. If your hired inspector finds violations then what? He trots down to city hall and gets the city inspectors who are either sitting on their asses or in bed with the developer, who in this case was a city official, to do what? I’m not trying to be a smart ass I’m just curious what would be the chain of events after you hire your own inspector and he finds cause?
*advice (to many rays at the beach today)
City inspectors have no duty or responsibility to protect individual homeowners. They exist to ensure compliance with very minimum standards set out by the local building code. When an inspector signs off on a house you should be assured that it won’t fall down or burn down. It may still look like crap and have a lot of annoying problems. City inspectors are not there to ensure top quality work. I teach building codes at a community college, and I tell them that a building code is “a description of the worst way you can legally construct a building”. Many builders use it as their bible. Others go far beyond it and build pretty good houses. Hiring a private inspector allows you to bring quality issues to the attention of the builder, which should be clearly outlined by the contract.
This subject reminds me of some info I read in a book titled “The Millionaire Next Door”. In that book they imply that wise persons “millionaires next door” tend to buy older homes than “new homes”.
Los Angeles Friends In Deed
Third party inspectors hired by the owner are the norm in many areas. A builder would much rather deal with an inspector hired by the owner than deal with an often irrational owner who doesn’t know much about construction and who insists his home isn’t being built correctly.
If the inspector finds deficiencies, the builder simply isn’t paid until corrections are made.
I grew up in bend and it’s ridiculous how much it has changed in the last 5 years. I no longer live there but enjoy visiting family and friends once or twice a year. The price of housing there is just rediculous when you compare it to the pay of the jobs there. Nobody makes money in that town! It costs 300k to get into a shack now and there are no reasonable paying jobs. It is going to be very interesting to see what happens the next few years. For the sake of every normal person that grows up in bend an wants to stay there, i hope the bubble bursts! It’s sad to see a great town be stormed by Californians and the local people with descent jobs can’t even afford to buy a piece of shit home. Is there anybody out there that has been tracking the inventory in Bend the last few years? I havent but would love to hear if inventory is going up if anybody has any info.
My same friend who moved to Bend heard about a campus for the Oregon State system being built there. Don’t know if it’s true or not but I think he’s hanging his hat on that as far as new jobs go. We’ll see.
Amen El perro,
That is exactly what I hope happens. I don’t want to lock the doors, but right now it feels like the best towns in the state are being taken by these bozos. A crash in California seems like the only hope for working Oregonians to own anything in the desirable retirement or telecommuting areas.
The locals need to travel to mainland Mexico and learn from the natives there.
Slowly bleed the foreigners dry in a passive-aggressive sort of way.
Take their $ and send them packing.
you would be thankful to californian, a couple of years from now, for bringing all the money to build these houses for sale very cheaply.
The plague of locusts from CA appear to be ruining many RE markets. Count Seattle as one.
Thank God the CA equity spigot will soon be turned off (i.e. can’t sell) and all these drips will dry up.
One correction is that the plague of other people infesting California never ends.
They make some money here and go ruin somplace else.
The only constant in the equation are themselves.
“Bend was approving about 10 times the number of new single-family homes than was San Diego, a city twice its size.” It’s been a long time since I visited Bend, but I can’t believe that SD is only twice its size.
My sister has lived in Portland for almost 15 yrs and has had to change jobs 5 times because of plant close downs, lay-offs, etc.Wages are terrible.
There are roughly 4 M people in the entire state of OR.
OC has 4 M people and SD has 3M people according to OC Renter’s site.
There is no way in hell Bend is 1.5M people.
The PDX-Vancouver MSA is 2M people.
The only higher ed in Bend is Central OR community college.
At least the towns in the Willamette Valley has full fledged Universities.
U of O
OSU
Western OR U
and a number of private Universities.
About 20 years ago when I was a teenager I’d visit my Aunt & Uncle in La Grande. I was shocked at the discontent they displayed towards Californians. looking back that was during the 80’s CA housing boom so I’m sure they were in the midsts of a huge CA influx.
I’d hate to see what that discontent towards Clifornians is like now..
History ALWAYS repeats itself, especialy in RE.
I implore EVERYBODY in CA to check out this link and bookmark it. I’ve verified the hisotrical numbers to be spot-on, and the author updates it every quarter.
[URL=http:// http://www.housingbubblebust.com/92SoCalRecession.htmlWill The 1992 So Cal Recession Be Repeated? [/URL]
Your link doesn’t work
http://www.housingbubblebust.com/92SoCalRecession.html
Yep, the famous
“Don’t Californicate Oregon” bumpersticker days.
“Californicators Go Home” was another one.
…and don’t forget the Henry Weinhard beer adds about 20 years ago that featured the Oregon Border Patrol keeping the Californians out…those were great! (OSU, 84)
Thanks for the link.
I am doing research into real estate price changes in Southern California, and especially Los Angeles, from Mid 1960’s to mid 1970’s.
The reason for the research, in part is to see what happened to real estate prices before, during, and after the Sylmar Earthquake in 1971.
And I want to see what was going on in real estate prices before the push for Prop 13.
Interesting note. It is my understanding that the current governor made their fortune as a result of the Sylmar earthquake, first by forming a contracting business with a body building buddy, doing brick laying, repairing brick walls, fireplaces, etc. He amassed large sums of money and invested the money into rental income producing property.
I would like to get more data on what the prices of real estate were like before the real estate price run up which is reported to have started sometime around 1976 or 1977.
If you have info to assist, please email me. the email address is in the profile at: Los Angeles Friends In Deed
Los Angeles Friends In Deed
Thanks.
yea,
Seems like a very cool site. I like all the graphs.
Sorry. Try this: http://tinyurl.com/rffzb
So tell me, do you think it will happen faster this time?
Very difficult to say Melody. I think it will happen much the same as the early 90s, which is a 20%-25% drop across the board over 6 years.
It would not be hard to make the case though that it will drop much more. Prices have tripled in CA over the last 8 years, versus rising about 75% back in the late 80s. Do not underestimate the affect the Fed Gov’t will have on propping it all up via massive liquidity.
I agree, it is difficult to predict. A priori, we know that the current housing boom, which is really an artifact of the worldwide credit boom is unprecedented. We also have an unprecedented symbiosis between the USA and the developing countries in that it is THEY who are currently financing US (used to be the other way around). Also without a precedent is the fact that despite all of USD imbalances, the global economy shrugs everything off, and operates as if there are no imbalances - low long-term interest rates conundrum, USD losing only slightly, unrelenting imports and trade deficits.
Something IS different, but I can’t put my finger on it. And it seems like nobody can. With this, I predict the current boom will take a lot of time to unwind, at least 10 years. And I also believe that the current financial risk created in the last 5 years is systemic, in other words - there are no hedging cures against it. Everything will be affected.
To be more specific, here is an approximate timeline of events I see happening (I was way off by suggesting the Fed would stop at 4%, so don’t listen to me too much):
1. 2006-2009 - The Shakeout. The initial wave of defaults due to ARMs and bad loans in general. The subprime market is wiped out. The Fed rate is 6%.
2. 2009-2019 Slow Deflation. the Fed stops the bleeding and eases. The RE market is harmed by inventory, and enters self-fueling deflation. Many undestand that further easing won’t help due to liquidity trap. The financial system slowly snaps bit by bit, and property prices slide by about 5% a year. Fed rate at 3%-4% on average.
3. 2019 and after - Recovery. Hard to see in what shape we are going to be. Probably home equity to GDP gains of the last years will be nullified.
The reason the future of this bubble is difficult to predict is that the market is not a machine…and, it is made up of individuals who are not robots. As long as individuals have income and jobs, and free will (!), there is no way to predict how they may use creativity in order to buy and keep their houses (housing bubbles almost always burst because of high unemployment). Other than saying that double-digit house price inflation will not continue in the near future, I’m not comfortable making any prediction. Prices could still go up single digits for years, or stagnate, or slowly decline or suddenly collapse (if unemployment increases). Don’t listen to anyone who tells you s/he KNOWS what will happen. If they were that smart, they’d own a lot of houses by now.
Bend is only about 100,000 people for those of you who were wondering.