Bend-Deschutes housing continues in federal top 10 appreciation

         After anchoring the bottom of national housing appreciation statistics eight years ago the greater Bend real estate market is maintaining its position in the top 10 as measured by the Federal Housing Finance Administration.

         In its latest statistical report, FHFA ranked Bend No. 8 in appreciation among 276 MSAs tracked with a 12-month increase of 18.99%. For the second quarter of 2014 Bend housing rose 4.61% year-to-year, and in the past five years 6.61%.

         At one point during the super-heated market of 2006 Bend was No. 1 each quarter in FHFA appreciation rankings, before slipping to No. 7 in the first quarter of 2007. By the end of 2009 the Bend MSA – including Deschutes County –was dead last among 299 MSAs tracked at that time with a 20.55% loss in home values.  

         Bend continued to bounce along the bottom among all MSAs and at the end of 2009 grabbed the dubious distinction of passing the Las Vegas area as the worst market in the country. It held that position until being barely edged aside for the bottom spot in the 3rd quarter of 2010 by the Daytona Beach area of Florida.

For that quarter, the last one reported through early 2011 by the federal agency, Bend was 298 among 299 MSAs with a one-year negative appreciation of -13.73% and -24.35% for the previous five years.

Out of the weeds and dust - a housing recovery

Only a couple of years ago Obsidian Heights as it’s known was a dusty, weed-choked stalled subdivision complete with streets, curbs and other infrastructure--but waiting for any sign of a market pulse.           

Now the community on the east side of busy NE 27^th Street just to the north across from Mountain View High School is one of the more notable examples of Bend’s housing market revival.

In less than 18 months 45 homes have been built and sold-- many before completion, at prices from $158,020 to $274,399, in sizes from 1,200 to 2,470 square feet.

And many sold at more than the listing price, resulting in a sale to listing price percentage of 100.88%.

Obsidian Heights is among many examples of home builders and land investors who have acted to meet substantial demand for new housing throughout the region. In some cases investors acquired land at deeply-distressed prices--either from banks that had foreclosed or other groups that could not hang on until the market turned.

And in one case, Central Oregon’s formerly top builder has reemerged as a major factor in construction and sale of new homes after surviving hard times and losing some projects to its lenders.

Obsidian Heights is a project of Hayden Homes, by far the largest homebuilder in Central Oregon. The Multiple Listing Service of Central Oregon database shows that since January 1, 2011 through August 27, 2014 Hayden has sold 553 homes at a median price of $189,625 for total sales volume of $104,742,443.

A Hayden Home in Obsidian Heights

Of those sales, 469 came after January 1, 2012 and the median price rose to $194,990. From January of 2013 through August of 2014, Hayden’s median price had risen to $205,152 for 333 sales.

Hayden’s total sales volume in the approximately 20 months since January of 2013 exceeded $68 million, more than two-thirds of the volume for the 44 months since January of 2011. In only eight months of 2014 the volume was more than $32 million, 30% of the total for the past three years and eight months.

With the accelerating number of sales, demand continued to drive up Hayden’s median price to $214,458, compared to  $250,000 for single famly sales on less than an acre in all of Central Oregon and $289,900 in the greater Bend sub-market.

Although Hayden has a large market share in Central Oregon, similar stories of weed-to-lawn subdivision revivals have been repeated throughout the region.

Among the most active participants in acquisition of previously-troubled bare land developments has been a joint venture involving California Republican Congressman Gary Miller.

Beginning in August of 2009 as the market had crumbled Long Term Bend Investors LLC - Miller’s Group -- purchased 17 lots for $450,000, or $26,740 per unit, from Liberty Bank  in the failing Crosswinds project along Reed Market Road east of Hwy 97.

That purchase was followed by  44 lots in a project known as Laurel Springs for $728,000 from Badger Partners LLC, or only $16,545 per unit.

Another major acquisition from lender Bank of the Cascades  by Long Term Investors was 117 lots in Fieldstone Crossing in Redmond for $2 million -- approximately $17,000 per lot. In that project, Long Term has partnered with builder Signature Home Builders LLC in construction of 18 homes in 2014 that were actively listed in a range of $209,900 to $339,900 as of late August 2014, but there had been no sales recorded.

Fieldstone Crossing was begun by Pahlisch Homebuilders, once the region’s leading builder until it shrank to only a few completions in the market slump. Now Pahlish partnerships are active again.

In 2013 and 2014 through August 28, the regional MLS shows that Pahlisch has built and sold  179 single family homes throught the region in prices ranging from $186,600 for a 2 bedroom, 2 bath 1,143 square foot home in southeast Bend to a 5 bedroom, 4.5 bath, 3,761 square foot one in Shevlin Ridge on the city’s northwest edge at $765,000.

In that period, Pahlisch has also built and sold 46 townhome and condo homes, starting at $194,000 for a 3 bedroom, 2.5 bath, 1,450 square foot unit in McCall landing of northest Bend, to a luxury 4 bedroom 3.5 bath, 3,075 home in Deschutes Landing along the Deschutes River trail immediately southof the Old Mill District.

Throughout Central Oregon the MLS database indicates that since January 1, 2013 through August 27, 2014 there were 990 sales of new homes--single family and townhomes/condos--that were built in 2013 or 2014, out of 8,097 sales during the period, or 12.27%.

But the percentage was higher in the bustling Bend sub-market, where 784 sales out of 4,545, or 17.25% were newly constructed homes.

Bend housing market maintaining steady pace

Back to the process: Bend UGB effort restarted

            The City of Bend is ramping up another attempt to fashion a long-delayed Urban Growth Boundary plan that will address how much land, and where, will be needed to accommodate growth in a 20-year period extending through 2028.

            The effort follows a state agency’s “remand” for revisions to an earlier plan submitted in 2008 by the city to comply with Oregon’s land use Goal 14, intended to guide urban expansion throughout the state. Any city of more than 25,000 must update it's comprehensive plan to comply.

            At the outset of the process the city forecasts that Bend’s population will have grown by more than 30,000, to more than 115,000 residents, with another 20,000 new employees, by the end of the plan period.

            In August the city began assembling “technical advisory committees” (TACs) to work on issues related to land needed for residential housing, for employment growth and how the urban boundary should be expanded to meet those requirements.

             Also involved in the process are outside consultants who will use a software-based  tool, Envision Tomorrow, to analyze options for future building  and locations.

The program involves a “prototype builder,” to analyze return on investment of various developments given current markets, land use regulations, and impacts of parking, building height, construction costs, rents. As one example, consultants say the program could be used to determine feasibility of such development as mixed-use retail with housing.

The other “scenario builder” component would design a “library of buildings” identified in the prototype building phase and create a “painted landscape” of the possibilities. The program would then evaluate different scenarios by critreria the city  defines such as impact on land use, housing, sustainability, transportation and the economy.

In remanding the original plan to the city for revision, the Oregon Department of Land Conservation and Development emphasized it had not adquately  addressed the potential for using available land already in the UGB, or potential infill property, to meet 20-year needs.

Under the current schedule published by the city, the final plan would be completed in April of 2016, only 12 years before the intended 20-year goal of 2028. 

Broken down by phases, the process involves:

·        Phase 1: establishing the methods and policy direction by February of 2015;

·        Phase 2:  completion of growth scenarios and a proposed new UGB beginning in January of 2015;

·        Phase 3: adoption and implementation beginning in November of 2015 and concluding in April of 2016.

The Phase 2 work will rely on the Envison Tomorrow program to test ideas and land use options and “narrow down the universe of boundary and infill scenarios into four competing infill and expansion scenarios that are all legal and meet the requiremnts of the Remand Order...”, according to a memo to city staff from the consulting group.

From that point, there will be additional analysis of the scenarios in relation to city service capabilities including water and sewer facilities, stormwater system and transportation.

Deschutes commissioners give resort a reprieve

            Although mostly forgotten along with the several proposed resorts that sputtered during the real estate downturn, the Thornburgh project in the Cline Butte area has a reprieve of sorts thanks to a vote by Deschutes County Commissioners.

            In a 2-1 vote in July  the county governing body essentially contradicted a hearing offer’s ruling in late March that the current developer had not met a county code requirement to show significant activity in building the project over a two year period.

            Hearing office Karen Green had ruled that developer Terrence Larsen would need to restart the project with a new master plan, a decision that Larsen appealed.

            Larsen, who acquired the project in bankruptcy in 2011, has argued that delays have resulted from various appeals by opponents, economic conditions and other unforseen issues. His attorneys have said nearly $7 million has been invested in the project starting prior to Larsen’s acquisition, in addition to the $2 million the Philadelphia-based investor paid for property.

            A key issue the commissioners had to address was whether a final plan submitted by Larsen that was rejected by the state’s Land Use Board of Appeals met the test of substantial action within a two-year period.

            The commission decision does not validate the final plan rejected by LUBA, but puts the process back on track without requiring Larsen to in effect go back to square one as the hearing officer ruled.

            The ambitious plan of the original developer, Kameron DeLashmutt, was for Thornburgh -- also known as The Tribute -- to offer 950 homes with 475 nightly lodging units on its approximately 1,300 acres. Among the three proposed golf courses was one to be designed by links-great Arnold Palmer, who visited the site before the real estate crash.
           Among other troubled resorts, Remington Ranch near Powell Butte in Crook County barely got off the ground with a clubhouse/marketing facility and nine-hole golf course before going into bankruptcy. In 2012 it was listed for $5 million in an auction with a Colorado company.

            Crossing Trails and Hidden Valley, another two projects proposed for Crook County, never made it beyond early stages of the permitting process.

Northwest Crossing - stable in the downturn & a leader in recovery

            It’s likely that anyone who has tracked the Bend residential real estate market will rank Northwest Crossing on the city’s west side among the most successful newer communities.

            Much like all housing in Bend, Northwest Crossing faced substantial challenges as the market began to dive in 2007, after what has generally been conceded was an unsustainable boom.

As the market continues its climb out of the recession-induced hole the community  is bustling with new construction, much of it on streets not yet completed before the downturn.

On the east side streets have been extended to connect with other west side neighborhoods. On the west side of Mt. Washington Drive, new lots are nearing shovel ready and a new city park to include a lake is under construction.

            Perhaps setting Northwest Crossing apart from more troubled projects was a master-planned vision that incorporated residential, office, retail, schools and developer control of buildable lot inventory, along with an approved “guild” of quality builders.

            And the financial stability of developer West Bend Property Company LLC, a partnership of Brooks Resources and the Tennant Family,  has resulted in the “staying power” that was lacking with some other developers.

            In its history through July of 2014 there have been 785 single family homes sold in Northwest Crossing, the first in 2002 when there were 10 sales at a median price of $289,045. 

Northwest Crossing master plan

           

            As the national economy continued to rebound after the 9-11 attacks, single family sales rose steadily to 91 in 2005, at a median of $424,377. In 2006 sales began to sag, falling to only 38 units, although momentum carried prices to $538,000 that year and to the all-time high of $575,000 in 2007 on 47 units sold.

            Then came the slide, as prices dropped 26% to $425,000 in 2008 on a meager 39 sales. Prices hit bottom at a median of $371,815 the following year, although sales increased to 53 homes. But only nine of those 2009 sales were built in 2009 or 2008, the lowest rate of new homes sold since the project’s inception in 2002.

            Northwest Crossing sales rose to 71 in 2011 while median prices remained in a narrow range of the $370,000s.

            Then 2012 marked a dramatic increase as the mix of  builders, lenders and buyers drove sales to 116 homes at a median price of $388,250--56 of those newly-built from 2011 through 2012.

Discovery Park at Northwest Crossing

            The pace continued in 2013 with 110 homes sold,.49 of those built in 2012 and 2013. But more notable in 2013, the median price rose nearly 20% to $462,500.

            At the end of July 2014 median prices had moved up to $490,000, edging closer to the $500,000s. And the rate of homes sold could be expected to top 100 for the third consecutive year, compared to the high of 91 homes sold in 2005 before the housing slump.

            Moving forward, West Bend Property is opening an additional 24 lots across Mt. Washington Drive that will be adjacent to a new 20 acre Bend city park with a 30 plus acre park with a 3-acre lake.