New density rules open divisions in single family neighborhoods

            UPDATE: As of February 18 Bend city planners say there is no longer an active application for development of the Compass Corner site. More details in the future.

          Proposed projects at different points on Bend’s Awbrey Butte are focusing a debate over affordable housing, the impacts of high density and multi-family units in traditional single family neighborhoods--and related new city development code provisions.
            Comments by residents regarding proposals by separate developers for the West View project on Glassow Drive on the west side of the butte and Compass Corner on the northeast side both emphasize that the scale and traffic impacts would be detrimental to existing neighborhoods.
            However, both proposed projects appear to fit an emerging city strategy to encourage more multi-family and higher density housing in neighborhoods otherwise zoned RS, for standard single family homes.
            Latest versions of the city code follow Oregon’s new statute, House Bill 2001, intended to force higher density in single family neighborhoods, with the objective of easing the crunch of escalating housing costs beyond affordability levels for many families.
            Among new code provisions is the potential to build up to a quadraplex on a lot of at least 4,000 square feet in a typical neighborhood of single family homes. The code would also downsize current requirements for off street parking.
            As the provisions take effect, homeowners in some neighborhoods have begun to review requirements in their covenants, conditions, and restrictions, or CCRs, that stipulate what type of housing can be built. In theory, CCRs restricting construction to only a single family home would supersede the city code, but legal action might be required to enforce the CCRs.
            One of the two Awbrey Butte projects gaining much attention is Compass Corner, proposed as a mixed use development for as many as 63 studio, 1 and 2 bedroom apartments, up to four floors including retail space. Parking would be above and below ground on the 1.02 acre site overlooking Mt. Washington Boulevard and bordered by Awbrey Road

Compass Corner concept plan

NW.
            County records show the site is owned by Hotel Management LLC, with a registered agent at the same address as that for owners of the recently opened My Space hotel off Bond Street above the Old Mill District. The registered agent is Sueng Lee, at the same address, while LLC members and addresses on the Oregon business registry include Michael Chun of Bend; Anthony Kim of Federal Way, WA; and Shilla Yi of Tacoma, WA.
             In a January online presentation, representatives of the development team fielded comments from area residents who complained the several story buildings were out of scale for the neighborhood, would create traffic hazards and result in parking spilling onto narrow streets.
            Some commented online that neighbors should hire an attorney to oppose the project, as was done by owners in the Rivers Edge community who appear to have prevented the golf course there from being developed for housing. (links to Rivers Edge

Homeowners play a good round at Rivers Edge course

Trading golf for homes: Rivers Edge proposal raises future housng issues

             The project vision appears to have expanded considerably since the city posted a “pre-application meeting summary” of the proposal in February of 2021. That document noted a project to include 35,000 square feet of apartments and 5,000 square feet commercial, up to four stories with surface parking.
            Now in the proposal under consideration by the city as of November 2021, Compass Corner would include 63 apartments in two buildings with up to 10,000 square feet of commercial space. The two buildings would total more than 57,000 square feet along with underground and surface parking. 
             A little over two miles on the other side of Awbrey Butte some neighbors are mobilizing with yard signs to oppose the 6.5 acre West Hill Development that would include 42 units of townhomes, duplexes, triplexes, and quadraplexes on 29 lots. It could also result in removal of more than 700 trees.

West Hill on Glassow overview

            In a guest column in the Bend Bulletin, one resident wrote that,” The objection is not over development per se...The concern is over the scale of the project and the lack of fit with the surrounding neighborhoods, physical environment and supporting infrastructure.”
            Taking a stance more favorable to the project, another writer responding in a column that,  “To complain about housing in your neighborhood (and mine) that does basically the same things that the building of your home did is peak entitlement. Being against the development because it doesn’t exactly mirror what is currently there, despite the law allowing such development, only compounds the cost of building and the shortage of housing.”
            Principals of the West View project are members of Oregon Builders Developers LLC Glenn Kotara and Mark Huffman, both who have Bend mailing addresses.
            By mid-January of 2021, neither Compass Corner nor West View had come before the city planning commission for review, which would be a step before going to the Bend city council.
            With Compass Corner a conditional use permit allowing an exception to maximum size on the site would be required. And it’s possible the issues swirling around both projects could result in both being considered by a hearing officer after public sessions.
            Although not yet in the development planning stage, another site in the same Awbrey Butte area of Compass Corner could also become part of the density discussion.
            At the northeast corner of NW Sonora and Awbrey Road are two lots, one of  0.20 acre and another of 0.14 acre which were listed in January, and became pending sales in 24 days,  as potential sites for duplexes on each property. The site is at the southern intersection of the neighborhood served by streets linking to Compass Corner and abuts an often busy roundabout at a sloped point on Awbrey Road.

Bend sees more million dollar sales - as affordable housing needs grow

             As the conversation over affordable Bend housing continues, home prices are also escalating at a rate that may outpace any near term solutions.
            Data compiled by Beacon Appraisal Group for its monthly market report shows that the median price of a Bend single family home on less than an acre was $640,000, the third consecutive month above $600,000 although below the high monthly median of $651,00 in April.
            Perhaps more remarkable are the sales of homes at more than $1 million. There were 341 homes closed at $1 million or more for the 12 months through June of 2021, a 158% increase of the comparable midway point of 2020.
            The trajectory of the million dollar sales has more than quintupled the 67 at that range recorded in just the three years since midway 2018.
            As a percentage of all sales, those of $1 million or more accounted for only 2.6% in 2018, then rose to 4.7% in 2019; and 5.7% in 2020 before leaping to 12.3% for the 12 months ending June 20, 2021.
          Although the upward arc of regional housing sales has yet to show any weakening, it’s instructive to balance single month prices over a 12-month stretch.
            By that measure, Bend’s median single price for homes on less than an acre over the 12-months from July of 2020 through June of 2021 was $567,000, a jump of 23% over the $460,000 recorded for the comparable 2019 through 2020 period.
            The median price for the same quarter of the two years shows a greater increase, from $464,000 for the three month median in 2020 against $640,000 in 2021 – a 38% increase.

            To the north in Redmond, the region’s second largest housing market, the June median price was $451,000. For the 12 months the median was $374,000, 14% above the same 12 months of 2020. The quarter to quarter price of 2020 and 2021 rose 33% from $334,000 for the 2^nd quarter of 2020 to $443,000 in 2021.
            With Bend homes going into sales contract in last than a week on the market in the past several months, and often closing above listing price, the path for more substantial affordable workforce housing in the city is difficult.
            Bend is not unlike other smaller to mid-sized municipalities, many in the West, where attractive outdoor recreational opportunities combine with other lifestyle amenities to change the character of those once included in the “last best place” category.
            There are few undiscovered western gems left, with such towns as Whitefish, Bozeman and Livingston, MT and Prescott and Flagstaff, AZ and even Washington’s more remote Methow Valley straining under an influx of new part and fulltime residents.
            One possibility for more dedicated affordable housing lies in the distant horizon after approval of special legislation that would allow Bend to bring 260 acres of land bordering the southeast limits into its urban growth boundary.
            In theory House Bill 3318, which makes an exception to usual state land use procedures, could add land for as many as 800 affordable housing units on 20 of the 260 acres, with a 50-year deed restriction. It would also restrict 12 of the acres to anyone making 60% of the area’s median income, among other provisions.
            Also in the early stages of development in southeast Bend is what is known as the Stevens Road tract, 375 acres now held by Lands Bend Corp., a development group with several local projects whose principals include former California Republican Congressman Gary Miller.
            Lands Bend acquired the property from the Oregon Department of State Land for $22 million in the Spring of 2020. That acreage already lies within Bend’s urban growth boundary.
            The Bend Planning Commission is reviewing the company’s preliminary master plan that would provide for more than 1,700 housing units, about 650 of those single family homes, 359 townhomes and approximately 700 multi-family units.

Bend’s affordability challenge

            In a July report the Bend City Council announced the city had a total of 3,942 new housing either completed, under construction or in planning review in the period 2019-2021, which the report said exceeded a council goal of 3,000 units.
            The number included 1.976 finished units, 1,406 under construction and 560 being reviewed.
            The numbers appeared to give city leaders some encouragement in the continuing housing crunch. But another study by the city unveiled at a recent public online webinar shows affordability remains a major issue in relation to local median income.
            US Census data for the period 2015-2019 shows Bend's median household income at $65,662.
            On July 22, city officials held an information webinar to explain how the city plans comply with new Oregon legislation, HB 2001, which mandates that municipalities provide for multi-family units such as apartments, condominiums and townhomes be allowed in areas zoned for single family homes.
            A chart presented in the webinar shows that a household earning an adjusted median income of $120,600 could in theory afford a home priced at the maximum $566,980. That would leave the buyer short by $84,020 to purchase the median priced home that solid in April, according to Beacon Appraisal’s statistics as drawn from the MLS of Central Oregon.
            It would take an income of $64,300 to buy a home priced at a maximum $299,000, as noted in the city’s affordability chart. It would be a longshot if someone were fortunate enough to find one of the only 72 homes that closed at less than $300,000 out of 2,755 total sales for the 12 months that ended in April.
            And there were no closings at less than $300,000 in April.

 

Where to now: Interest rates, inflation and the housing market?

             As the housing market explodes with demand and tight inventory, the natural question arises of whether this is another housing bubble like the one that popped in the “Great Recession.”
            Some of the supply and demand factors are similar although inventory during the earlier pre-recession pricing boom generally remained higher than today in most areas of the country, including Bend and the rest of Central Oregon.
            Another key difference is that lax lending standards have largely disappeared with many buyers in today’s market coming in with all cash or solid loan prequalifications.
            Interest rates may be playing a larger role in today’s housing trends than in the previous boom and bust cycle.
            In the runup to the 2008 housing market peak and collapse, 30-year fixed rate mortgage interest rates averaged 6.34% in 2007 and 6.03% in 2008 according to charts of the federal FreddieMac database. Over the decade ending in 2020 rates fluctuated in a range from mid to higher 3% to 4%.
            As of May 13 this year the Bankrate benchmark survey of the nation’s largest mortgage lenders showed the 30-year fixed mortgage rate at 3.050% with an APR of 3.270%
            On May  12 the Dow Jones Industrial Average fell more than 600 points and the S&P 500 Index dropped a proportionate percentage, before rebounding to recover about two-thirds of the losses by the next day’s market close.
            Much of the drop was attributed to a rise of 0.8% in the April Consumer Price Index, the most in a single reporting period for more than a decade and 4.2% above April 2020. That raised concerns of rising inflation with government stimulus spending and a recovering economy. There’s apprehension this could in turn force the Federal Reserve to back away from its prolonged pattern of “quantitative easing,” or lower interest rates.
            However, barring a major shift in the Fed policy it doesn’t appear likely that gradual increases to tweak inflation fears would significantly blunt the continuing demand for housing. One analysis is that the largest segment of the CPI price increases was used cars and trucks, spurred by computer chip scarcity holding back new car sales.
            Another factor, the thinking goes, is that the dramatic upswing in new housing prices is-- besides pandemic demand--also due to pandemic related timber harvest and mill operation reductions pushing lumber prices to new levels.
            A local and regional snapshot is available from statistics provided by Beacon Appraisal, and derived from the MLS of Central Oregon database.

            At the March 31 end of the first quarter of 2021, only 61 single family homes on less than an acre were listed in all of Bend and outlying areas of Tumalo to the north and Alfalfa on the eastern edge. That translates to less than 0.30 months inventory.
            Another way of parsing the inventory is to translate the low inventory of listings to the pace of sales as determined by the time a home is on the market. Consider that most homes in the Bend area have gone from listing to pending sales in barely four days for the past four months.
            At the end of the Q1 2021, the median price for a single family home on less than an acre in Bend that sold in March was $590,000, more than 28% higher than the same month of 2021.
            For the period from March of 2018 through May of 2020 monthly median prices had held in a range from a low of $415,000 in May of 2018 to a high of $475,000 in August of 2019.
            Then came what might be logically called the “pandemic inflection point,” as the May 2020 median price of $445,000 jumped to $529,000 the next month, hit $560,000 in October, dipped to $524,000 in December and rose to $580,000 in January this year.
            When calculated over a 12-month period ending in March, the median price was $535,000, an increase of 16% over the $460,000 median for the 12-months ending in March of 2020. A comparison of median prices for the first quarters of 2020 and 2021 shows a 26% increase from $460,000 to $580,000.

            For April this year the Bend median hit $590,000 according to statistics in the Beacon Appraisal report. In emailed comments, Beacon’s Donnie Montagner noted that 40 of the 236 Bend sales in April closed at $1 million or higher, or 17% of the total. That compared with April 2020 with only 10 sales over $1 million out of 146 closings, or 7%.
            “After reviewing the data several times, I noticed the median was heavily influenced by the number of sales in the 1Mill+range, which had increased significantly," Montagner wrote.
            Nevertheless, he explained, “While sales in the (million plus) range have an impact on the median, the overall SFR (single family residential) price trend in Bend is significantly trending upwards when compared to the past several years.”
            The housing demand has veteran brokers competing for scant inventory. After capturing a listing the frenzy usually begins with multiple offers, often above the listed price. That in turn has given rise to “offer review days,” often only several days after a home is posted on the MLS. In many cases those offers are in hand even before the listing is known to the general public.
            More  often than not the offers are all cash, with no financing contingency. And even with the financing contingency the offer will likely have to substantially top others to even be in the running.
            Another trend has been a decrease in contingencies for inspections – with some buyers willing to take the risk that a problem may require additional investment, rather than be left in the cold in a hot market.
            Driving the housing market for at least the near-term could the delicate balance of consumer response to current low interest rates against potential higher rates resulting from rising inflation—along with uncertainty over the choppy economy as it emerges from a tough stretch.

Skyline Forest timberland for sale: Priced well above current timber value

            The Asian-based owners of substantial timberland in Deschutes and Klamath counties have put up for sale a 33,000 acres portion of their holdings for a whopping $127 million, twice what they paid for that and other land acquired in a bulk sale of about 200,000 acres less than five years ago.

            The potential sale is listed on the website of ranch and land broker Mason & Morse of Colorado, which said the offering includes timberland, “providing high quality timber for harvest, great for logging industry development and liquidation.”

            Also noted is the possibility of large homebuilding sites, “private hunting and fishing, private parks and campgrounds,” as conditional uses on the property which is zoned F1 forestland. The minimum lot size is 240 acres as a conditional use, which would require county approval.

            “The property has significant long-term appreciation potential, with opportunity for sustainable timber management, conservation, abundant recreation, in combination with residential and mixed-use development,” the broker website noted.

            The listing information: https://www.ranchland.com/bull-springs-skyline-forest-bend-oregon-3431

            The announcement apparently caught the Deschutes Basin Land Trust by surprise, with the group quickly issuing a news release explaining its 15 year quest to have the property, which it has called Skyline Forest, preserved mostly for public recreational use and low impact sustainable timber harvest.

            In a news release Land Trust executive director Brad Chalfant said, “We remain fully committed to the permanent conservation of Skyline Forest for its wildlife, scenic views, and its recreational and educational potential,” adding that the group seeks to continue its efforts with the current owners.

            Although the name Skyline Forest took hold in the past decade, the property was originally known as the Bull Springs Tree Farm, an expansive intact acreage of numerous parcels stretching from Bend’s northwest border to the fringes of Sisters. The broker listing refers to the property as Bull Springs Skyline Forest.

            In the early 2000s Crown Pacific Timberland owned the land before losing it in bankruptcy to a subsidiary of John Hancock Insurance, which in turn sold it to Fidelity National Timberlands, then a subsidiary of publicly-traded Fidelity National Financial, which controls several of the nation’s largest title insurance companies..

            The Asian investment group, Shanda Asset Management, that now owns the property initially acquired it in 2015 through Whitefish Cascade Forest Resources LLC from the Fidelity timberland company. The Whitefish name apparently has its origin in the Whitefish, MT  business base of Bill Foley, chairman of Fidelity National Financial.

            A Securities and Exchange filing in 2015 by Fidelity noted the sale of the timberland to the Asian investors for $63 million. It is not clear from company annual reports and other documents how much Fidelity paid for the property. However, the 2013 annual report notes it recorded a "$6 million impairment" in 2012 related to “Cascade Timberlands.”

1: Boundary of Bull Springs Skyline - Mason & Morse

            The Shanda Asset principals at one time had addresses in Singapore, although online information indicates the bulk of the investors' wealth was derived from interactive internet and online gaming in the Chinese market. Other information shows that Shanda Group had a Hong Kong base.

            According to the broker’s estimate in the listing, the 33,000 acres is more than 93% Ponderosa pine, or 71,905 thousand board feet, with remaining stands of mostly White Fir. Ponderosa is a lower value species than others such as Douglas Fir and White Pine typically found in less arid locations of Oregon, Washington Idaho and Montana.

            Information posted online for the fall of 2019 by the University of Montana shows that the mill-delivered price of Ponderosa  for the western part of that state averaged $333 per board foot. Another online chart from an Idaho private broker estimated prices of $325 to $380 depending on the tree diameter.

            Assuming a higher price of $400 per thousand board foot, the 71,905 thousand board feet of Ponderosa estimated by the broker would currently be worth $28.774 million, or approximately $871 per acre.

            Current Deschutes County tax records list one of Skyline Forest/Bull Springs larger parcels of 12,543 acres at a “real market value of  $7,379,870, or $588 per acre. For the 2015-2016 year at the time it was purchased by the current owners the county estimated the real market value of that parcel at $4,865,730, or $387 per acre.

2:Deschutes Co. Destination Resort Map (dark)

            By most measures, the $3,848 per acre price for the 33,000 acres listed at $127 million is a staggering jump when considering the current price of standing timber, or "stumpage." It’s reasonable to consider much of the non-timber residual value in the listing price could be based on potential “highest and best use,” an appraisal term, which might include residential single family homes or cluster development as noted in the listing package, with additional value in long-term forestland growth.
            A more complex discounted cash flow calculation would factor in a laddered future value of long-term timberland management, including such points as periodic harvest thinning and reforestration as well as related expenses.

            Another more elusive value might be assigned to the potential of carbon sequestration, the process in which timberland absorbs atmospheric carbon and releases oxygen. With climate change has emerged a "cap and trade" market whereby business and industry can obtain credits created by timberland to offset operations that contribute to greenhouse gases. Or they might trade a permit that allows a defined amount of emissions.         
            There had been  discussions with previous owners that portions of the land might be developed as a destination resort. But current zoning and a 2017 state law requiring that destination resorts be more than 24 miles from an urban growth boundary of cities of more than 100,000 population could be impediments.  The state law also requires counties to develop a wildfire protection that “demonstrates the site can be developed without being at a high overall risk of fire."

           Two wildfires, the Two Bulls in 2014 and Rooster Rock in 2011, have burned more than 10,000 acres of the property before the 2015 acquisition by Shanda Asset Group.

            Bend’s growth is fast approaching the population threshold related to resorts. And the property is not currently designated on Deschutes County’s comprehensive plan for a potential destination resort. (See map 2 - resort map area is south of Skyline). 

 

 Previous posts

Scenic forest between Bend & Sisters spurs conservation effort

 Massive timberland sale raises questions for Deschutes and Klamath projects