Early 2011 - Signs of improvement but don't break out the champagne

Better, worse or more of same?

Depending on how you analyze it -- or interpret the "metrics" in currently fashionable biz speak--an argument could be made that the Central Oregon market is slowly stabilizing. But there are lingering questions whether we’re in for another dip or a protracted period of bouncing along the bottom.

And the answers will be found not only in the pace of a reported, if elusive, national economic recovery but also in local conditions specific to Bend and Central Oregon.

In the nearly vertical climb of the region’s real estate market in the first decade of the 21^st Century unit sales, prices and sales volume were driven by forces in play throughout the country—escalating prices everywhere, easy credit for primary and secondary homes and the generally euphoric attitude that it wouldn’t end. Of course it did—with a thud.

Today’s realism has supplanted any thoughts that we’ll ever see a confluence of market events like the recent past, and the most rational among us probably think that’s a good thing.

As we emerge into a new decade there are a number of positive, if subtle improvements underway in Central Oregon.

--Home sales are up, although slowing after impacts of the federal $8,000 tax credit have largely been absorbed. Only the LaPine area out of seven area sub-markets failed to notch a gain in unit sales from 2009 through 2010.

--Notices of default on home loans and ELOCs (equity lines of credit) filed by lenders in Deschutes County declined by 7.3% from 2009 through 2010, after a phenomenal rise of 537% from 590 in 2007 to 3,762 in 2010.

--In early 2011 the “supply” of active listings of single family homes on the Multiple Listing Service of Central Oregon database was down to 4.5 months. At one time in recent years it was more than 13 months. (The supply is calculated by averaging the previous 12 months sales, then dividing current active listings by that number).
A caveat in the diminished supply, however, could be that with a healthy supply of distressed properties on the market some "traditional" sellers are holding back to wait for more favorable economic conditions.

--Median prices have leveled off after drops of as much as 45% in Bend from 2006 through 2010, and even higher in other sub-markets of Central Oregon such as Jefferson County.

 Apart from the positive numbers distressed properties have indisputably driven sales for the past few years. In the two largest sub-markets short sales or foreclosed properties (known as REOs, or real estate owned by lenders) claimed 57% of 2010 single family sales in Bend and 68% in Redmond. Moreover, distressed properties also comprised the overwhelming majority early 2011 pending or contingent sales—77% in Bend and 87% in Redmond.

Coming up:

The region’s appeal as a recreation, resort and retirement area continues to attract careful investors.

Vacation-second (3rd etc.) homes still drive Bend ...

The following chart provides an overview focusing on single family homes as the largest slice of the regional market. Statistics are derived from the Multiple Listing Service of Central Oregon and may vary slightly from reports of appraisal companies or other entities.

SINGLE FAMILY HOMES (on lots less than 1 acre) Central Oregon-Bend MSA*
TOTAL UNITS SOLD						SOLD as SHORT SALES/REOs		PENDING/ CONTINGENT SALES		ACTIVE LISTINGS	SHORT/REO ACTIVE LISTINGS
Town or area	Total units sold Including short sales and foreclosures (REOs)				% change total units sold	Short sales/bank owned (REO) units Sold	% Short/ REO units sold	Pending or contingent sales(all)  /PendContshortREO	% short& REO of total pending or contingent	Total active listings	Active short/ REO listings	% short / REO of active listings
	2001	2008	2009	2010	2009-2010	2010	2010	Jan 2011	Jan 2011	Jan 2011	Jan 2011	Jan 2011
Bend	1,419	1,123	1,544	1,687	+9.26%	964	57.14%	316 / 244	77.21%	508	184	36.22%
Redmond	519	446	629	727	+15.58%	494	67.95%	135 / 117	86.67%	272	138	50.74%
Sisters	90	77	70	88	+25.71%	36	40.91%	19 / 11	57.89%	71	16	22.54%
Sunriver	170	72	80	92	+15.0%	11	11.9%	11 / 4	36.36%	130	5	3.85%
Crook Co.	127	120	163	221	+35.58%	157	71.0%	40 / 32	80.00%	103	31	30.0%
La Pine	17	31	71	64	-9.86%	43	67.19%	9 / 6	66.67%	27	13	48.14%
Jefferson Co-Madras	NA	78	113	120	+6.19%	92	67.67%	27 / 21	77.78%	60	16	26.67%

Town or area	MEDIAN PRICES							MEDIAN PRICE CHANGES
	2001	2004	2005	2006	2007	2008	2009	2010	% change 2009-2010	% +/- from 2006 peak to 2010	% change 2001-2010
Bend	168,950	227,500	279,900	352,500	345,000	289,450	212,637	191,000	-10.18%	-45.82%	+13.05%
Redmond	125,000	158,500	198,818	262,524	250,000	216,000	147,500	123,900	-16.00%	-43.81%	-0.80%
Sisters	235,000	308,500	394,250	460,500	415,000	367,450	286,250	233,750	-18.34%	-49.24%	-0.53%
Sunriver	289,500	393,500	462,500	575,000	548,547	555,738	402,000	417,500	+3.86%	-27.39%	+44.21%
Crook Co.	106,524	114,928	149,275	197,000	199,450	177,500	111,875	91,100	-18.57%	-53.76%	-14.48%
LaPine	86,000	135,000	148,500	183,250	215,000	160,000	109,000	102,450	-6.01%	-44.23%	+19.13%
Jefferson Co-Madras	NOT REPORTED	NOT REPORTED	NOT REPORTED	165,080	177,950	139,950	89,900	68,700	-23.58%	-58.38%	NA-NOT REPORTED UNTIL 2006

This information is derived from the Central Oregon Association of Realtors MLS database. It is deemed reliable but not guaranteed. MSA includes three counties of Central Oregon.

Vacation-second (3rd etc.) homes still drive Bend economy: snapshots from other similar mountain town areas

      It's difficult to dispute that Bend's fortunes have largely been tied to appeal of the region's recreation abundance and the resorts that initially attract visitors who may end up buying a vacation retreat which may even become a retirement home. As such a comparison with trends in areas like Colorado's ski country is useful.

 Richard Seymour, CEO and founder of a leading Colorado resort investment and nightly lodging company, observes vacation real estate in Summit County, Colorado--home to Breckendrige, Keystone and Copper Mountain--continued to struggle in 2010. Seymour predicts it could be several years before pricing returns to mid-2000s levels. However he says skier days have rebounded from such events as 9-11 and the 2008 implosion of the financial markets.

Colorado ski country:

"It looks like the economic dam may be breaking," Seymour believes.  The only thing that's happened recently is that crazy tax deal compromise, which didn't seem like much at the time.  But Christmas spending took off in December and now the economy continues to hum along in January.  2.5 years is quite a run for a recession--hope it's ending.

"October was the first month in over 2 years which had more bookings than the preceding year (month-to-month).  December was also up a bit and January has been way up (at least the first week). Not convinced we're out of the woods yet, but these are the first encouraging signs in years.

"The Keystone brokers are saying we're 'back to 2006 prices,' but the market has stabilized.  My guess is that things are leveling out, but I don't see any impetus for improved values anytime soon (still no buyers in sight and those that do show up are bottom-feeding)."

Elsewhere in Colorado, an Aspen title company reports that through November the value of real estate sales in the country’s most expensive ski town  had increased by 15%, to $1.14 billion over 2009.

The town’s finance department also reported a 5% jump in sales tax receipts, indicating a recovering commercial economy.

Jackson Hole:
The Wyoming ski area also reports vacation bookings are up for the winter holidays. An abundance of snow enabled Jackson Hole Mountain Resort to open all its lifts in November.

One report says it appears the mid to luxury market in the pricey area may be stabilizing. There was particular strength in areas considered primarily second homes, which accounted for nearly half of all sales in 2010.

"At the close of 2010, there appears a chance that the mid-to upper-level market segments are stabilizing," according to a principal in RMAppraisals of Jackson. "However, entry-level housing appears poised for more devaluation until the inventory of distressed properties can be worked through."

The dollar volume of all transactions--single family, condo and commercial--in Jackson Hole peaked in 2007 at more than $1,570,000,000. Total dollar volume in 2010 was $509,000,000, off 66% from the record high but up 53% from the $333,000,000 in 2009, according to The Hole Report by veteran broker Dave Viehmans.
However, Teton County records show foreclosures also jumped dramatically--60%--with the opening bids for properties sent to auction rising by more than 90% to $181,000,000 from $95,000,000 from 2009 through 2010.

The broader impact on the Central Oregon economy

Although median prices for single family homes in Central Oregon peaked in 2006 the market’s momentum had shifted to the downside much earlier. And the tremendous loss of home sales revenue in the ensuing years has rippled throught the regional economy.

The effects have spread to builders, brokers, lenders, title and escrow companies and others more directly involved in real estate transactions to retailers in such areas as building products and home furnishings. Cities and counties saw declining revenue from fees and taxes while charities and other nonprofit groups suffered from a contraction in giving.

For the five years from 2005 through 2010 more than $888 million in single family home sales was subtracted from the economy. Considering that most real estate commissions are at least  5%, the loss to brokers alone could be nearly $45 million.

In the boom of mid-decade, total sales in the seven combined key regional sub-markets--with Bend leading the group--rose to 5,119 single family sales by the end of 2005 on a total volume $1,515, 887,504 according to the regional MLS data.

The following year unit sales dropped 22.52% to 3,966 on a volume decline of 6.67% to $1,415,032,725 while the median price trend continued upward by 25.87%, from $246,000 to $309,000 by the close of 2006.

A major shift in market momentum was underway but pricing had not yet reflected the trend.

Median prices continued to ignore the prevailing market direction by notching another high in 2007 at  $316,663 as the number of single family sales again slipped, by 34% to 2,614 from 2006. Volume was off another 28.89% in 2007 to $1,006,211,366.

But from 2007 to 2008 the controlling forces behind home pricing appear to have “gotten the memo.”  Median prices took a 17.89% dive -- the first yearly decline in a decade – to $260,000. The pricing trend has dropped each year since then, to a median of $180,000 in 2009 and $160,000 in the most recent year.

Although unit sales and dollar volume were also down from 2007 to 2008, by 25.44% to 1,949 homes sold and 37.58% to $628,116,463 in total dollars, there was a notable change in the trend starting in 2009 and continuing into 2010. The number of homes sold rose a dramatic 38.38% to 2,697 in 2009 and another 11.16% in 2010. In the same period sales volume held up in a narrow range for $630,451,463 in 2009 and $627,518,751 in 2010.