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Worse Before Better: The Central Oregon Economy

AIR DATE: Wednesday, October 8th 2008

Download the mp3 for this show.

What are the lessons of central Oregon's boom and bust, and what are the right engines for its future success?

It wasn't long ago that central Oregon was the state's fastest growing economy. Californians were selling their $600,000 homes, moving to central Oregon (where it's sunny and warm and you can ski...), and buying much grander homes for half the price. They'd sit on the difference and enjoy a comfortable life in a booming town. The building industry grew at an astonishing rate. And so did the accompanying services.

But a new day has come (some say almost overnight): construction is at stand-still; home prices have taken a dive; and the economy is suffering.

Two thousand new single family homes were built in Bend in 2005. This year, only 234 building permits were requested. Default notices in Deschutes County have almost tripled over the last year, from 590 in 2007 to 1,308 in 2008 -- with three months to go.

This pinch on the economy is spreading past the building industry. The City of Bend laid off 13 people this week (for a total of 33 this year). They're leaving 50 more jobs unfilled, and they say the hard days are still to come, when a loss of property taxes starts to impact the funding for police, fire, road maintenance and more. Last year, Neighbor Impact distributed 5,000 emergency food boxes in central Oregon. This year they're up to 9,000... each month.

But the news is not all dire. Talk to economic development professionals and they'll tell you that green energy or information technology or aerospace (or all of the above) could be the future of the central Oregon economy. And that the area continues to attract business.

We recorded this program Monday evening, October 6, in front of a live audience in Bend. But the web conversation has just gotten started. Share your thoughts right here, right now! What's your perspective on the central Oregon economy? Did it grow too big, too fast? Is it just experiencing a few hiccups on a road of truly sustainable growth? What are the right engines for its future success? And what does the central Oregon example of the last few years mean for the rest of the state?

Photo credit: matthew.hickey / Flickr / Creative Commons

Tagged as: bend · central oregon · deschutes county · foreclosure · recession

I bought a second home for "investment" purposes. Now it is not worth as much as I paid for it. I don't expect anyone to bail me out. I will wait it out and use as a vacation home.

Gadwall — Sun Oct. 5th 8:47p.m.

The conversartion for the show should be how to suvive the crash.
Central Oregons economy has not even began to fell the full impact.
Jel-Wen is laying off and working those still there only part time.
Overtime is a thing of the past.
The landscaping crew at the new mall on 97 near Wal-Mart (Old truck stop)
are almost all illegal aliens.
Local builders are cutting salaries 15% across the board.
Unemployment stats are meaningless when you consider the hours lost due to 3 and 4 day work weeks.
Has rabid growth been good for central oregon. Not hardly.
We have only began to pay for the full adverse impact of our over building boom.
Bend and Redmond look a lot like San Jose and Santa Clara, California in the 70s.
Our water supply is running out and no one seem to notice. Plan ahead for the drought.
Local BOCC is in LOVE with the building industry and totally deaf to the public.
Are things going to get worse? You bet ya!

ElmerF93779 — Mon Oct. 6th 4:50p.m.

Having moved to Bend 25+ years ago when the unemployment was about 30% and only a few stores remained open in Downtown, our economic base is much broader and can weather so much more than it did during the early 80's. Bend has a history of boom and bust; out-of-state developers and quick-turn real estate types have come and gone before. While times are very difficult, I also see greater opportunity for community in the larger sense of the word during these times when money isn't the overriding goal. People seem more human and genuine during these tougher times here than when people are 'rolling in the quick-turns'.

To live and enjoy Bend as I have had the opportunity to do over these decades, my work has been only 1/4 to 1/3 based in Bend. I have been a tele- and internet commuter and now have a web-based business here that has primarily been in my home. This has allowed me to weather the ups and downs economically. The spirit of the people who share a common love of the beauty of Central Oregon, its activities and family life really make the community for me. And, it is through these strengths that hopefully we'll grow again (maybe more slowly for a decade till too many forget history), but I see Bend ever more gaining that 'broader, less volatile' base.

joanmann — Tue Oct. 7th 12:32a.m.

First of all... thank you Emily... it was great to see you in action tonight.
I wanted to post my comment about the part of the show where we all chuckled about buying at the height of the boom... July 2006. I chuckled because we did the same... we had MANY realtors tell us our downtown Bend home could get 500k... "easy"... we bought a bigger 500k home contingent on us selling our small downtown home... we did and now two years later I'm sure we couldn't get more than 375k-although, we don't want to sell. We'll be here the rest of our lives and the market will eventually come back.
I truly feel part of the boom was due in part to the masses of realtors wanting to cash in on the boom.

mtullis — Tue Oct. 7th 1:08a.m.

I have lived in Bend for over 32 years now and I believe that Bend is becoming a beautiful woman. It has grown beautifully, with safe and clean parks, beautifully landscaped roads (Brookswood, Mt Washington Drive) and roundabouts and a vibrant cultural life. 32 years ago it was a rough and tumble mill town. We used to drive to Portland to go school clothes shopping for our kids and once I went to the grocery store for cilantro and they had never heard of it. Bend has gone through growing pains before (early 80s when everyone bailed out and moved to Texas) and it will emerge out of this too.....and be better than ever. Our kids, who flew out of town the day they graduated from high school in the late 80s and early 90s are now all coming back home to raise their own kids...a testimony to what a great place this is to live. I'm glad to see housing prices go down, so that our kids CAN buy a house and live and raise their families in sunlight and clean air. If this economic downturn causes some people to move out of Bend, that's fine. Many of those people only came for the 'profit' they could make, not the lifestyle it provides. We all have our priorities. Jane Williamson

janew16 — Tue Oct. 7th 1:34a.m.

I am a Real Estate Appraiser. I have worked as a Realtor, Loan Officer and Real Estate Appraiser here in Central Oregon since 1995. I've heard your program before and I must commend you on presenting topics without the thunder of partisanship politics.

Family Wage Jobs-
The Central Oregon area has some special challenges that occur in other areas of the country (Aspen, Durango, Lake Tahoe come to mind). Unfortunately, we have a number of groups which have formed political alliances to maintain the status quo. The number one priority of our local government should be in obtaining family wage jobs. The status quo group of Realtors, Politicos, Developers and the Bend Bulletin believe that we should be building additional resorts. While tourism brings needed dollars and businesses to our area, the minimum wage jobs these industries spawn does nothing to raise the standard of living for the majority of Central Oregonians. The developing of our land, for resort use, benefits those at the top of our economic food chain with very little dribble down to the majority of Central Oregonians. The time, effort and money wasted by our local government spent in kowtowing to this cartel would be much better spent in wooing businesses to the area with tax breaks and/or other benefits.

The Local Housing Market-
I said at the beginning of this year, that I believed our local housing market was going to get worse. The bad news is that we have not hit bottom yet. This makes the March 2008 prediction of recovery by Dana Bratton, one of our local appraisers, look that much more ridiculous. Home pricing will continue to spiral downward as credit tightens - it's a horrible snowball that is still gaining strength as it rolls down the hill. Check out Kevin Phillips book - Bad money : reckless finance, failed politics, and the global crisis of American capitalism. This gives a glimpse of how short sighted politicians have allowed greed to ruin our economy. Locally, foreclosures are increasing and driving the median home pricing down. This will continue to snowball as local businesses begin to fail and thereby force more pressure on homeowners already struggling to pay their monthly mortgage. This financial pressure has tragically manifested itself through a number of suicides and a rise in divorce filings. The financial strain of our declining real estate market takes a very real toll on the personal lives of all Central Oregonians.

Local Arts Scene-
Thankfully, the Bend market is a relatively decent market for musicians and artists. This is mainly due to the influx of tourism. One of the many benefits of tourism. However, family wage jobs are not one of the benefits of the tourism industry.

Of course, Central Oregon is still a great place to live and work. I am heartened by the responses posted here to date. It shows that citizens of Bend care deeply about this place. I moved here for the lifestyle and I have not been disappointed, those who moved here to "get rich" can't help but be disappointed.

If I can respond to some of the posters in this forum:

Gadwall - I noticed about four years ago that 40% of my appraisal assignments were for out of town buyers. I knew then that Central Oregon was going to experience a bubble. Outside investment in real estate is one of the surest signs that a market may be undervalued; however, that outside investment tends to create problems of it's own. Namely, it creates an artificial market that is not based on economic realities (jobs, income, community, economic growth, etc)... rather speculation runs rampant and a false market is created. I'm sorry you got caught up in that house of cards. I began warning my "spec builder" clients in late 2005 to get out of the market as I sensed a pyramid scheme in the making. Sadly, very few of them listened as they were caught up in the "get rich quick" frenzy of that market period.

Elmer F - You make a great point about our lack of leadership in local government. I had a conversation with the city manager and his assistant in 1998 in which they commented that Central Oregon had enough water for the next 25 years of growth. This comment was later repeated at a community meeting. Sometimes the arrogance of government employees is hard to fathom.

Joanman - Bless you... I love Central Oregon too and it is a great place to raise a family.

mtullis - The real estate market is not going to come back anytime soon. If you look at other countries (Japan for one) that have gone through a similar financial upheaval you'll find that real estate prices will flat line for many years. I'm afraid that the overall national economy will suppress real estate pricing for many years to come. Plus, we have not hit bottom yet. My heart goes out to those of you who purchased homes in the 2005- early 2007 period as it will be many, many years until those prices are seen again. Also, I agree with you about Realtors; however, the final resting place for responsibility always lands on the investor. Suffice it to say that the majority of Realtors do not have the education or foresight to render any intelligent comment on the future of a specific market. Realtors are salespeople... plain and simple. I would never buy a car without performing hours of research into that vehicle; likewise, when purchasing a home, the buyer needs to research that home and market diligently. Please note I said the majority of Realtors, I do not wish to paint their qualifications with too wide a brush as I have found a few in Central Oregon who are capable of thinking outside the box.

Jane W - I believe you used to be a realtor back in the day. Good to see you here... I agree heartily with you.

Thank you for allowing me to post here,

David Skelton
Appraiser

DavidSkelton — Tue Oct. 7th 12:47p.m.

We laughed, Emily, because Andy High delivered that comment as a self-deprecating, can-you-believe-it joke, Re: "I'm in charge of the builders association, and even I bought at the peak one month before the crash! Can you believe it?" type of comment. So we all laughed. I mean, I was sitting right there. Mr. High tried to infuse a lot of humor into his comments all night long, if you take another listen. Your lead makes it sounds like the entire audience was happy for his misfortune! So not true. Laughing with, not at.

saracronin — Tue Oct. 7th 6:30p.m.

Andy was charmingly self-deprecating! And you're right, the promo for the show doesn't spell that out. Everyone I talked to after the taping had a different reason for laughing! I heard no malice, but a range from sympathy for him (and themselves) to a bit of schadenfreude. I thought the whole thing was interesting and fun to think about.

Emily Harris — Wed Oct. 8th 12:37p.m.

As far as population boom is concerend within central Oregon. Is there something in the constitution that says we have to allow new housing that invites an increase in population?

There are non-profit organizations out there that fight to protect land. If you find reasons to protect land, then you can decrease the rate of population.

I think that our infrastructure is built backwards. Why doesn't central Oregon provide employment by increasing the public transportation programs and educational programs, and become a mechha for alternative sources of energy. Then when there is a solid trasportation system, educational system, etc. provided. Slowly allow the population to increase.

Is this idea out of reach?

mydaughterisbeautiful — Wed Oct. 8th 12:45p.m.

"But a new day has come (some say almost overnight): construction is at stand-still; home prices have taken a dive; and the economy is suffering."

Caused by Conservative Republicans De-Regulating the financial sector; it turns out that "Free Markets" are "Anarchy Markets" and threaten the entire worlds economy.

You just have to consider that the worst threat facing the USA was not Osama Bin Laden, it was and still is, Conservative Republicans, they have done more damage to America and the rest of the world than Bin laden ever dreamed of!

Tom D Ford — Wed Oct. 8th 12:46p.m.

Why do we take it for granted that growth is good? The discussion should be focused on what is sustainable, and what we have seen in Bend (I have lived here for 20 years, having moved from a small town in Wyoming to find a more "cosmopolitan" area) is obviously not sustainable.
Let's take the present circumstances of a soft housing market to re-evaluate the recent growth, its impacts on livability of Bend, and how to proceed without the manra of "growth is good."
The housing bubble popped; let's not re-inflate it.

elkski — Wed Oct. 8th 12:50p.m.

I agree. Central Oregon can lead a movement of sustainable communities. We should go back to relying on eachother within our communities to function, and survive.

mydaughterisbeautiful — Wed Oct. 8th 12:51p.m.

I consider myself very lucky in Bend. My husband bought our house in the 1970's in a desirable area of town (which is long paid off) and I work for a High Tech. company which should not be affected too much by the economy. What I am concerned about is that as I approach retirement age, will I be able to leave work with the constant rising prices.

ChrisE — Wed Oct. 8th 12:53p.m.

You will be fine. Just be strong ;)

mydaughterisbeautiful — Wed Oct. 8th 12:57p.m.

Instead of promoting "Blue Sky" profits for Pacific Power, Bend ought to have bought equity in a Wind Turbine Farm. Eugene Water and Electric Board is an example that Bend ought to emulate.

Tom D Ford — Wed Oct. 8th 1:02p.m.

As nice and polite as the mayor of Bend and City officals appear, they are the problem of overdevelopment and the collaspse of the local economy. Their relationships with developers have defaced the character of Bend, homoginzed and disfigured the look and feel of our community. Take for example the people in the city Building permits and Enforcement. For years our neighborhood has complained about the developer D.H Horton. The past 3 years they have hung an orange plastic fensing along the rim of the Deschutes River to the horror of everyone. Amy Barry, an otherwise nice lady, ignores the wishes of home owners and sides with D.H.Horton of allow this unlawful structure.
There are many more important examples...... but most of us must get back to more productive work this afternoon. Bend City problems are very distracting to a working and productive community. More Later.
Larry

Jane Thorsdale — Wed Oct. 8th 1:28p.m.

I like this post! It's worth a read.

latex mattress

Susancai — Wed Oct. 20th 8:56p.m.

Comments are now closed.