Bend real estate off 31% since peak

The Central Oregon Realtors Association (CORA) released their fourth quarter data this month and the downward trend is intensifying.
Bend’s average sale price for the fourth quarter 2008 was $306,760; down 27% from the same quarter the year prior. The Bend market peaked in the third quarter 2007 and prices have fallen 31% since then.

Sales continue to fall but at a decreasing rate. 257 homes sold during the quarter; down 13% from the same quarter the year prior.

The final graph shows how affordable the median priced home is for a family of four. History indicates the ratio is usually between 2.5 and 3.0. Prices would need to fall 39% from the current median for the ratio to reach 3.0.

Summary of the layoffs reported today from the Oregonian

Electro Scientific Inc. said this afternoon that it will reduce its work force by 12 percent during the current quarter in the face of a huge decline in sales.
ESI employed about 700 people before its latest layoffs, roughly half of them at its headquarters just west of Portland. It wasn't immediately clear how many of the latest cuts will be in Oregon.

Tektronix is taking an unusual measure to preserve jobs: Everyone is getting a 10 percent pay cut indefinitely. Here's the company's statement:
Tektronix announced to employees on January 29 that the Company will be implementing several cost saving measures in an effort to save jobs in this unprecedented economic environment. For the U.S. workforce, effective February 8 Tektronix will implement a 10% salary reduction to base pay.

Cessna Aircraft Co., which has a manufacturing site in Bend, said today it plans to lay
off another 2,000 workers, or about 13 percent of its work force, as the slumping worldwide economy is forcing more customers to cancel or delay orders for new aircraft.
The manufacturer earlier had announced 2,600 job cuts. The combined 4,600 layoffs are expected to be completed by the end of March, with the company's headquarters in Wichita losing about a third of its work force and its Bend plant losing nearly two-thirds of its staff. Cessna employs about 15,000 people worldwide.

Another bad forecast for 2009

Dick Riley is a real estate appraiser specializing in single family residential property appraisals. Here is his economic forecast for 2009 as published in the Columbian:

Real estate markets, like politics, are local in nature. The Pacific Northwest was the last region to enter this unprecedented recession and it will be the first to move out of it. That recovery, however, will be awhile in coming, likely in mid- to late-summer 2009
before it gets started.With lower mortgage interest rates and an improving general economy, home sales in Clark County should rebound this year. Sales could increase as much as 15 percent. That might be on the lower end of projections.
The bottoming out has begun with lower-end properties. Those properties in the $150,000 to $200,000 price range are experiencing the bottom. Many of these properties that have received minor updating and repair are seeing a slight increase in value. In full respect to all properties, the lower end had less of a value range for decline. The upper end of homes valued at $500,000 and higher is experiencing a deeper decline.
Clark County’s higher-priced homes also have been negatively influenced by a large oversupply of listings. Inventory is still at an all time high.
Be mindful that home ownership if more than gaining equity and personal wealth. Pride of ownership and tax benefits are also strong factors.
This is the beginning period to start buying. Use this time to qualify for a loan that you know you can afford. It is a good time to buy; the bottom will be short-lived. It is a natural fact that the darkest part of night is just before sunrise. The sun will rise during 2009.

A much more interesting read is Eric Fuller's forecast for the commercial and industrial sectors.

Central Oregon unemployment in double digits

From the Bend Bulletin:

Unemployment rates in Central Oregon continued their climbs into record territory in ecember as the local economy continues to shed jobs.
Deschutes County’s December unemployment rate climbed to 11.3 percent, from a revised rate of 9.8 percent in November, according to Oregon Employment Department data released Monday. In December 2007, the jobless rate was 6.1 percent.
In Crook and Jefferson counties, the December 2008 unemployment picture was bleaker — 14 percent and 13.3 percent, respectively.

Eugene is a little better off. From the Register Guard:

Lane County’s jobless rate continued its steep climb in December, to 9.5 percent, according to figures released Monday by the state Employment Department.
It was the county’s highest December rate in 24 years — since unemployment hit 10 percent in 1984, the department said.
There were 17,711 people unemployed in Lane County in December — that’s 2,162 more than in November and 7,918 more than December ’07, according to department
figures.
The county lost 4,200 nonfarm payroll jobs last year — half of them in manufacturing.

Portland apartment rental rates dropping

From Yahoo!:

The economic crisis has opened up opportunities for apartment tenants. The inventory of vacant apartments is expanding, and rents are dropping quickly in major metros across the country.
For renters with leases about to expire, it's time to negotiate. Landlords are working extra hard these days to keep units filled.
Apartment vacancies spiked in September after the collapse of Lehman Brothers and the eruption of the financial crisis.
"If you've got job, it's a great time to be a renter and to sign the longest lease possible," said Ron Johnsey, president of Axiometrics.com, a Dallas apartment data company.
BusinessWeek.com worked with Axiometrics to come up with a list of 25 large metros where rent declines accelerated most at the end of 2008. In Salt Lake City, where the economy had been holding up better than most cities, effective rents (including landlord concessions) fell 2.3% in the fourth quarter compared with the previous quarter. By comparison, rents were climbing 3.3% in the fourth quarter of 2007.

Here is the list:

Salt Lake City
Rank: 1
Rent drop: -5.7%
Q4 2008 rent change: -2.3%
Q4 2007 rent change: 3.3%
Effective rent: $810.30

Nassau-Suffolk (Long Island, N.Y.)
Rank: 2
Rent drop: -4.7%
Q4 2008 rent change: -3.2%
Q4 2007 rent change: 1.5%
Effective rent: $1,786.60

Raleigh-Cary, N.C.
Rank: 3
Rent drop: -4.0%
Q4 2008 rent change: -4.4%
Q4 2007 rent change: -0.4%
Effective rent: $752.70

New York-Wayne-White Plains, N.Y./N.J.
Rank: 4
Rent drop: -3.7%
Q4 2008 rent change: -3.2%
Q4 2007 rent change: 0.5%
Effective rent: $2,672.20

Seattle-Bellevue-Everett, Wash.
Rank: 5
Rent drop: -3.5%
Q4 2008 rent change: -3.8%
Q4 2007 rent change: -0.3%
Effective rent: $1,161.60

Portland-Vancouver-Beaverton, Ore./Wash.
Rank: 6
Rent drop: -3.2%
Q4 2008 rent change: -2.8%
Q4 2007 rent change: 0.4%
Effective rent: $850.40

San Jose-Sunnyvale-Santa Clara, Calif.
Rank: 7
Rent drop: -3.0%
Q4 2008 rent change: -3.0%
Q4 2007 rent change: 0.0%
Effective rent: $1,788

Charlotte-Gastonia-Concord, N.C.
Rank: 8
Rent drop: -2.9%
Q4 2008 rent change: -3.8%
Q4 2007 rent change: -0.9%
Effective rent: $736.40

Oakland-Fremont-Hayward, Calif.
Rank: 9
Rent drop: -2.9%
Q4 2008 rent change: -2.1%
Q4 2007 rent change: 0.8%
Effective rent: $1,515.40

Boston-Cambridge-Quincy, Mass.
Rank: 10
Rent drop: -2.8%
Q4 2008 rent change: -2.4%
Q4 2007 rent change: 0.5%
Effective rent: $1,634.20

Most Realtors said rents would be driven up because more people are choosing to rent instead of buy. Unfortunately, they didn’t consider all the negative cash flow ‘investment’ homes that would be converted to rentals . The housing supply can shift quickly between 'for sale' and 'for rent' so as long as we have an aggregate over supply of housing units prices will drop for both.

Oregon banks cut dividends

From the Portland Business Journal:

With little visibility into the economic future, Portland-area banks are cutting dividends to preserve precious cash.
Umpqua Bank parent Umpqua Holdings Inc., based in Portland, cut its quarterly dividend in December to 5 cents from prior payments of 19 cents per share.
l West Coast Bancorp, the Lake Oswego-based parent of West Coast Bank, cut its third and fourth-quarter dividends to 1 cent per share, down from 13.5 cents per share in the second quarter.
Some local banks have cut their dividends completely.
Riverview Bancorp Inc., the Vancouver-based parent of Riverview Community Bank, and Columbia Bancorp, based in The Dalles, both eliminated dividends in 2008.
Both banks are struggling with high loan losses due to failing construction loans.
Riverview said its capital ratio is 10.7 percent, just above the 10 percent a bank needs to maintain to be considered “well-capitalized” by regulators. Columbia has said it adequate reserves to meet its obligations.

Bankrupt home builders price inventory to move

From the Portland Business Journal:

Pacific Lifestyle Homes and Legend Homes, two of four local home builders to file for reorganization under Chapter 11 of the U.S. Bankruptcy Code in 2008, have formed a joint marketing venture to sell more than 100 completed homes in the Willamette Valley by the end of March.
Mike Higgins, a spokesman for the joint venture, said the two companies teamed to clear out inventory after bankruptcy consultants counseled them to clear out unsold inventory.
Legend Homes, formed in 1965 in Portland, sold 1,760 homes between 2004 and 2008. It expects to file its reorganization plan with the U.S. Bankruptcy Court for the District of Oregon this quarter and to emerge from Chapter 11 around the end of the second quarter.
Pacific Lifestyle Homes, formed in 1996 in Vancouver, built 971 homes through 2007. It expects to file its reorganization plan with a Washington court by mid-2009 and could emerge from bankruptcy by the end of the year.
The joint venture will aggressively market more than 100 homes. In Oregon, homes are in Happy Valley, Hillsboro, Tualatin, Tigard, Wilsonville, Clackamas, Albany, Corvallis, Lafayette and Salem. In Southwest Washington, the two developers have homes in Vancouver, Camas, Ridgefield, Washougal, Woodland and in Vancouver.
Higgins said the homes are priced to sell by the end of March.

Help me keep an eye out for these homes. It will be interesting to see what the bankruptcy consultants consider 'priced to move'.

OHSU will cut 500-1,000 jobs

From the Oregonian:

Adding to the state's growing unemployment, Oregon Health & Science University said Thursday that deteriorating finances will force it to eliminate up to 1,000 jobs, cut employee benefits and make other program reductions by the end of June.
OHSU cut about 115 jobs earlier this month, and its total planned reductions -- between 500 and 1,000 positions -- will place OHSU alongside Intel and Hynix Semiconductor as the state's biggest job shedders this recession.
The university is one of Portland's largest employers, with about 12,900 employees.
One in eleven Oregonians in the work force is without a job, pushing the jobless rate to 9 percent at the end of December, according to state figures.
The recession also has significantly reduced its big source of profits, clinical operations, as the hospital and clinics see fewer patients and more without insurance.

From the Portland Business Journal:

Movie Gallery Inc. on Thursday said it will close its Wilsonville distribution center, a move effecting all but 25 of the center’s 238 employees.
The Wilsonville-based movie rental company said it is consolidating the distribution center with another one in Nashville, Tenn., as part of an effort to streamline operations. The company said 25 of the Wilsonville employees will be transferred to other parts of the company.

From the Oregonian:

Sun Microsystems notified Oregon officials Wednesday that it plans to eliminate 22 jobs at its two Hillsboro sites between March 23 and June 13. Additional layoffs could come in late May or early June, the Silicon Valley company said, as it works to reduce spending.
Sun laid off a similar number of Oregon workers last summer.

State unemployment rate now at 9 percent

From the Portland Business Journal:

Oregon’s unemployment rate rose to 9 percent in December from 8 percent in November.
The state’s unemployment rate has risen rapidly over the past six months after remaining stable throughout the first half of 2008 at near 5.5 percent. The U.S. seasonally adjusted unemployment rate rose to 7.2 percent in December, from 6.8 percent in November.

Then this today...

Intel Corp. on Wednesday said it would halt production at five factories, including one in Hillsboro.
The Santa Clara, Calif.-based company (NASDAQ: INTC) said the moves would affect between 5,000 and 6,000 jobs worldwide.

Vancouver RMLS Market Action Report – December 2008

The Regional Multiple Listing Service released the Market Action Report this week and the median sale price for December 2008 was $232,200 this is a 10.6% decrease from the median sale price for December 2007.

The Vancouver residential real estate market peaked in July 2007 with a median sale price of $269,900. Prices have now fallen 13.9% from that peak.

Months of supply (total inventory/monthly sales) sits at 14.8 months compared to the 12.7 months of supply for the same month last year. A balanced market has about 7 months of supply.

The first graph compares the median and average sale price with the months of supply. Click on any graph for a sharper image.

The second graph shows the total supply of homes available for sale. This is simply a calculation of the months closed sales multiplied by the months of supply. There are currently 4,218 homes for sale; this is an increase of 11.8% from the same month the year before.

The third chart shows closed sales by month. There were 275 closed sales during the month; a decrease of 4.0% from the same month the year before.

The fourth chart shows new listings by month. There were 576 new listings during the month; an increase of 3.8% from the same month the year before.

The final graph shows how affordable the median priced home is for a family of four. History indicates the ratio is usually between 2.5 and 3.0. Prices would have to fall 12.8% from the current median for the ratio to reach 3.0.

Eugene RMLS Market Action Report – December 2008

The Regional Multiple Listing Service released the Market Action Report this week and the median sale price for December 2008 was $200,000 this is an 11.3% decrease from the median sale price for December 2007.

The Eugene residential real estate market peaked in June 2007 with a median sale price of $243,300. Prices have now fallen 17.8% from that peak.

Months of supply (total inventory/monthly sales) is at 10.7 months compared to the 7.0 months of supply for the same month last year. A balanced market has about 7 months of supply.

The first graph compares the median and average sale price with the months of supply. Click on any graph for a sharper image.

The second graph shows the total supply of homes available for sale. This is simply a calculation of the months closed sales multiplied by the months of supply. There are currently 1,893 homes for sale; this is an increase of 8.6% from the same month the year before.

The third chart shows closed sales by month. There were 177 closed sales during the month; a decrease of 28.9% from the same month the year before.

The fourth chart shows new listings by month. There were 238 new listings during the month; a decrease of 20.1% from the same month the year before.

The final graph shows how affordable the median priced home is for a family of four. History indicates the ratio is usually between 2.5 and 3.0. Prices would have to fall 16.8% from the current median for the ratio to reach 3.0.

Ten billion in federal aid could land in Oregon

From the Portland Business Journal:

Oregon leaders are racing to snag as much as $10 billion of President-elect Barack Obama’s proposed economic stimulus package.
Obama wants to invest as much as $1 trillion in “shovel-ready” transportation and infrastructure projects in order to create jobs and kick-start the economy.
Of the $10 billion in federal stimulus money that could land in Oregon, Portland officials expect around $847 million. The money will save 8,800 jobs. Possible stimulus-related projects:
$65 million worth of paving along key arterial routes.
$22 million in bridge repair.
$75 million for the Portland Streetcar loop that would link the Oregon
Museum of Science and Industry with the South Waterfront district.
$52 million for sewer work.
$428 million for water supply projects, such as replacing or improving the city’s reservoirs.
$86 million for parks projects, including the Washington-Monroe Community Center, and trails construction.
$101 million for downtown’s new Resource Access Center and a Veterans housing facility in the South Waterfront district.
$30 million for a new emergency coordination center.

First local bank failure of the new year

From the FDIC:

Bank of Clark County, Vancouver, Washington, was closed today by the Washington Department of Financial Institutions, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Umpqua Bank, Roseburg, Oregon, to assume the insured deposits of the Bank of Clark County.
As of January 13, 2009, Bank of Clark County had total assets of $446.5 million and total deposits of $366.5 million. At the time of closing, there were approximately $39.3 million in uninsured deposits held in approximately 138 accounts that potentially exceeded the insurance limits.
In addition to assuming the failed bank's insured deposits, Umpqua Bank will purchase $30.4 million of assets comprised of cash, cash equivalents, marketable securities and loans secured by deposits. The FDIC will retain the remaining assets for later disposition.
The transaction is the least costly resolution option, and the FDIC estimates the cost to its Deposit Insurance Fund will be between $120 and $145 million. Bank of Clark County is the second FDIC-insured institution to be closed this year. Bank of Clark County is the first bank to fail in Washington since Emerald City Bank, Seattle, on July 2, 1993.

From the Oregonian:

The unraveling of the nation's financial sector hit Southwest Washington with bitter impact Friday when the Washington Department of Financial Institutions shut down the Bank of Clark County.
Bank customers could lose nearly $40 million in deposits in the shutdown, as some accounts exceeded the $250,000 FDIC insurance.
The bank was heavily exposed to the faltering real estate sector through loans to builders and developers. Construction and development loans accounted for more than 36 percent of the bank's total portfolio.

Portland RMLS Market Action Report – December 2008

The Regional Multiple Listing Service released the Market Action Report this week and the median sale price for December 2008 was $252,900; this is an 8.5% decrease from the median sale price for December 2007.

The Portland residential real estate market peaked in August 2007 with a median sale price of $302,000. Prices have now fallen 16.3% from that peak.

Months of supply (total inventory/monthly sales) sits at 14.1 months compared to the 8.5 months of supply for the same month last year. A balanced market has about 7 months of supply.

The first graph compares the median and average sale price with the months of supply. Click on any graph for a sharper image.

The second graph shows the total supply of homes available for sale. This is simply a calculation of the months closed sales multiplied by the months of supply. There are currently 13,916 homes for sale; this is an increase of 9.4% from the same month the year before.

The third chart shows closed sales by month. There were 978 closed sales during the month; a decrease of 34.0% from the same month the year before.

The fourth chart shows new listings by month. There were 1,880 new listings during the month; a decrease of 17.4% from the same month the year before.

The final graph shows how affordable the median priced home is for a family of four. History indicates the ratio is usually between 2.5 and 3.0. Prices would have to fall 20.0% from the current median for the ratio to reach 3.0.

A big thanks to Ralph for expanding my database.

People still want to live here

From the Business Journal:

Despite a flagging economy, Portland is the fifth most popular destination for movers, according to a recent study.
Some areas of the country fared worse than others. The Relocation.com survey indicated that for every 100 people looking to move to Michigan, 210 were looking to move out and for every 100 people looking to move to Ohio, 150 were looking to move out.

Here is the top 10 list:

1. Las Vegas
2. Denver
3. Charlotte
4. Phoenix
5. Portland
6. Seattle
7. Orlando, Fla
8. Washington, D.C.
9. Atlanta
10. Tampa Bay/St. Petersburg, Fla.

Vancouver sales volume slowest in 15 years

From the Columbian:

Home sales in Clark County dropped by 32.6 percent in 2008, reflecting a year-long stalemate between bargain-hunting house hunters and sellers who refused to lower their prices.A total of 5,133 new and pre-owned houses were sold last year, down from 7,613 homes sold during 2007.
The 2008 total was down 61.2 percent from 2005, the peak of the housing boom, when 13,232 homes were sold, according to “benchmarks,” a tracking service provided by Vancouver’s Riley & Marks Inc. appraisal firm.In December, 321 new and pre-owned houses sold in Clark County, down 20.7 percent from the same month in 2007.
Potential home buyers were sidelined even further in 2008 by tightened mortgage lending standards, which contributed to a rising stockpile of homes. More than 4,650 homes were listed for sale in Clark County through November, according to RMLS, a Portland-based listing service.
The supply had nearly doubled from the same period the year before. It would take 16.9 months to sell off the inventory if no new listings are added.
Last year’s sales were the slowest in at least the past 15 years.

Leading economic indicators fell again in November

Professor Duy released the U of O Index of Economic Indicators for November last week.

The University of Oregon Index of Eco­nomic Indicators™ fell again in November to 89.6 (1997=100), a 0.5 percent decline from the previous month. Compared to six months ago, the UO Index is down 7.9 percent (annualized). Deteriorating labor market conditions, as measured by initial jobless claims and payrolls at employment service agencies, drove index weakness during November. Remaining indicators were either unchanged or improved slight­ly. Overall, the UO Index indicates that Or­egon remains in recession.

As a general rule of thumb, a decline of 2.5 percent (annualized) over six months, coupled with a decline in more than half of its components, signals that a recession is likely imminent.

On the job market

The recession continues to weigh heav­ily on Oregon labor markets. Initial job­less claims spiked higher in November to a weekly average of almost 14,000, well above the peak of 10,245 reached during the 2001 recession. Payrolls at employ­ment services firms (largely temporary help agencies) fell for the fourth consecu­tive month and are down 8.6 percent com­pared to year-ago levels. Total nonfarm payrolls (not included in the UO Index) indicate that firms shed 6,300 employees in November and 34,900 employees since February of 2008. The Oregon unemploy­ment rate climbed to 8.1 percent, the high­est since September 2003. The depth of the downturn in the Oregon labor market will almost certainly exceed that of the 2001 recession.

On housing starts and capital spending

For the fifth consecutive month, residential building permits (smoothed) remain near a monthly level of 1,000. Recent stabilization in this indicator is a hopeful sign that new residential construction activity has bot­tomed. Still, permit activity remains very low, housing markets deteriorated further in November, and there is lit­tle to indicate that an
upturn is near.

Unlike home prices Charles Turner's optimism never peaks

Charles Turner is quickly establishing himself as one of the most optimistic realtors in town. I started tracking his comments a few months ago when it became clear that he wasn’t going to change his tone on Portland real estate. My goal isn’t to embarrass him; rather it is to give people some context of his views. In a few years most of us will use a Realtor (hey, they are free for the buyer right!) and I feel this information will be valuable when deciding which Realtor to use.

Here are a few of his comments:

“Since the market has retained its strength, sitting back doesn’t look like a smart bet.”
From his blog on December 27th, 2006.

“If I had cash on hand, I’d probably be looking to buy”
From the Oregonian on December 16th, 2008.

One reason he might be giving optimistic quotes is because he has his own inventory to sell. You can find Charles’ latest flip project at 2356 NW Hoyt St. The house went on the market in October for $1,195,000 and was dropped 4% to $1,150,000 last week. We will see if that price drop was enough to entice some buyers. My guess is no but I always see the glass half empty.

Another interesting note about the NW Hoyt property. It’s been on the market for three months and has dropped 4% in price. If the property stays on the market for another week and drops in price by another 3% then it will start to appear on Agent 503’s Desperate Sellers Database.

Liens-Liens-Liens

From Oregon Business Magazine:

The steep hillside overlooking the Willamette River is a Portland residential community without residents. On one side of Seymour Court, all of the newly built homes are either for sale or for rent. On the other side of the street, seven townhouses and eight condominiums stand not quite finished, an ambitious project swamped by construction liens.

This condo project is Sophie's View. If you drive I-5 north it is the one off of Corbett Ave.

It’s an increasingly common scene in once-hot real estate markets from Eugene to Portland to Bend. Construction liens have doubled in Multnomah County and tripled in Washington County, and while other major metro counties throughout Oregon do not track those pleas for payment specifically, the anecdotal evidence suggests that the love affair between banks, developers, builders, suppliers and subcontractors is officially over.
And then there is the granddaddy of all Oregon construction liens: the $15.8 million owed to Hoffman Construction by the developers of Portland’s 194-condo Waterfront Pearl. Hoffman vice president Bart Eberwein says it is by far the largest lien the company has filed. If the bill is not paid, Hoffman could end up owning the entire development. “We try to avoid situations like this,” says Eberwein, “because the whole thing just trickles down and people get hurt.” Hoffman is also ensnared in another
high-profile project being torpedoed by liens, The Nines hotel above Macy’s in downtown Portland. Two subcontractors filed liens for a combined $6.5 million just days after invitations went out to the high-priced hotel’s grand opening in late October.

Is Portland a top ten commercial real estate market

Check out Grubb & Ellis rankings for commercial real estate markets between 2009 and 2013.

Portland rankings are:
Office Market Strength - Second
Industrial Markets - Ninth
Retail Markets - Tenth
Multi-Housing Market Strength - Ninth

Portland ranked in the top ten in every category. I don't know a lot about the commercial real estate market but we can count the number of new commercial towers on one hand.

Don't drink the kool-aid

Tim Duy says 'Don't drink the kool-aid':

Local pride is an asset, but we should not let cheerleading lead to complacency. Policymakers and the business community need to stop drinking the “Oregon is different” Kool-Aid and recognize that with the national economy heading into what is likely the worst recession since the early 1980s, Oregon almost certainly faces an economic downturn that exceeds that of 2001-2003. The prudent approach in this environment is to plan for the worst, and hope for the best.

The underlying premise was that real estate values would always go up

From the Oregonian:

The same real estate boom and bust that delivered a devastating body blow to the U.S. economy also brought an enormous wave of failed and allegedly fraudulent investment schemes.
There are plenty of reasons besides fraud and bad faith that real estate deals failed in recent months. Falling prices and lenders' wholesale retreat from the market killed countless legitimate transactions. Unscrupulous opportunists only made matters worse.
From Portland to Albany to Bend and beyond, Oregonians hoping to cash in on the boom have instead suffered major financial setbacks in real estate deals gone awry.
Mortgage fraud emerged as the trademark crime of the boom. Unscrupulous brokers worked through straw buyers to obtain bank loans, pocketing thousands of dollars for themselves from the loan proceeds while the "buyer" often never made a single payment.
But the ever-rising tide of escalating real estate prices hid the problem.
"The underlying premise was that real estate values would always go up," said Karin Immergut, U.S. attorney in Portland. "If they got into trouble, they could always sell it.
If the bank had to repossess it, they could put it on the market and make money.
"Now, we're seeing the whole house of cards crumble."
The feds were well aware of the mortgage industry issues before the house fell down.
Chris Swecker, former assistant director of the FBI in Washington, D.C., warned in the boom year 2004 of widespread fraud in the industry. Swecker, now retired, predicted bogus home loans could cause multibillion-dollar losses to financial institutions.
Swecker's prescient warnings were wrong in only aspect: He vastly underestimated the losses and the impact on the broader economy.
But the feds didn't intervene in a more forceful way in part because much of the FBI's
resources were diverted to combat terrorism. Besides, rising real estate prices kept losses to a relatively low level -- at least until 2006 and 2007.
Federal sentencing guidelines are based on provable financial losses. Absent a large tangible loss, perpetrators are unlikely to get much of a sentence beyond probation, which gave prosecutors little motive to push mortgage or real estate cases.
Even the most bogus mortgage deal didn't lose much money as long as homes continued to appreciate in value -- which they did in Oregon until mid-2007.
Now, only time and the courts will determine whether the cases addressed here are bad luck, bad faith, or worse.

One of the principals of economics is that people respond to incentives and it is clear the FBI didn’t have an incentive to stop the crimes.

Oregon Foreclosures up 143% in November 2008

RealtyTrac released their November 2008 foreclosure data last week and Oregon now ranks 12th in the nation for per household foreclosures.
There were 912 notice of defaults last month, up 152% from November 2007. The bank files a notice of default when a mortgage payment is late and attempts to reconcile the issue out of court have failed.

If the homeowner doesn’t pay the default balance within 90 days then the bank records a notice of trustee sale with the county and schedules a trustee's sale. There were 1,448 notices of trustee sales last month, up 244% from November 2007.

The best way to compare state foreclosure rates is with a penetration or per household rate. Here is a comparison of the regions states. A larger number indicates fewer foreclosures. Oregon is experiencing one foreclosure for every 535 households.

Portland brokers optimistic about 2009

From the DJC:

The real estate market downturn started during the summer of 2007 and will likely not show signs of improvement until the final months of 2009, real estate experts say.
While brokers at the national level remain cautious about the coming year, Portland-area brokers plan to try to buck the trend by keeping the market moving throughout the entire year.
“The Portland commercial real estate market is positioned to roll through the downturn,” said Crispin Argento, Colliers International's Portland-based research analyst. “That’s because we didn’t throw all our eggs into the housing mess.”
Still, that doesn’t mean the stagnant multifamily housing market won’t cause problems for the rest of the city’s real estate scene in 2009.
Greg LeBlanc, a real estate analyst for Portland State University, estimates that by the end of 2009 there may be between 3,000 to 4,000 new high-end apartments on the market – a result of luxury condominiums going unsold and converting to apartments.
According to a Colliers International national survey, real estate investors are looking to 2009 with a marked sense of caution and conservatism, exacerbated by the full-blown economic meltdown.
In fact, the Colliers International survey and resulting 2009 outlook indicates that 22 percent of that company’s investors foresee the coming year as an active one for buyers, compared to 78 percent who said they wouldn’t venture back into the market until the second half of 2009.