State economists sees signs of a turnaround (again)

From the Oregonian:

Oregon's economic free fall appears to be over, but economists predict the state will likely see a slow, jobless recovery.
"Yes, finally, recovery is in sight," state economist Tom Potiowsky said Thursday during a presentation of the latest economic data to members of the Legislature.
Signs of a turnaround should become more visible this fall, he said. At the same time, Potiowsky warned that Oregon will not likely return to peak employment growth until 2013.
Oregon's economic downturn and hoped-for recovery appear to be tracking national trends, with the exception of the housing market. Economists predict Oregon's housing markets will stop dropping by mid-2010 -- later than some states but still ahead of Arizona, Nevada, California and Florida.
Consumers may feel more comfortable about spending by the holidays and businesses may see healthier profits. But Potiowsky says employers are likely to wait a little longer before adding jobs.

Normally Potiowsky's forecast sounds like a NAR press release so this is a nice change of pace but I think his prediction on the housing market bottoming in 12 months is still too optimistic.

Maybe he'll get it right next year. Maybe.

CalPERS walks away from KOIN building

From the Portland Business Journal:

The California Public Employees’ Retirement System has given up control of the KOIN Center, The Wall Street Journal reported Wednesday.
After action by a state circuit court in New York, a receiver can now be appointed to take control of the building and sell it.
A partnership of CalPERS and CommonWealth partners LLC of Los Angeles defaulted on a $70 million mortgage to New York Life Insurance Co.
The partnership paid $109 million to buy the 355,000-square-foot office building in 2007, at what was then the top of the market. The building, is one of the tallest buildings in Portland. It opened in 1984.
The decision by CalPERs to walk away from the investment shows even large institutional investors are choosing to give up on troubled properties rather than put more money into them, according to the Wall Street Journal.

SouthWaterfront condos goes to auction block

Agent503 posted about Atwater condos going to auction next month. You can read more on his blog and the auction website.

Let us know if you are going to attend!

Here are the minimum bids...

Portland RMLS Market Action Report – July 2009

The Regional Multiple Listing Service released the Market Action Report last week and the median sale price for July 2009 was $250,000; this is a 13.3% decrease from the median sale price for July 2008.

The Portland residential real estate market peaked in August 2007 with a median sale price of $302,000. Prices have now fallen 17.2% from that peak.

Months of supply (total inventory/monthly sales) sits at 7.3 months compared to the 10.0 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 14,512 homes for sale; this is a decrease of 20.7% from the same month the year before.

The third chart shows closed sales by month. There were 1,988 closed sales during the month; an increase of 8.6% from the same month the year before.

The fourth chart shows new listings by month. There were 3,907 new listings during the month; a decrease of 25.4% 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 19.0% from the current median for the ratio to reach 3.0.

A few comments:
The increase in sales is great news for the industry, the last time sales increased when compared to the same month the year before was in late 2005. This is obviously due to the $8,000 first time homebuyers’ tax credit so the enthusiasm will be short lived when the program ends in the next few months and sales continue their slide in the winter months.

Inventory continues to churn. In the first seven months of this year 27,000 new listings entered the RMLS system and only 9,200 exited via closed sales. Inventory only increased by 500 homes during this time period so that leaves 17,300 new listings unaccounted for. Since I am not a realtor I do not know how many of these are duplicate listings but it is very clear that the hidden inventory continues to grow.

Personal note:
I’m sure you’ve noticed my absence from the blog lately. The truth is I am burnt out and tired of all the bad news. The readers come and go from the blog when they want but I feel an obligation to keep blogging because I want to call the bottom of the market. The market will bottom and buying a home will be a great experience but it is still a few years away.

You should expect fewer posts from me going forward, maybe one or two a week. When the market bottoms and we start buying homes I imagine the posts will pick up again, until then I need a little break.

-Clint

Professor Duy on Bend migration and the 'creative class'

Tim Duy's take on Bend and Portland's desire to attract the 'creative class':

For those in the Portland area, notice that relative income per capita has slipped below the low of the 1980s. One has to wonder if a development focus on attracting the "creative class" is yielding the expected results.

Read the entire post on his blog.

More details on Teufel Nursery bankruptcy

From the Oregonian:
Teufel Nursery Inc., one of the area's largest nursery and landscaping operations, is fighting for its life after its long-time lender withdrew financing in May.
Textron Financial Corp. demanded immediate payment of the $5.3 million owed by Teufel, which forced the company to file for Chapter 11 bankruptcy in June.
Textron increased the pressure last week when it sued Teufel seeking repayment of its $5.3 million debt. The Providence, R.I.-based company also sued Donald Hauenstein, Teufel's chief financial officer, accusing him of fabricating financial records of non-existent receivables in order for the company to borrow more money from Textron before the bankruptcy.
...
Teufel's nursery and landscaping businesses have been hit hard by the economic decline and the deep slowdown in residential construction. The company's sales have declined by a third from $45 million at the 2006 peak to a projected $32 million this year. Its payroll has dwindled from 500 to 300.

Bend is 'poverty with a view'

From the Oregonian:

This city in Oregon's scenic high desert once had one of the nation's hottest economies. Resort developers, bankers, construction workers and luxury car dealers rushed for a piece of the action.
Now some locals call Bend "poverty with a view."
The county it anchors, Deschutes, shows some of the most serious recession pain in the land, as measured by The Associated Press Economic Stress Index.
The county ranked fourth this spring among American counties of more than 25,000 people in a measurement of the yearly rise in the AP index. The index measures unemployment, foreclosures and bankruptcies at the county level across the nation -- the higher the index's number for a county, the worse the recession's impact...
Michael Hollern, chairman of Brooks Resources Corp., the region's largest developer, said the Bend boom coincided with the one in the Sun Belt. Brooks once owned the massive Brooks Scanlon Lumber Company, which was founded in 1915 and basically built Bend.
The building boom began gradually in the 1960s and took off seriously a few years ago. "We thought we were different, special, with real jobs and real people.
It turns out we weren't that different. And we realized prices were out of touch with reality. Now we need to work off our excesses."
Much of the work force is still around, he said. The quality of life is off the charts, and few people want to leave.
"Where are they going to go? Hollern said. "Conditions are the same everywhere. There seems to be a sense that it is better to be unemployed in Bend than in other places."

The article is more of a story than a business article so I'd recommend reading the entire thing.

2356 NW Hoyt still can't sell. Charles Turner drops asking price again.

The stalled housing market continues to impact Charles Turner's flip project at 2356 NW Hoyt St.

He just dropped the asking price another $25,000. This is the 6th reduction in as many months.

The Original asking price in October 2008 was $1,195,000.
In January he dropped the asking price $45,000 to $1,150,000.
In February he dropped the asking price $25,000 to $1,125,000.
In March he dropped the asking price $25,000 to $1,100,000.
In May he dropped the asking price $50,000 to $1,050,000.
In June he dropped the asking price $50,000 to $999,950.

Now he dropped the asking price $25,000 to $975,000.

Total reduction is $220,000 or 18% and the home has been on the market for 9 months.

Records show Charles purchased the 'fixer upper' in May of 2008 for $535,150.00 under SAPPHIRE DEVELOPMENT LLC.

We do not know how much Charles has invested into the property but we do know he is personally liable if the LLC defaults.

It is clear Charles is chasing the market down and articles like this one from the Wall Street Journal probably don't help his cause:

High-End Homes Frozen Out of Budding Housing Rebound

Housing is fast dividing into two markets: Sales of low- and moderately priced homes are picking up and values have stopped falling in some parts of the nation. But on the upper end, sales remain mired in a deep slump and price declines are expected to accelerate.

Kruse Way CRE vacancy rate hits 22%

From the DJC:

All of Portland’s office markets showed signs of suffering during the second quarter of 2009, according to numbers recently released by Grubb & Ellis. But nowhere is the effect more noticeable than Kruse Way, where vacancy rates for office space are climbing at a rate higher than the city average.
Three years ago, Kruse Way was lauded as a local success story. Office space in speculative buildings seemed to be leased almost as soon as it hit the Portland submarket just off Interstate 5.
Now, however, Kruse Way vacancy rates hover around 22 percent, compared with 13.5 percent for the entire metro area. And when space is leased in the area, it sometimes comes at a rate discounted as much as 20 percent.
Raymond Duchek, vice president of CB Richard Ellis, attributes the current abundance of unleased space on Kruse Way to the fact that in fat years the area was home to a large number of real estate and financial companies. But those two industries have suffered during the economic downturn.
“It’s a sign of the time,” Duchek said.
Other signs: the newly opened Kruse Oaks III, a 110,000-square-foot office building, sits completely empty, and a 22,000-square-foot building remains unoccupied since Textron Financial closed its commercial finance division.

Waterfront Pearl goes back to the bank

From the Oregonian:

The Waterfront Pearl, one of four buildings featured in this year's Street of Dreams show, is the first major Portland condo project to go back to the bank since the condo craze crashed in 2007.

A subsidiary of Macquarie Group, an Australian financial firm, took over the 194-unit project this summer after the developer couldn't raise enough cash to cover cost overruns.

Developer Paul Mayer of Pemcor Development in Vancouver, B.C., tried since last year to negotiate a workout with his lenders. On other Portland condo projects, lenders and investors have stopped short of foreclosure by agreeing to take lower returns or a loss.

I enjoy walking by this building. The water feature is pretty cool but I wouldn't want to buy one of the lower level units because everyone walking on the riverfront can see in your unit.

The article covers much more in detail...worth the read.

Roger Pollock walks away from Buena Vista Custom Homes

From the Portland Business Journal:

Buena Vista Custom Homes Inc., named Oregon’s fastest-growing business four years ago, has been dissolved.
The Lake Oswego homebuilder fell victim to plummeting demand for new homes, which in turn spawned a series of lawsuits and foreclosures, including a $10.7 million judgment in Happy Valley against Buena Vista and its owner, Roger M. Pollock.
The company has been sued for defaulting on loans and for shoddy construction at a condominium it built in Southeast Portland. It also lost a series of semi-developed lots in Southwest Portland to foreclosure.
The Oregon Secretary of State’s office formally dissolved Buena Vista’s corporate
registration on June 26, two months after it missed a deadline to submit its annual report and pay a $50 renewal fee, as required by state law. The company can renew its license by paying the fee and filing the report.
The company’s contractor’s license has also been suspended.