Bend Economy Bulletin Board

09/04/11
Quick Summary
We have been and are currently experiencing flattening to downward pressure on inventory coupled with close to average sales activity. Positive appreciation experienced 2nd qtr over 1st this year could very well be repeated if current trends continue and some or all of historic trends occur again (see first chart).

The disposition of current and future bank owned assets however, remain a mystery to most of us, creating a lot of uncertainty. Even so, a doubling of bank owned inventory today wouldn’t result in much of an inventory increase and would more than likely sell quickly as has been the case.

View charts at the bottom of the webpage in PDF format at:
http://www.centralorproperty.com/Central,ORTrends.html

First page
List to sold ratios for 2011 remain the lowest yet since beginning this project in 2007 with a typical August drop. If the typical downward trend experienced the past 3 years repeats, we will see a significant reduction in the average list to sold ratios from 2010 to 2011.

Second page
The past 14 months list to sold ratios trend in Central Oregon held close to flat.

Third Page
The past 3 months show a steady, typical decline in list to sold ratios.

Fourth Page
• New listings trends continue to move down.
• Sold property trends are moving up which is typical. September is a strong sales month.
• The Back on market property trend is down.
• Pending property count trend rose very slightly.
• Expired, terminated/withdrawn properties trended up slightly. While remaining the largest source of inventory reduction, the gap has narrowed significantly with sold properties. Most expirations occur at the end of the year, quarter and month, creating wide trend swings.
Fifth Page
Average sales per business day YTD is right at average since beginning this project in Jan of 2010.
View charts at the bottom of the webpage in PDF format at:
http://www.centralorproperty.com/Central,ORTrends.html

The disposition of current and future bank owned assets however, remain a mystery to most of us, creating a lot of uncertainty. Even so, a doubling of bank owned inventory today wouldn’t result in much of an inventory increase and would more than likely sell quickly as has been the case.

One question - Have you seen what the auction schedule looks like between now and Jan? It might change your perception regarding the magnitude of the inventory increase.

The disposition of current and future bank owned assets however, remain a mystery to most of us

You knew jlemay wasn't going to let that slip by ......................

One question - Have you seen what the auction schedule looks like between now and Jan? It might change your perception regarding the magnitude of the inventory increase.

You knew jlemay wasn't going to let that slip by .....................

Yes I knew that would create a response from Jlemay!

To be clear I am referring to the MLS inventory. Despite the reporting of auction schedules and notices of default, REO inventory on the market remains much lower than a year ago. Just spoke with an individual that went to the court house steps the other day and he stated every single auction was postponed. I don't go myself because it is just a waste of time for my purposes but most folks I speak with report the same or similar situation.

I try to stick to reporting what is tangible. Jelamey is certainly correct, there is a lot of potential inventory. Unfortunately, most of that inventory is not making it to the market and that has been the case for quite some time. In my neighborhood, there are 6 abandoned homes in a 1/4 mile radius just sitting there supporting weed growth. In the meantime, I have 3 people chomping at the bit to buy something in that same 1/4 mile radius. One of them is a builder turned investor and he is ready to buy as much as he can.

Not to mention, the buyers I currently represent from Bend to Madras whom are becoming increasingly frustrated with the lack of choices. We all know everthing is subject to change and I for one would like to see these homes come to market. Currently, the demand far exceeds the supply of most of these homes. If all of the foreclosed hims hit the market tomorrow we would obviously have a bad situation on our hands. For most of the year it has only trickled on and to this day I haven't seen a single credible report showing that this will change in the near future. If anyone else has, it would be very kind of them to share

As I mentioned previously, the picture changed on Aug 8th. That's when all of the canceled foreclosures by B of A earlier in the year were rescheduled to start hitting the courthouse steps. Most of those (B of A properties) are going off as scheduled. For example, yesterday and today there were 4 properties that reverted to lender and 2 that were canceled. Prior to Aug 8th, you'd be lucky to see 1 in 9 go off as scheduled. This will begin to show in the inventory numbers over the next few months as the properties are processed and marketed for sale. Yes, there are still a fair number of cancellations. But they are still out there and the majority will hit the market at some point. All this into a dramatically weakening economy does not bode well for prices over the next year.

10/03/11
Quick Summary
In this quick summary the thoughts expressed on 09/04/11 remain essentially the same with some additional thoughts added in itallics:

We have been and are currently experiencing flattening to downward pressure on inventory coupled with close to average sales activity. Positive appreciation experienced 2nd qtr over 1st this year could very well be repeated if current trends continue (see first chart).

The disposition of current and future bank owned assets however, remain a mystery to most of us, creating a lot of uncertainty. Even so, a doubling, tripling or quadrupling of bank owned inventory today wouldn’t result in much of an inventory increase and would more than likely sell quickly as has been the case.

Expired listings continue to be a significant potential source of additional inventory in the future.

If I were the CEO of a widget company and this chart reflected percent defective product returned, a very important question to me concerning what the charts are telling us would be, “are recent results compared to past results and current trends creating a more or less compelling reasons for people to buy my product?”
I would then ask my leaders and workforce what the top 3 to 5 internal and external factors were that contributed to the current trend. I would follow that up with another question – what are the top 3 to 5 internal and external factors that would swing this trend the opposite direction?

Once accomplished, this task will have taken us a long way toward understanding “the rest of the story” aka, the full context. Any takers on identifying the factors driving current trends or factors that might push us the other direction?

View charts at the bottom of the webpage in PDF format at:
http://www.centralorproperty.com/Central,ORTrends.html

First page
List to sold ratios for 2011 remain the lowest yet since beginning this project in 2007. 2011 list to sold ratios are below that of 2010 and the villain I refer to as variation continues to tighten up. If the current downward trend repeats in the coming months, we will see a significant reduction in the average list to sold ratios from 2010 to 2011 and I just might lose the inventory burrito bet because of my low end guesstimate of inventory.
Second page
The past 14 months list to sold ratios trend in Central Oregon held close to flat and slight reduction in variation continues. Most outliers are downward spikes which is a reversal of the past.

Third Page
Average list to sold on the 3 month chart dropped from 2.0 to 1.7. The past 3 months show a steady, typical decline in list to sold ratios. Variation improved as well. All outliers are downward spikes.

Fourth Page
• New listings trends up.
• Sold properties are trending up more than new listings narrowing the gap significantly. September is usually a strong sales month.
• The Back on market property trend is down.
• Pending property count trend is very close to flat.
• Expired, terminated/withdrawn properties trended up significantly, remaining the largest source of inventory reduction. Because of this, I believe this potential future inventory remains more significant than the REO “shadow inventory”. Most expirations occur at the end of the year, quarter and month, creating wide trend swings.
Fifth Page
Average sales per business day YTD is right at average since beginning this project in Jan of 2010. Short term trend is up typical of September and overall trend is very flat indicating that demand has remained fairly constant since beginning this project.
View charts at the bottom of the webpage in PDF format at:
http://www.centralorproperty.com/Central,ORTrends.html



09/04/11
Quick Summary
We have been and are currently experiencing flattening to downward pressure on inventory coupled with close to average sales activity. Positive appreciation experienced 2nd qtr over 1st this year could very well be repeated if current trends continue and some or all of historic trends occur again (see first chart).

The disposition of current and future bank owned assets however, remain a mystery to most of us, creating a lot of uncertainty. Even so, a doubling of bank owned inventory today wouldn’t result in much of an inventory increase and would more than likely sell quickly as has been the case.

View charts at the bottom of the webpage in PDF format at:
http://www.centralorproperty.com/Central,ORTrends.html

First page
List to sold ratios for 2011 remain the lowest yet since beginning this project in 2007 with a typical August drop. If the typical downward trend experienced the past 3 years repeats, we will see a significant reduction in the average list to sold ratios from 2010 to 2011.

Second page
The past 14 months list to sold ratios trend in Central Oregon held close to flat.

Third Page
The past 3 months show a steady, typical decline in list to sold ratios.

Fourth Page
• New listings trends continue to move down.
• Sold property trends are moving up which is typical. September is a strong sales month.
• The Back on market property trend is down.
• Pending property count trend rose very slightly.
• Expired, terminated/withdrawn properties trended up slightly. While remaining the largest source of inventory reduction, the gap has narrowed significantly with sold properties. Most expirations occur at the end of the year, quarter and month, creating wide trend swings.
Fifth Page
Average sales per business day YTD is right at average since beginning this project in Jan of 2010.
View charts at the bottom of the webpage in PDF format at:
http://www.centralorproperty.com/Central,ORTrends.html

a doubling, tripling or quadrupling of bank owned inventory today wouldn’t result in much of an inventory increase

Now you're just being mean

Hey there builder dude, not being mean, just trying address the misconceived idea of context . For instance, take a look at the last inventory count of REO, multiply it by 2, 3 or 4 and plot that value on the Total Inventory chart. You will quickly see that the data points will lie within the “normal range” (between the red lines

If you put the doubled value in the REO Inventory chart it would still fall within the “normal range” but if you put the tripled or quadrupled figure in the REO chart they would indicate very significant change. Demand at the time would be a very important consideration. Right now most REO inventory is flying right off the market very quickly. So… if REO inventory tripled or quadrupled we would want to review the REO Inventory charts as well as sales activity and should get a quick idea of how significant the change was. With current demand for REO as it is, I doubt if a tripled or quadrupled inventory would last very long. That is of course is speculation on my part.

Following the above process would be digging deeper into the context of the data. Keep digging deeper with factual verifiable information and you get to more of the story. Headlines, opinions and agenda based proclamations can become part of the context manifested as public opinion, conventional wisdom and sometimes fact. but are always the most suspect, less reliable and less verifiable. Certainly not saying these things aren’t important, just that they are often not based on fact and simply can’t be verified until the event has actually occurred. Think of the top or bottom of any market, predictions, then revised predictions, etc.

We will probably see a big headline story pretty soon concerning third quarter sale prices for 2011. Plot these values in the appropriate chart and you can quickly see if the new news is within the normal range, part of a trend, a significant event (beyond the normal range) etc.

If it turns out the headline news shows up as a spike or is part of a trend then we certainly have a headline worth noting. If the headline makes a big deal about a data point that falls in the normal range, the headline should just be considered noise. I’ve talked about “noise” in many past blogs. Think of it as static noise in the radio broadcast as you are driving through the desert valley trying to listen to a good Hitchcock story. The more you focus on the static the less you’ll hear the real message.

The charts are showing significant change and have been for quite some time. Not saying everything is going to be bright and rosy because of this but there is a distinct difference between now and 2007/ 2008. Some may vehemently claim it is out of context with something or other but since it is the same data, presented in the same fashion over time, all of the data is presented in the same context.

It was a busy day on the courthouse steps today. The foreclosures are coming in earnest now, meaning few cancellations and nearly everything "reverting to lender". Today, 21 auctions in Bend... no cancellations, 2 sold to investors, 19 reverted to lender. That's 21 homes in a single day that will be hitting the market in Nov and Dec. The auction schedule in the days and weeks ahead is similarly quite heavy. Note that this is factually verifiable information, not opinion, conventional wisdom, "agenda based proclamation" or anything else that can be spuriously rationalized away. Charts look back, this is forward looking hard data.

Charts look back, this is forward looking hard data.

What would be really useful I believe is to provide the “reverted to lender” data to me and I can put them in control chart format. We could then easily put into context future events as we will have established long running data streams with calculated upper and lower limits. Combined with the rest of the charts we could potentially provide some very powerful, easy to understand data to our friends on this site.

After all, the charts do look back but they are also designed to look forward as well as tell us if the process is predictable in the first place and put any future shifts into context with past data – they differentiate between signals vs. noise. The list to sold ratios charts were designed specifically to create a window to the future and all of the charts are based off hard data. Adding charts depicting “reverted to lender” activity would give us another window to look through.

Whatta ya think?

One way to estimate "reverted to lender" data is using the Deschutes County DIAL system. Here's a summary of 2008-2011 Bend residential transactions for the three sales codes "FORECLOSURE/BANKRUPTCY/TRANSFER TO AVOID LIEN", "ESTATE/LENDER/AFTER FORECLOSURE", and "LENDER, DISTRESS OR SHORT SALE". Early 2011 numbers appear to be declining from the previous two years, but keep in mind that it takes a while for transactions to show up in DIAL so the July and August 2011 numbers may well go up if we revisit this in a few months.

Code: Select all

2008-01    22
2008-02    16
2008-03    22
2008-04    34
2008-05    30
2008-06    52
2008-07    51
2008-08    61
2008-09    111
2008-10    66
2008-11    59
2008-12    100
2009-01    81
2009-02    92
2009-03    87
2009-04    106
2009-05    136
2009-06    178
2009-07    142
2009-08    135
2009-09    151
2009-10    152
2009-11    138
2009-12    171
2010-01    137
2010-02    122
2010-03    147
2010-04    142
2010-05    114
2010-06    136
2010-07    108
2010-08    137
2010-09    155
2010-10    143
2010-11    100
2010-12    132
2011-01    101
2011-02    89
2011-03    85
2011-04    72
2011-05    62
2011-06    53
2011-07    35
2011-08    40


Here's a summary of 2008-2011 Bend residential transactions for the three sales codes "FORECLOSURE/BANKRUPTCY/TRANSFER TO AVOID LIEN", "ESTATE/LENDER/AFTER FORECLOSURE", and "LENDER, DISTRESS OR SHORT SALE".

Thanks for the information. I think this will be a fun and hopefully useful project. I am not sure if the last category "LENDER, DISTRESS OR SHORT SALE". belongs in the same category as the first 2. I'll take a look myself and in the meantime perhaps you can alaborate a bit to help us understand. Either way, it can be changed pretty easy if we decide it should be just the first two categories or all three at a later date.

rtpage wrote:I am not sure if the last category "LENDER, DISTRESS OR SHORT SALE". belongs in the same category as the first 2. I'll take a look myself and in the meantime perhaps you can alaborate a bit to help us understand.

You're probably right about "LENDER, DISTRESS OR SHORT SALE" not belonging in the same category as the first two. Unfortunately I can't provide any elaboration because Deschutes County doesn't offer descriptions of the sales codes used in DIAL. Here's a complete list of all the sales codes they use.

Code: Select all

01    CHANGE OF USE
02    NOT A TRANSACTION OF REAL ESTATE
03    GRANTEE/GRANTOR IS A POLITICAL SUBDIVISION
04    INTEREST TRANSFERRED IS SECURITY ONLY
05    GRANTEE IS CHARITABLE, RELIGIOUS, OR OTHER INSTITUTION
06    GRANTEE IS RELATED OR BUSINESS ASSOCIATES
07    INTEREST TRANSFERRED IS PARTIAL OR UNDIVIDED
08    GRANTEE/GRANTOR ARE THE SAME
09    TRADE OR EXCHANGE OF PROPERTIES
10    FORECLOSURE/BANKRUPTCY/TRANSFER TO AVOID LIEN
11    GRANTOR IS SHERIFF OR COURT OFFICER
12    DEED RESULTING FROM CONTRACT BEING PAID
13    ESTATE/LENDER/AFTER FORECLOSURE
14    RE-RECORDING/OTHER/CONSIDERATION UNDER $500
15    OLD SALE OR DATE MISSING
16    PROPERTY/COMMUNICATIONS TOWERS
17    UNKNOWN
18    SPECIALLY APPRAISED & GROUND LEASES
20    UNKNOWN
21    PROPERTY SOLD NOT SAME AS ASSESSED
22    SPECIALLY ASSESSED
23    NOT USABLE IN STUDY DUE TO ADJUDICATION
24    CONFIRMED SALE NOT USABLE IN RATIO STUDY
26    NEW CONSTRUCTION OR NEW PROPERTY
27    TRANSACTION MUST BE CONFIRMED
30    UNCONFIRMED SALE
31    LENDER, DISTRESS OR SHORT SALE
32    PRIOR YEAR CONFR SALE TIME ADJ
33    CONFIRMED SALE
34    CONFIRMED SALE ADJUSTED
35    MULTIPLE ACCOUNTS INVOLVED IN SALE
36    SPECIAL ASSESSMENTS OR DISCOUNTS REMOVED
37    MULTIPLE ACCOUNTS INVOLVED IN SALE CONFIRMED
39    PERSONAL PROP MANUFACTURED HOME UNCONFIRMED

Here's a link to a summary of 2000-2011 Bend residential transactions by month and sales code so you can import the data into Excel and filter the sales codes any way you'd like.

http://www.bendmaps.com/bend_residential.php

Fri at the courthouse was even busier than Thurs. 35 scheduled auctions.... 24 reverted to lender, 5 sold to investors, 6 cancellations. They are coming fast and furious now, the busiest day I've seen. That's 50 homes of additional inventory in just 2 days that will be hitting the market over the next few months. That's not counting any new listings. Hard to imagine that kind of inventory increase can be absorbed in an orderly manner.

jlemay wrote:Fri at the courthouse was even busier than Thurs. 35 scheduled auctions.... 24 reverted to lender, 5 sold to investors, 6 cancellations. They are coming fast and furious now, the busiest day I've seen. That's 50 homes of additional inventory in just 2 days that will be hitting the market over the next few months. That's not counting any new listings. Hard to imagine that kind of inventory increase can be absorbed in an orderly manner.

Your auction numbers appear to include all types of properties in all parts of Deschutes county. In other words, you're mixing residential and commercial, single family and multi-family, houses and bare lots, in Bend, La Pine, Redmond, Sisters, and Sunriver. Only a fraction of those auctions are Bend residential.