Rob Kerr / The Bulletin

Crews and equipment from Taylor Northwest prepare ground for construction of 28 homes in River’s Edge Village Phase 15, near Mt. Washington Drive west of Third Street, according to Gary Cox, property development manager for River’s Edge Property Development. At left, workers from Pahlisch Homes complete construction on 15 homes in Phase 14.

Developers question city’s buildable land figures

By Hillary Borrud / The Bulletin / @hborrud

Published Jan 23, 2014 at 12:01AM

The cost to buy a home in Bend and the surrounding area will probably climb this year, according to experts and recent data surveys.

For instance, local experts say a 30-year, fixed-rate mortgage could reach 5.5 percent or 6 percent. Home prices will probably continue to climb, as well. Inventory is not what it was a year ago, and that “shadow inventory” of properties — homes whose owners have stopped making mortgage payments — has yet to find its way onto the market.

Finding consensus among real estate professionals can be tough. One thing most agree on: Mortgage interest rates will rise.

The 10-year Treasury note is the benchmark for mortgage rates. Bill Smith, an investment counselor in Bend, expects the yield on 10-year T-bills to climb as the consequence of the Federal Reserve Board’s decision in December to taper off its “quantitative easing,” or bond purchases meant to hold down inflation.

The yield on 10-year Treasuries closed Thursday at 2.84 percent. Add another 1.5 percentage points, roughly, to arrive at the 30-year rate.

“We’re working within a framework (the 10-year Treasury bond) might be at 3.5 percent over the next six months and as high as 4 percent by the end of the year,” Smith said recently.

Chip Reeves, chief banking officer at Bend-based Bank of the Cascades, agreed the market is driving up the 10-year yield. Consequently, the 30-year fixed could go to 5.5 percent.

Reeves said homebuyers have a window on reasonable mortgage rates, but bargains in home prices are drying up. In his estimation, the so-called “shadow inventory,” or homes in foreclosure limbo, is just that, a shadow.

“I would say for the most part we’ve worked our way through the majority of the foreclosure issues, and at Bank of the Cascades we have basically zero inventory in regards to foreclosure residential properties,” Reeves said.

However, David Ambrose, CEO at Total Property Resources, said the shadow inventory is real. As evidence, he noted the number of judicial foreclosures filed in Deschutes County dropped dramatically beginning in September. The cause, he wrote in an email, may be the mandatory mediation requirement imposed on judicial foreclosures last year by the Legislature.

“So, I would venture to guess that the so-called ‘shadow inventory,’ which I would define as those loans in material default, as to which no formal foreclosure action has yet begun, is still substantial,” Ambrose wrote.

In Bend, demand stoked a continuing rise in median-home prices, from $166,000 in November 2011 to $298,000 in September, before dropping back to $267,000 last month, according to the Bratton Report, a monthly overview of Central Oregon real estate trends by the Bratton Appraisal Group. Sellers often fielded multiple offers and sold above asking price, according to Cheri Smith, a real estate broker with Total Property Resources who writes a blog about the local real estate market

“This is largely responsible for the rapid increase in home values and can be attributed to the low inventory in Bend,” she wrote at buyinbend.word press.com.

That may change if, as Ambrose said, the number of qualifying homebuyers shrinks due to changes to lending practices that took effect Jan. 10. Other experts, Reeves included, said the new rules imposed by the federal government should have little effect on the real estate market.

A buyer’s market, or at least a more balanced market, may return to Bend, Smith wrote in an email.

Plus, investors who snapped up lower-priced homes in Bend for cash will find few properties listed for sale below $200,000, Smith wrote.

“With fewer investors in the picture, many homebuyers that got frustrated and took a break might re-enter the market as they feel they might have a shot now at submitting an offer that gets accepted,” she wrote in an email.

Editor’s note: This report has been corrected to reflect David Ambrose’s title. The Bulletin regrets the error.

— Reporter: 541-617-7815, jditzler@bendbulletin.com

Silicon Valley investor Bruce Cleveland has teamed up with local investor Dino Vendetti to create a plan to transform Bend’s economy.

As part of the strategy, they intend to build a user-experience design academy — a school for programmers who write code and design the graphic interfaces that generate the overall experience users have with products such as websites, smartphones and computer applications — that will attract techies from around the world.

But first, they have created a competition called the Big Bend Theory to draw Silicon Valley startups and entrepreneurs to Bend.

There are more than 40 software companies in Bend, according to Economic Development for Central Oregon. But Cleveland and Vendetti want to build billion-dollar tech companies that will employ hundreds.

“The idea is to transplant high-growth companies through this contest and create anchor tenants,” Cleveland said. “If we bring in two or three really high-growth companies that then forms the backbone of a high-growth technology community … and then we can attract others.”

Their goal is to diversify and stabilize the local economy currently so reliant on the real estate market and seasonal tourism industry by building a tech hub that will generate high-tech jobs.

Nationally, high-tech industries were more resilient during the recession compared with other service-providing industries, such as retail, leisure and hospitality and construction, Oregon Employment Department Regional Economist Damon Runberg wrote in an email. And high-tech firms tend to provide high-paying and stable jobs for a community, he wrote.

“Most of the technology hubs in the United States tend to be very prosperous regions with unemployment levels lower than the national average and strong job growth,” Runberg wrote, adding that most hubs are in large metro areas. “The question is whether these metro areas are prosperous because of the high-tech industries or if the industry is successful because of the characteristics of these metro areas? It is likely a combination of both, but clearly a region’s workforce, infrastructure, and industry clusters play a huge role in the success of these tech hubs.”

He agreed the addition of high-tech firms would help diversify the Central Oregon economy and limit the effect of large economic shocks, such as the crash of the construction industry in 2008 and the collapse of the timber industry before that. But to make Bend a technology hub, he said it would likely take time to build the reputation, workforce and infrastructure to compete against other regions for startups and other tech firms.

Cleveland said the biggest fear Silicon Valley entrepreneurs have about bringing their startups to Bend is not having a place to work if their companies fold. But by bringing in two or three Silicon Valley companies, it mitigates the risk to smaller startups.

Vendetti recently said he had received around 20 applications for the competition, which is scheduled to take applications through Jan. 31. The top three startups will receive a weekend trip to Bend for the company co-founders and spouses. And if they choose to relocate, he said they will be provided a temporary office space and funding.

“Bruce and I believe that there are many of these folks in Silicon Valley who are fed up with the cost structure down there and want to build their business in a community that offers a high quality of life and yet still has the infrastructure needed for them to build their businesses (active tech community, university, venture capital),” Vendetti wrote in an email. “So the challenge we issued was really an experiment to see if we are right about our assumptions.”

Along with attracting high-growth startups, Cleveland said the next step is to work with Oregon State University-Cascades to create a pipeline of engineers who can form ideas and new high-growth companies in Bend.

And lastly, the duo plans to build the user-experience academy in 2014, where students will live in Bend and work on user-experience code for real companies locally and around the world.

“I think these are the building blocks to enable Bend to transform from its reliance (on) recreation and retirement to a full-time clean, stable economy,” Cleveland said.

— Reporter: 541-617-7818, rrees@bendbulletin.com

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Recovery continues in Central Oregon

Economic index shows growth in housing, tourism

By Joseph Ditzler / The Bulletin

Published Dec 8, 2013 at 12:01AM

Changes to landlord-tenant law in Oregon that take effect in 2014 have something for both renters and landlords.

The Landlord-Tenant Coalition Omnibus Bill, Senate Bill 91, passed by the Legislature in May with near unanimous consent, takes effect Jan. 1. It allows landlords to require tenants to obtain renter’s insurance, with some limitations that effectively exempt low-income renters. The law also gives renters a break for evictions that are five or more years old. And it gives landlords the ability to charge fees to renters who break some terms in their leases.

One important change affecting the rental market does not take effect until July 2014. Landlords will no longer be able to turn away prospective, low-income tenants solely because they rely on government subsidies to help pay their rent, so-called Section 8 vouchers. That change comes with House Bill 2639, a measure introduced by state House Speaker Tina Kotek, D-Portland.

“No landlord will be forced to accept Section 8 under this law,” wrote Jim Straub of Eugene, legislative director for the Oregon Rental Housing Association Inc., in the October newsletter. “But no landlord will be able to refuse to rent to someone solely because their income is a Section 8 voucher.”

Landlord groups in Oregon did not contest Kotek’s bill, however, because she granted concessions. For example, the bill creates a mitigation fund on which landlords may make claims up to $5,000 for property damage by Section 8 tenants, said John Van Landingham, a Lane County attorney, renter advocate and coalition member,

“That was a big part of the bill,” Van Landingham said Tuesday. “All three landlord groups didn’t support it, but they didn’t oppose it. They were neutral.”

SB 91

The General Landlord Tenant Coalition negotiates changes every year to the landlord-tenant law in Oregon. It grew from two people in 1993 to sometimes more than 20 people gathered in the same room, Van Landingham said. “The coalition typically works by compromise and horse trading,” he said.

SB 91 passed both state legislative chambers with only two no votes, cast by state Rep. Kim Thatcher, R-Keizer, and state Sen. Doug Whitsett, R-Klamath Falls, whose district includes parts of Crook and Deschutes counties.

“I don’t believe the state Legislature has any constitutional authority to tell a landowner what he can or can’t do in a rental agreement,” Whitsett said Monday. “We keep getting, it seems, with each passing legislative session, we keep putting more and more restrictions on owners of property, what they can and cannot do with that property.”

After Jan. 1, landlords may require tenants to obtain renters’ insurance to a maximum $100,000 coverage. However, landlords may not impose the insurance requirement on tenants who earn 50 percent or less of the median income in their area. In Deschutes County — including Bend, where the rental vacancy rate has been 1 percent —the median income for 2013 is $59,700 according to the U.S. Department of Housing and Urban Development.

Criminal record

Another change will prohibit landlords from turning away prospective tenants based solely on an eviction elsewhere more than 5 years old, or who were subject to an eviction that was dismissed or resolved in the tenants’ favor.

Landlords may still screen tenants for certain crimes, particularly those involving drugs, sex, violence or financial fraud, for example. But, they may not deny an applicant based on an arrest that did not result in a conviction or a charge that was dismissed.

The law is not as restrictive as it seems. Landlords may still deny an applicant based on a poor reference from a previous landlord.

“A lot of people get arrested and never charged with a crime, especially homeless people,” Van Landingham said. “Our view is that (denials based on arrests) may well be disproportionately impacting on minorities, racial minorities and, especially, homeless people.”

Finally, the omnibus bill allows landlords to charge fees for failing to comply with seven specific lease terms, including two new ones: smoking in a unit and keeping unauthorized pets, according to the legislative summary. In addition, after a first-time warning, landlords may charge a $50 fee for a second violation, according to the Oregon Rental Housing Association. For subsequent violations, landlords may charge $50 plus 5 percent of the monthly rent, according to the association.

But it restricts landlords from deducting fees from rent payments and charging another fee for late rent.

Straub, the association’s legislative director, said landlords in 2009 lost some power to charge noncompliance fees, due in part to abuses by some. Regaining that authority for two more instances is a major gain. He described fees as a “very important tool to deter behavior.”

Likewise, the power to require renter’s insurance protects renters, as well as landlords. An apartment fire, for example, could burden an uninsured client with a financial obligation that derails career plans, Straub said.

Landlords, in general, are wary of the implications of Kotek’s Section 8 bill, he said. But Straub endorsed it Wednesday. The mitigation fund effectively creates a $5,000 security deposit for every Section 8 tenant, he said.

Overall, he said, landlords benefited from the 2013 changes. “Yes, absolutely,” Straub said. “I believe we got more than we gave.”

— Reporter: 541-617-7815, jditzler@bendbulletin.com

Good news on the employment front surfaced Monday from the Oregon Employment Department: a continuing strong surge in hiring across several sectors in Central Oregon.

“The fastest growing industry (in Deschutes County) is construction — 330 jobs over the past year,” said the department’s Regional Economist Damon Runberg. “That industry locally was just devastated, but we’re really starting to see some strong hiring there.”

As a result, skilled workers, particularly finish carpenters and framers, are in high demand, said Tim Knopp, executive vice president of Central Oregon Builders Association. And wages and material costs are rising along with demand for workers and new housing. Construction companies report 15 to 25 percent higher costs, Knopp said Monday.

However, office jobs — the professional and business services sector — has led the Deschutes recovery in sheer numbers hired over the past year with 550. A larger sector, it realized an 8.2 percent increase in hiring against 9.2 percent for construction.

Also, a second look at spring and summer employment figures for Deschutes County showed a stronger picture — 860 more jobs overall — than previously reported by the department, Runberg said.

“All signs in the economy right now point to things being better than previously thought,” he said.

The Bend Metropolitan Statistical Area, which covers all of Deschutes County, also relinquished its spot last month as the Oregon metropolitan area with the highest unemployment rate, out of the six metro areas in the state. Deschutes County’s seasonally adjusted rate in October fell to 9.4 percent. That’s a shade behind the Medford MSA, which moved to the top that month with a 9.5 percent adjusted rate.

In Crook County, hiring posted the second strongest year-over-year growth rate of all Oregon counties, 5.8 percent. Overall, the Crook County unemployment rate stood at 12.1 percent in October, still high, but down from 13.8 percent in October 2012, according to the Employment Department. Construction, along with growth in the transportation, trucking companies, for example, accounted for some of that improvement, Runberg said.

Jefferson County reached its lowest seasonally adjusted unemployment rate since July 2008, 10.4 percent. Manufacturing, retail and tourism-related all showed gains in the past year. Wholesale trade lost 190 jobs, however.

— Reporter: 541-617-7815, jditzler@bendbulletin.com

Pronghorn resort plans to start construction next year on a 105-room hotel on its property northeast of Bend, resort officials announced Tuesday.

Pronghorn’s parent company, Auberge Resorts, is putting $20 million into the project, which will also double the size of Pronghorn’s spa facilities and renovate some existing buildings.

The proposal makes Pronghorn the second Central Oregon resort to announce hotel plans after years of struggling to clear up ownership and development issues. Construction started in April on a 50-room hotel at Tetherow, just west of Bend.

Pronghorn’s plan is to develop the hotel in two phases, General Manager Spencer Schaub said. Construction crews will build 67 of the rooms starting in April, with a tentative opening set for the second quarter of 2015.

The second phase, with 38 rooms, will start after the first phase is complete.

The hotel “was always part of the development requirements for the property,” Schaub said. “It’s an exciting development and an exciting way to showcase Pronghorn and Central Oregon.”

Pronghorn officials are calling the planned hotel The Huntington Lodge, named after a 19th-century wagon trail that ran through Deschutes County. Pronghorn currently has some condo-like lodges available for guest stays, but this would be the first full-scale hotel.

A San Francisco architectural firm that specializes in resorts is working on the hotel design, and Pronghorn is still finalizing some specifics, including its interior design. The hotel is expected to have two varieties of rooms: standard rooms of about 470 square feet; and suites ranging from 940 square feet to 1,430 square feet, Schaub said.

Among a half-dozen resorts

Pronghorn, like more than a half-dozen resorts planned across Central Oregon since 2000, has struggled to meet some of the timelines developers first planned for home and hotel construction around the property.

Oregon and Deschutes County require destination resorts to provide overnight lodging units in addition to homes, golf courses and other amenities. Pronghorn, which opened in 2004, has applied for extensions with the county on the requirements several times since first getting development approval.

The resort includes plans for up to 420 home lots surrounding its two golf courses, clubhouse and recreation center on 640 acres east of U.S. Highway 97 between Bend and Redmond. Just a fraction of the homes have been built.

Still, construction activity and visits to the resort have been on the upswing over the last year, Schaub said.

In February 2012, The Resort Group, a Hawaii development firm, acquired more than $43 million in loans for the property, effectively taking ownership. That company put Auberge Resorts in charge of daily operations in May 2012.

Troubled developments

Pronghorn is hardly the only Central Oregon resort to face financial hardship over the last decade, and it has fared better than most.

Building at Tetherow, a resort located just west of Bend that broke ground in 2004, has also failed to reach the 380 homes and 210 townhomes that developers first envisioned. But after several ownership changes and the near foreclosure of 191 lots last year, Tetherow officials started construction on a 50-room hotel in April and have said they’re seeing more permits for homes around the resort property.

Of the nine destination resorts proposed across Central Oregon between 2000 and 2008, just three — Pronghorn, Tetherow and Brasada Ranch — opened. A hotel management group bought Brasada in 2010.

The others collapsed in the wake of the real estate crash, personal bankruptcies among resort planners and land use decisions restricting development.

— Reporter: 541-617-7820, eglucklich@bendbulletin.com