Bend rated as second in U.S. for overvalued housing
Published: June 06. 2008 4:00AM PST
The Bend area housing market is the second most overvalued in the nation, according to a quarterly study released Thursday.
The Bend metropolitan statistical area, which includes all of Deschutes County, was 49.5 percent overvalued with a median home price of $290,500, according to the survey that was co-authored in May by Lexington, Mass.-based Global Insight and Cleveland-based National City Corp.
Any valuation greater than 35 percent means the metropolitan area poses a risk of substantial price declines going forward, according to the report.
“We’re careful not to say this is a forecast, but I would not be shocked if prices dropped significantly in the near term in Bend as they have in California,” said Jim Diffley, the managing director for Global Insight, an economic research firm.
“The price drops in California have been more than 20 percent in some places,” Diffley said.
Fewer sales of high-priced homes and a spike in sales of foreclosed properties have caused price declines nationally, according to the Global Insight research. Also adding to the downward pressure are significantly tighter lending standards, which are reducing the amount of credit available for home purchases.
Income levels and population densities were used together with home prices and interest rates to determine what would be considered normal housing values in an area. A region’s attractiveness and its amenities also were considered, Diffley said.
In the first-quarter survey, price declines were pervasive nationally, with 262 of the nation’s 330 metropolitan areas posting lower year-over-year median sales prices.
Eight of the top 12 overvalued markets in the nation were in Oregon and Washington state.
The appearance of northwestern cities among the worst price performances indicates that the region was likely “the next shoe to drop” in the nation’s housing market downturn, according to the survey.
“I’m not surprised at all because of all the trends and how quickly these markets went up,” said Tim Duy, an adjunct assistant professor for the University of Oregon’s Department of Economics. “Housing prices were out of line with incomes.”
Dave Woodland, the vice president and regional manager of Signet Mortgage in Bend, urged caution in drawing too much from the national survey, which doesn’t capture the true income of the area, he said.
“They look at Bend and say it’s overpriced based on reported compensation levels,” Woodland said. “The reason Bend is so popular is that it’s a great retirement area, and there are a base of individuals who are independently wealthy, self-employed or retired.”
Diffley of Global Insight said there was a possibility that the wealth of individuals was understated, but that’s not likely to affect the region’s overvaluation, he said.
“The last few years, Realtors were saying the same thing about South Florida, but we don’t hear that anymore because prices are crashing,” Diffley said.
Bend could be better positioned if it is increasing its amenities, and becoming more attractive to retirees and other high-income professionals than it was in the past, Diffley said.
Those factors may not show up yet in the survey, he said.
Jeff McDonald can be reached at 383-0323 or at jmcdonald@bendbulletin.com.
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