Bend Oregon Rated as One of the Best Low-Tax Retirement Towns
The city of Bend will be featured in the third edition of America's Best Low-Tax Retirement Towns. According to a survey completed by Where to Retire magazine readers, a low overall tax rate is one of the five most important factors when choosing a place to retire.
For over seven months, nine researchers collected and verified tax rates for 203 in all 50 states and Washington D.C. Researchers looked at the tax liability for nine hypothetical couples looking at everything from income to property values for each city.
The city's best rank was 7 out of 173 towns in the income/home value scenario of $30,000/$125,000.

In addition to a summary on how the property tax in the city is calculated, the book also features an exclusive profile of the city as a top retirement town. The profile gives readers a glimpse of the quality of life Bend has to offer including: living and housing costs, climate, recreational and cultural opportunities, and so much more.
Other Oregon cities highlighted were Ashland, Grants Pass, and Medford.

High-flying Central Ore. Real Estate Market Cools
02:26 PM PDT on Sunday, August 13, 2006; Associated Press

BEND, Ore. -- Even in booming Bend, there are signs of softness in the housing market.
For example, Linda Laws and her husband have been trying to sell a 712-square-foot rental house. Even after they cut their asking price to $349,000, they'd still make a tidy profit on a house they bought for $135,000 in 2002 and renovated.They want to plow the gains on that house and another into an investment property out of state. But they've run into a problem: Hundreds of other people have the same idea.

The number of homes for sale in Bend has risen 249 percent since the first of the year, overwhelming a flow of buyers that was strong through most of the year. Buyers have plenty of choices, and some are hanging back to wait for prices to drop, real estate broker David Foster said. Some sellers are getting frustrated. "I think we're at the point now where we'll just make this thing work, and maybe take the houses off the market until the market gets better," Laws said. "I'm not sure."

Month-to-month sales volumes in the region's priciest markets, Bend and Redmond, skidded in July from June, according to the Central Oregon Multiple Listing Service. Bend posted 162 sales, down 32.5 percent from June. Redmond's 68 sales marked a 9.3 percent decline.Those numbers were still good enough to keep the region's year-to-date sales on track to beat the pace of 2004, then a record year. But they lagged far behind the torrid pace of 2005. Sales prices, however, continue to go up.

Bend's median on the 162 sales that closed in July reached $354,000, according to the MLS, up 22.3 percent from July 2005 and up from the $343,950 median for the first six months of the year. Redmond's July median reached $268,200, up 35.6 percent from the same month last year and also up from its six-month median. Median sales prices reflect the level at which half are higher and half are lower. Average prices tell a different story.

Broker Bill Berger said average prices throughout the region show prices rising steadily through June, except for a minor pullback in April, and then dropping 5.6 in a month-over-month comparison of June and July. "I think we are going to see that coming down some more," Berger said. Others disagree. Broker Norma DuBois said the agents in her office have seen an uptick in prospective buyers in the last couple of weeks, while the flood of homes entering the market seems to have slowed. "I think we've hit the bottom and we're on our way back up," she said.  

Fed Holds Interest Rates Steady As Slowdown Outweighs Inflation
By Greg Ip From The Wall Street Journal Online

The Federal Reserve left interest rates steady Tuesday for the first time in two years, gambling that a nascent economic slowdown will cap growing inflation pressures.

In leaving its short-term interest rate target at 5.25%, the Fed said: "Readings on core inflation have been elevated in recent months," but "inflation pressures seem likely to moderate over time, reflecting contained inflation expectations and the cumulative effects of monetary policy actions and other factors." (Read the statement.)

For the first time since Ben Bernanke took over as chairman on Feb. 1 from Alan Greenspan, the policy-setting Federal Open Market Committee didn't agree to the action unanimously. Federal Reserve Bank of Richmond president Jeffrey Lacker dissented, favoring instead another quarter-point increase.

The statement said, as it did after the last meeting in June, "Some inflation risks remain. The extent and timing of any additional (increases) ... to address these risks will depend on the evolution of the outlook for both inflation and economic growth."

The retention of that sentence in effect reflects a continued bias, but not a presumption, to raise rates in the future. In effect, the Fed gave itself some breathing room to assess the impact of the preceding 17 quarter-point rate increases before deciding whether to hike again. Mr. Bernanke has been suggesting since April that he was seeking more flexibility.

"A pause does not mean a stop," said Stephen Stanley, chief economist at RBS Greenwich Capital Markets. "And there's certainly ample evidence the economy has been on a slowing trajectory over the last couple months. There's enough evidence there for them to take six weeks off."

Signs of slowing growth and rising inflation have aroused deep disagreements among economists on what the Fed should do. Some economists think the Fed has already raised rates too far and is courting recession; some think it must raise them further to stop inflation from accelerating. Some say both things are true.

"You can't fight inflation without risking overkill on the economy," said Ethan Harris, chief U.S. economist at Lehman Brothers, who thinks the Fed shouldn't have paused and predicts it will eventually raise the rate to 5.75%. "That is a risk, and it's a risk they should take." He added: "It's not fair to Bernanke that he steps into his job just as the economy is set to decelerate and inflation takes off."

The Fed's view has been that inflation recently topped the informal "comfort zone" of 1% to 2% , excluding food and energy, primarily because firms have passed higher energy costs on to consumers. If growth does not exceed "potential" -- the rate at which the economy can grow without straining the available work force and capital stock -- and energy prices stabilize, the Fed figures inflation should drop back. Meanwhile, it believes that as the housing market cools and consumer spending slows, business investment and exports will pick up the slack.

But recent data have not been supportive of that view. Economic growth slowed to 2.5% annual rate in the second quarter in part because of a surprise drop in business equipment investment. Macroeconomic Advisers, a forecasting firm, predicts it will grow at about the same moderate rate in the current quarter. Payroll growth was sluggish and the unemployment rate rose in July.

But at the same time, inflation has ticked higher, and new data on productivity, growth and labor costs suggest that inflation pressures have been bubbling longer than previously realized. The Labor Department said nonfarm business productivity grew at a 1.1% annual rate in the second quarter, a sharp decline from the 4.3% growth rate of the first quarter, and was up 2.4% from a year earlier. At the same time, labor costs per unit of output climbed 4.2% in the second quarter, and were up 3.2% from a year earlier. Labor costs were actually declining in 2004, but have steadily accelerated since, and now are rising fast enough to eat into profit margins -- which could encourage firms to try harder to raise prices. Importantly, Tuesday's Fed statement did not repeat a reference from June's that "ongoing productivity gains have held down the rise in unit labor costs."

Revisions to economic data from 2003 to 2005 also show the economy grew less quickly and inflation was a bit higher than previously thought. That, economists say, suggests the economy's "potential" growth rate is lower than previously realized, and the economy may already be straining capacity.

None of this means the Fed is making a mistake now. Indeed, inflation and labor costs were both rising in 2000 when it last stopped raising rates after a cycle of increases. In retrospect, however, the downturn in tech stocks and subsequent decline in tech investment had already set in motion a slide into recession the following year and a big drop in inflation. There are concerns that an accelerating downturn in the housing market today could similarly undermine the overall economy now.

"There was a strong case for pausing at 4.5%," said Ian Shepherdson, chief U.S. economist at High Frequency Economics. "There was already plenty of evidence the previous hikes had begun to soften growth." He predicts the Fed will start to cut rates by next April.

Nouriel Roubini, an economist at New York University and author of a popular economics blog, says it's already too late to prevent a recession. "The Fed should have tightened earlier to avoid a festering of the housing bubble early on. The Fed is facing a nightmare now: the recession will come and easing will not prevent it."

Lakshman Achuthan, managing director at the New York-based Economic Cycle Research Institute, said the economy is not now headed into recession but it is slowing and thus more vulnerable to some kind of shock that tips it into one. At the same time, he said, inflation shows no sign of turning down soon. So, "The Fed may have to stay in the game even though there are elements slowing the economy that still have to play out."

Area Home Values Still Rising
Central Oregon homeowners cashing in, upgrading homes by David Fisher/The Bulletin

Barbie and Mike Milichichi's sweat equity has carried them a long way in six years - with a big boost from Central Oregon's still red-hot real estate market. Back in 2000, the Milichichis invested their own time and labor to get a big break on the down payment for their first house, a little rambler on Stonebrook Drive on Bend's east side. The price then: $137,000. Their asking price this spring: $329,000, enough, they hope, to afford the 10-acre site with a manufactured home near Eagle Crest that they have their sights on this year. "I would never have dreamed that prices would go this high," Barbie Milichichi said Tuesday. "But we're happy."

Despite slowdowns in the national and regional housing markets, Central Oregon home-sellers still have plenty of reason to smile this spring. The median price of a Bend single-family home - the price at which half are higher and half are lower - reached $327,500 by the end of the first quarter this year, up 30.5 percent from the first quarter of 2005, according to the Central Oregon Association of Realtors. The Redmond median hit $238,000, up 38.6 percent in the last year. Prices in La Pine jumped 18.8 percent, and median prices spiked 35.9 percent and 33.8 percent, respectively, in lower-priced Jefferson and Crook counties. In one sense, it's no surprise that year-to-year numbers are up, since the last three quarters of last year brought a record-breaking surge in home prices. But the pace of the increases has barely slowed in the first three months of this year. Median prices in Bend have risen 6.3 percent since the fourth quarter of 2005, according to the Multiple Listing Service of Central Oregon. Redmond's prices are up 6.7 percent. In Crook County, where new subdivisions are sprouting in Prineville, the median is up 1.8 percent. Only in La Pine, where new subdivisions also are adding to the housing stock, are prices down since the fourth quarter of 2005. The median price there has slipped about 6.5 percent to $154,000, according to the MLS. But sales volumes are nearly twice what they were a year ago, jumping from 17 homes in the first quarter of 2005 to 31 in the first quarter of 2006.

Sales volumes, in fact, are up in all of the region's major markets, despite the traditional slowness of the late-winter season. Bend registered 485 homes sold in the first quarter, up about 4 percent from the first quarter last year. But Redmond posted 257 sales, up 35.6 percent and Jefferson County, where Madras is undergoing something of a renaissance, saw sales boom by more than 184 percent to 54. Homes with land have seen even bigger price expansions. In Bend, homes with one acre or more sold for a median of $545,000 in the first quarter, according to the MLS, up 54.7 percent from the first quarter last year. In Redmond, similar properties fetched a median $485,000 sales price, up 46.7 percent. In La Pine, homes with land followed the northern boom, rising 43.3 percent to $215,000.

Nationwide, existing home sales are expected to drop 6 percent this year from the record levels seen in 2005, National Association of Realtors chief economist David Lereah said Tuesday, and prices for all housing types are expected to rise modestly, despite slippage in some of the nation's biggest and hottest markets. Nationally, Lereah is projecting a 6.4 percent price rise this year, to about $221,700.

In neighboring California, though, median prices slipped about 2 percent in February, dipping to a still sky-high $535,470, according to the California Association of Realtors. That's still about 13.7 percent above the February 2005 California median, and the demand for Central Oregon property - driven by people selling out of higher-priced markets, and by move-up local buyers who are cashing out equities to buy bigger homes - is taking on more and more of the look of a two-sided market. There are those who own. And those who might never.

The Milichichis needed four years to get into their first home after they moved here 10 years ago, Barbie Milichichi said. But she and Mike, the owner of a small construction company that specializes in interior trim, found the key to their first-time house in a sweat-equity program that allowed them to save by putting their own work into the construction. The growth in that home's value will let them buy their Redmond-area acreage, and they will refurbish the manufactured house that sits on the land now, she said. But could they afford their own house if they had to do it all over again? "No," she said. "No."

Jeremy Graham, a stay-at-home dad, and his wife, Lisa, a chemical engineer, also are hoping to join the "move-up" market. Their 1,850-square-foot home on east Bend's Larkview Road is on the market for $324,900, and it's attracting walk-throughs and callers "like crazy," Jeremy Graham said. They're already set up to close on their new $450,000 house, a 2,350-square-footer on a quarter of an acre in northeast Bend's new Quail Crossing development.

The move will give their two young children more room to run, Jeremy Graham said. They're OK with the $1,100-a-month jump in their monthly payments, he said, because the move gives them the chance to lock in their upgrade "while we could still afford it." Some, however, are on the outside looking in.

Shane Welsh, 22, worked a flagman's job Tuesday for a Cascade Natural Gas crew installing lines into a new subdivision on Bear Creek Road east of 27th Street. Flagging brings in an average of $15 per hour during the busy summer months, but Welsh said he and his girlfriend can barely afford their $620-a-month rent, much less save for the ever-rising price of local property. So after 10 years in town, his dreams of owning property here may never happen. Still, "Could be worse," he said. "Could be raining."

David Fisher can be reached at 541-617-7862 or at dfisher@bendbulletin.com.