In the winter of 2005, I had a conversation with a developer in Central Oregon. He was regaling me with the unlimited upside to the property market (and his deal-making prowess). I replied that what was going to happen was that the Fed would raise interest rates and that would end the hot money propping up the housing market. No one would be buying property, I said (I don't think I was particularly insightful, truth be told - it was easy to call that bubble, even if you didn't believe the nation as a whole faced the same problem). He leaned forward to get into my face and replied indignantly - or perhaps angrily is a better word - that I was wrong, that he "would still be buying property!" I left it alone. I was reminded of this conversation as I passed a Eugene U-Haul dealer today:
Apparently U-Haul is trying to move trucks into Central Oregon, which tells you something about the likely migration patterns currently underway.
In the long run, I suspect Central Oregon will do just fine. I think that any out-migration will be a relatively short-lived phenomenon. Ultimately, people will continued to be attracted to the region by virtue of its physical location (any decent bubble has a hint of truth at its core). That dynamic is important, and is likely the reason Bend in particular did not suffer the ongoing relative income declines that have plagued much of rural Oregon since the 1970s. Compared Bend, for example, with Pendelton (series ends in 2007):
But the region's attractiveness never justified the housing prices that generated so much wealth - wealth that was lost as quickly as it was gained.
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. Perhaps after a city hits some size, relying only on in-migration to generate sustainable quality growth simply isn't enough. On the migration story, I believe Bend still has room to run. But does Portland? Does Portland (a great city, by the way) need a fresh look at its economic strategy?
