October 18, 2008 in Business

Oregon resort developers feeling credit pinch

Associated Press
 

PRINEVILLE, Ore. – The collapse of the credit and housing markets has put a halt to resort development in central Oregon.

“With the state of the economy, we’re not going to see new resorts in the next couple of years. That’s an absolute certainty,” said Steven Hultberg, a Bend attorney who represents several resorts.

Destination resorts began as rural developments granted an exception to the state’s strict land-use guidelines.

Increasing numbers of baby boomers seeking vacation homes, combined with the surge in real estate investment during the housing bubble, led to an unprecedented increase in resort development in central Oregon.

Since 1984, when the state crafted a resort law to encourage economic development in rural areas, there have been 10 new resorts covering 17,000 acres with as many as 8,300 homes, nearly all in central Oregon, said Bob Cortright, a resort expert with the state Department of Land Conservation and Development.

“Looking back to 1984, I think that’s a much higher level of development than we could have envisioned at that time,” Cortright said.

In recent years, new resorts such as the 1,800-acre Brasada Ranch between Bend and Prineville boasted of selling more than 200 lots for between $200,000 and $450,000 in a matter of hours.

Now those buyers have largely disappeared.

“The customer is having a hard time selling their current house or getting financing,” said Dennis Pahlisch, a Bend home builder and partner in a proposed 4,125-acre resort in Crook County.

At the upscale Pronghorn resort east of Bend, partner Scott Denney likes to share the story of one of his buyers, a person with excellent credit and worth hundreds of millions of dollars who was seeking a loan for a $625,000 lot.

First the bank told him he’d have to put 25 percent down. Then it was 40 percent, and finally it was 60 percent.

The median price of a home sold in central Oregon is down 14 percent from last year, according to the Association of Central Oregon Realtors.

And homes are staying 50 percent longer on the market compared with 2006.

In Deschutes County, home prices had appreciated at 21.4 percent in 2006, faster than any other metro area in the country, according to the Office of Federal Housing Enterprise Oversight.

Now, it ranks 240th out of 292 in home appreciation rates.

Even if they had buyers waiting, builders can’t get financing to fund construction of new infrastructure or amenities at partially built resorts.

“Right now the banks are just taking a position that they are not in the real estate lending market anymore,” Pahlisch said.

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