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The Bulletin tells us today that “Bend Leads the Nation in Home [Price] Depreciation.” I add the word “price” because I believe there is a very marked difference between price and value. Prices, after getting way ahead of true value, are now depreciating even though the value of the real estate may not be.

Values obviously did not climb nearly as fast as prices did during the boom. Because the regional population is still growing, however, it is very possible that true values are still climbing. Prices are another story: the chart above represents just how far prices have come since topping out in 2006. The Bulletin reports:

Housing values in Bend have dropped at a higher rate than in any other metropolitan area in the nation during the past year, according to real estate website

Bend's median home price fell by 21.8 percent, to $167,500, from the second quarter of 2009 to the second quarter this year. Values have dropped 52.5 percent in Bend since the peak of the market in mid-2006, when the median price was $354,000, according to Seattle-based Zillow.

This begs the question, 'have prices and true value approached some sort of parity yet?' Well, according to IHS Global Insight who maintains the most thorough database I've found (and who dubbed Bend the most overvalued market in the nation at the top of the real estate bubble), as of the end of last year, Bend's home prices were still 2.3% overvalued. That's close enough to fair value for me.

That's not to say that this is “the bottom,” though. Prices can and usually do decline well below fair value after a bubble bursts. Still, we've come a long way in working off the massive excess in local home prices and current buyers can feel good knowing that they are no longer paying a premium above fair value.

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