It's well known by now that although destination resorts are supposed to be focused on overnight visitation that they're becoming increasingly residential in nature and use. For several years now, the industry has focused on relaxing laws that restrict the sale of individual lots and the private single-family houses that are built upon them. The increase in privately-owned houses has been justified in part by the fact that many of them are supposed to be made available to overnight visitors, and that the owners themselves are only there - we're told - about 25% of the time, on average.

However, some of us have speculated that even if current owner occupation is low and homes operate successfully as rentals for the time being (the jury's still out on both these assertions, with the latter falling into the "extremely dubious" category), that over time many of these units will become places of primary residence. It's happened in other resorts areas - will in happen in Central Oregon?

In today's Bulletin, Sunriver's Director of Real Estate, John Fettig, had this to say, in regards to Caldera Springs:

"In 2007, we’re not seeing investors," Fettig said. "The folks we are talking to now are interested in having a home here. Maybe not today, but five or 10 years down the road."

I'm guessing that Fettig missed the industry's memo that he's not supposed to talk about this in public. After all, the biggest thing the industry has going for it is that private owners in resorts pay taxes just like anyone else but because they're not there much of the time, they require far fewer services than other area homeowners. Empty homes means that roads, schools, and other facilities and services are none the worse for wear, and those tax dollars can go to do other good things within the county.

But if resorts morph into permanent communities, the windfall created by property tax dollars will go towards - yes - serving the residents who pay those taxes. As a result, the financial justification for resorts - which is the assertion that their financial benefits outweigh their negative impacts - will be all but gone.

It strikes me as absurd that the industry has been allowed to brush aside the notion that resorts may someday be primarily - if not wholly - comprised of permanent residences as pure speculation. If Fettig believes what he told the Bulletin, it's reasonable to assume that the industry itself may actually expect the very thing it's been brushing off as speculation to become a reality.

POSTSCRIPT: There was another quote that caught my eye as well. Although the article suggests that resort lot sales remain strong, they are obviously lagging considerably behind the rate at which they were able to sell in 2005 and 2006.

What's interesting, is as sales start to lag, it appears the resort market is "resorting" to higher-risk payment plans in an effort to attract buyers who otherwise might not be able to get enough capital together to pick up a lot and build a home:

Sales at Caldera Springs have tailed off considerably from the overheated pace of 2006, Fettig said, but the resort managed to move 12 lots into escrow within a week recently at prices ranging from $285,000 to $389,000, thanks to a seller-financing option that allowed buyers to get into their lots with no payments or interest for the first two years. The deal, Fettig said, apparently reassured shoppers who were sitting on the fence that they would have time to sell other properties to pay for their new Caldera lots, despite the generally sluggish market. [Emphasis ours]

Is this an indication that the Central Oregon resort market is now forced to engage in the sort of risky behavior that has led to so many foreclosures in the "regular" housing market in order to sell lots? I'm not reading too much into this yet, but if that's what's going on, and if the industry applies its usual lack of constraint, look out, this may be a market headed for radical failure.

What's more, it wasn't that long ago that resorts were selling lots FAR faster than this. In June of last year, the Bulletin reported that 201 half- to 1.3-acre homesites, priced from $200,000 to the mid-$400,000s sold in a single weekend. And in October 2005, 57 cabin homes priced between $459,000 and $699,000 sold out in a weekend as well.

And now they are touting 12 lot sales in a week (and only as a result of "creative financing") and 21 lot sales at Tetherow over the course of a month as signs of a healthy market? Within the regular housing market, a drop in sales of 20% from one year to the next is precipitous. What then would a reasonable person be forced to say about a drop from 200 units over a single weekend to 12 lots over an entire week or 21 sales over 30 days? That's a change from 100.5 lots per day to a 1.7 lots per day. That means the market is kicking around, not at 80%, but at between 1 and 2 percent of sales rates from 2006.

It's hard to say what this all means, but it's pretty damn curious. And while I expect this will be called an "apples to oranges" comparison for some reason, I'm not buying. At the very least, it's like comparing Gravensteins to Golden Delicious. Any way you look at it, they're still apples.