Index shows region’s economy recovering
Housing market in particular strongest in years
Published Aug 24, 2014 at 12:02AM / Updated Aug 24, 2014 at 06:32AM
The Central Oregon economy is gaining ground it lost to the Great Recession, according to the Central Oregon Business Index for the second quarter.
“It looks very sustainable, a sustainable pattern of activity, much like we saw in that era prior to the bubble,” said Tim Duy, the University of Oregon economist who compiles the data for the index. “Some of the job growth has been remarkable. Five percent job growth year over year. … It’s really quite stunning.”
The index shows nonfarm payrolls increased to 68,100 employees, the highest employment number since summer 2007, when it stood at 71,500. The Oregon Employment Department on Aug. 18 reported a 5.1 percent increase in job numbers for the second quarter over the same quarter last year, slightly lower than the 5.2 percent in the index.
“A return to the pre-recession peak of 71,500 jobs is now in sight,” Duy wrote in his report.
The index, based on nine variables that include housing units sold, nonfarm payrolls and lodging tax revenue, stood at 124.2 for the second quarter. The benchmark index, 100, was measured in 1998. The first-quarter index measured 120.3, at the time an increase of 3.9 percent from fourth quarter 2013.
Duy described the recovery from the 2007 housing market collapse and subsequent recession as strong and broad based. Although tourism this summer grew predictably in Central Oregon, measured by an increase in hiring and lodging tax revenue, other sectors showed strength, too. Hiring in business and professional services, construction and health services showed steady gains, according to numbers released by the Employment Department.
“I’m just pretty darn impressed with this set of numbers,” Duy said. “You could almost sense in the air that this is an economy that is picking up speed fairly quickly.”
Signs that the housing sector is also gaining speed include an increase in numbers of residential units sold, a decline to 95.8 in the number of days those units spent on the market and a continued increase in the number of building permits issued in Deschutes County, according to the index.
Duy’s figures show 402 homes sold in Central Oregon in the second quarter, a peak-and-valley climb from a low of 177 in late 2007. The number of July home sales in Bend reached 237, up from a low of 101 in January, according to the Bratton Report, a compilation of real estate data from Bend and Redmond. That report showed a three-year high of 249 home sales in Bend in May 2013. In July, the median price of a single-family home in Bend reached $317,000, according to the Bratton Report.
Residential housing sales that slacked off elsewhere remained comparatively strong in the Bend area, Duy said. That phenomenon has less to do with investors picking up low-priced foreclosures, as it had in 2011-12, than it does with a strong housing recovery, he said.
“I don’t think you can play that off as so much bottom feeding, because prices have been higher as well,” he said. “There’s a fundamental interest in the region as an attractor of new residents.”
A healthy recovery could achieve equilibrium with a growth rate of 3 or 4 percent annually, with no further decline in new unemployment claims and stabilization in the number of days on the market for home sales and the number of building permits issued, Duy said.
“You can have equilibrium with a steady rate of growth,” he said.
While some may see signs of a growing bubble in real estate prices of the kind that precipitated the 2007 crash, Duy said he’s not concerned that Central Oregon is rushing toward another imminent recession. For one, the underlying cause of the recent crash, risky mortgage lending, is nearly nonexistent this time around, he said. The escalation in housing prices and numbers of homes sold, while steady, is not as hot as in 2006-07, he said.
“We know this housing recovery does not have the underlying weakness of the last housing boom,” Duy said. “Yes, interest rates are down, but you’re not seeing a surge in new mortgage purchases as a result of that. I don’t think it’s reached the level yet of something to be concerned about.”
— Reporter: 541-617-7815, firstname.lastname@example.org
Editor’s note: The Bulletin has partnered with the University of Oregon’s College of Arts and Sciences and Department of Economics to produce the Central Oregon Business Index. The index provides a regular snapshot of the region’s economy using economic models consistent with national standards. The index, exclusive to The Bulletin, appears quarterly in the Sunday Business section.