The Central Oregon Business Index dipped slightly in the fourth quarter of last year, a lackluster end to a year in which gains in housing, travel and tourism helped fuel a recovery from the 2007 recession.
“It is not a worrisome issue,” said University of Oregon economist Tim Duy, who compiles the data that comprises the index. “We kind of coasted through the fourth quarter.”
The data suggests the Central Oregon economy paused to catch its breath after a busy summer and fall. The index measured 119.7 in the fourth quarter. The benchmark index is 100, measured in 1998. The index, although flat in the fourth quarter, overall gained 5 percent over the year.
“The data indicate that the Central Oregon economy remains sensitive to fluctuations in housing activity,” Duy wrote in the report released today. “With housing activity moderating, the pace of job growth has slowed.”
Home sales in Central Oregon fell to an average 355 a month, down from 413 in the third quarter, according to data Duy compiled. Factors that dampened that pace include a drop in the inventory of homes for sale and higher interest rates.
Distressed sales — homes sold out of foreclosure, for example — cleared away many for-sale homes on terms that made mortgage payments cheaper than paying rent. They also lured investors who scooped up bargain properties for cash. Distressed sales fell sharply in 2013 to 11 percent of all sales in Bend and 18 percent in Redmond.
Three years earlier, distressed sales represented 60 percent of all sales in Bend and 70 percent in Redmond, according to Central Oregon Association of Realtors data.
“The reality is (home) prices were beaten down pretty hard and interest rates were pretty low,” Duy said.
That will change, Central Oregon real estate and mortgage brokers have said over the past four months. Duy agrees and said he sees moderation in the housing market going forward. That, in turn, will eventually lead to more normal market conditions, he said.
“The fundamentals are still in play,” Duy said. “You’re not going to jump from where we were two years ago to where we were before the recession, immediately. But we’re moving in the general direction.”
Hiring, too, leveled off in the fourth quarter, with nonfarm payroll at 64,000, only slightly above the third-quarter average, according to the index. No surprise, since fluctuations in the Central Oregon housing market bears directly on other sectors, Duy said.
“I do think that’s the stage we’re in,” he said. “We jumped up. We consolidated. We’re getting ready for that next level. It’s the pause that refreshes.”
Employment posted large gains in Central Oregon through the third quarter of 2013, although the labor pool itself shrank by nearly 3,000 during the year, according to the Oregon Labor Department. In December, the unemployment rate in Central Oregon fell below 9 percent for the first time since 2008.
Initial claims for unemployment compensation edged up in the fourth quarter, but “remain in a range consistent with job growth,” according to Duy’s analysis. “That said, nonfarm payroll growth has slowed to a crawl after rapid improvement at the end of 2012 and beginning of 2013.”
Lodging revenue dipped in the fourth quarter, although still higher than the second quarter, according to the index. Duy, like other analysts, attributed the dip to a slow start to ski season.
Duy forecasts continued, steady economic improvement in Central Oregon, “dependent on the pace of housing and migration dynamics.” In other words, continued growth in jobs and housing markets in California, primarily, may free homeowners and job seekers to cash in their equity and seek better prospects in Central Oregon. Young families buying their first homes or IT workers seeking a place to play as well as work will once more drive at least part of the Central Oregon economy.
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.
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