Oregon's economy should continue to hum along in the next few months at an above-average pace

by: TRIBUNE PHOTO: JON HOUSE - Although the construction of single-family homes has yet to take off (an economic indicator), experts remain optimistic about Oregons economy. Here, construction workers install the roof to a new home in the Bronson Creek development.Oregon’s economy should continue to hum along in the next few months at an above-average pace, a statewide measure of economic activity suggests.

And further gains are likely as the national economy continues to strengthen, said economist Tim Duy, author of the University of Oregon Index of Economic Indicators.

“I don’t see any red flags here,” he said. “This expansion is most likely going to continue going forward and is most likely to continue at an above average pace of growth for Oregon.

“We’ve had a nice acceleration in the past year on the back of a nice acceleration the previous year, and we’re starting to see that in a more broad fashion,” Duy said. “You’re seeing that really across most sectors of the economy and largely across most of the major metro areas in Oregon.”

While the economy is better off than any time since the Great Recession, it’s not performing as well as it did in earlier economic expansions — especially the 1990s, a long period of solid economic growth in the state, he said.

The brighter current economic picture reflected falling initial unemployment claims — the lowest level since 2006 — gains in residential building permits, largely from apartment construction, and improvement in other areas, including new orders for core manufacturing goods and average weekly hours worked in manufacturing.

Construction of single-family houses has yet to take off for a variety of reasons, Duy said.

“On the demand side we’re likely looking at some dearth of buyers — particularly in the first-time homeowners,” he said. “Until recently, job recovery was relatively slow and wage growth has been relatively slow and (mortgage) underwriting conditions are somewhat higher and I think that has constrained the first-time home buyer market.

“On the supply side, probably in many areas we’ve had a constraint on the number of buildable lots,” Duy said. “And not just because of basic land use issues, but for a number of years developers weren’t focusing on new land because the housing market was so bad. Why would you bother? So I think there has been some lack of sufficient supply in the buildable lots.

“If you have a lack of sufficient supply, the lots will go to more expensive housing rather than less expensive housing,” he said. “Also on the supply side you have financing issues,” Duy said.

“It’s not clear that banks are as willing to lend into the speculative single-family market as they are lending into the speculative multifamily housing.

“Another factor could just be deterioration in other supply chains during the recession,” he said. “Either labor or materials might be slowing some of the single-family housing.”

The statewide economic index rose slightly in May to 97.6. The index uses 1997 as the base year of 100. In general, the higher the index, the better the economic outlook.

Follow Sherri on Twitter @sburimcdonald . Email: [email protected]com

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