Oregon Economic and Housing Update - Mark McMullen

OregonEconomic and Housing Update

Mark McMullen

State Economist,

Office of Economic Analysis

March 17, 2014

Housing Alliance

OregonRegional Economic Performance and

Outlook

Job Gains Have Accelerated, but Remain Somewhat Modest

Jan-50 Jan-60 Jan-70 Jan-80 Jan-90 Jan-00 Jan-10 (150,000)

(100,000)

(50,000)

-

50,000

100,000

Oregon Total Nonfarm EmploymentYear-over-Year Job Gains

Jan-50 Jan-60 Jan-70 Jan-80 Jan-90 Jan-00 Jan-10-10%

-5%

0%

5%

10%

15%

Oregon Total Nonfarm EmploymentYear-over-Year Job Growth

4

Oregon’s Employment Outlook

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10% Oregon Nonfarm Employment Growth (Y/Y)Recession Employment Expansion Average

Rural Areas Have Not Improved Until Recently

5

Job Growth Has Recently Become More Broad-Based

6

OregonHousing

Housing Metros Were Coming Back Strong

Jan-07 Jan-09 Jan-11 Jan-13-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

Private Sector Growth Picking UpY/Y, 3MMA, QCEW

U.S. Hardest Hit Housing Metros

These are the 50 worst home price decline metros, per FHFA data.http://oregoneconomicanalysis.com/2013/11/07/hardest-hit-housing-metros/

Oregon Office of Economic Analysis

http://oregoneconomicanalysis.com/2013/11/07/hardest-hit-housing-metros/

http://oregoneconomicanalysis.com/2013/11/07/hardest-hit-housing-metros/

But Permit Growth Has Decelerated Significantly

Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

Single Family Housing PermitsYear-over-Year Growth

Housing Metros US ex Housing MSAs


Housing Stall Impacted Housing Metros the Most


Jan-10 Jan-11 Jan-12 Jan-13-10%

-5%

0%

5%

10%

15%

20%

25%

30%

2%

3%

4%

5%

6%

Interest Rates Slow Housing's Rebound

Mortgage Rate -->30 Yr Fixed

<-- Housing Metros Permit Growth Differential

Jan-10 Jan-11 Jan-12 Jan-13-20%

-10%

0%

10%

20%

30%

-20%

-10%

0%

10%

20%

30%

Affordability Slows Housing's Rebound

Housing Affordability-->NAR Composite Index

<-- Housing Metros Permit Growth Differential

Slowing Down Employment Too


May-07 May-09 May-11 May-13-20%

-15%

-10%

-5%

0%

Private Sector EmploymentSeasonally Adjusted, 3 Month Moving Average

Medford CES

Bend CES

But Fundamentals Remain Solid


And Outlook is Bright


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20160.0

0.5

1.0

1.5

2.0

2.5

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Housing Starts Forecast

U.S. (millions, rhs) Oregon (lhs)

More Room for Improvement

14

OregonSupplemental Housing Data

Price Growth Will Remain Modest

1995Q1

1996Q1

1997Q1

1998Q1

1999Q1

2000Q1

2001Q1

2002Q1

2003Q1

2004Q1

2005Q1

2006Q1

2007Q1

2008Q1

2009Q1

2010Q1

2011Q1

2012Q1

2013Q1

2014Q1

2015Q1

2016Q1

2017Q1

2018Q140

60

80

100

120

140

160

180

200

220

Oregon Home Price IndexFHFA, 2000 Average = 100

Home Price Index Inflation Adjusted Home Price Index

Forecast-->

Supporting Affordability

Jan-92 Jan-96 Jan-00 Jan-04 Jan-08 Jan-120%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Portland MSA Housing AffordabilityHousing Expense to Income Ratio

Affordability Threshold Conventional, 20% Down 10% Down, PMI

Affordability Thresholds in the Portland Metro Area

<$10k

$10-15k

$15-20k

$20-25k

$25-30k

$30-35k

$35-40k

$40-45k

$45-50k

$50-60k

$60-75k

$75-100k

$100-125k

$125-150k

$150-200k

>$200k$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Portland Housing Affordability and Income

Affordable Home Price (lhs) Share of Households (rhs)

Household Income

Market Volume Remains Low…

Jan-95 Jan-99 Jan-03 Jan-07 Jan-11 -

1,000

2,000

3,000

4,000

5,000

6,000

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

Portland MSA Housing MarketRMLS Market Action Reports, SA 3 MMA

New Listings Closed Sales Median Price (rhs)

…but not Among Low-Price Houses

20

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 through

July

0

100

200

300

400

500

600

Multnomah County Sales of Homes Under $90K

CondoSingle family

Low-End as a Share of Sales

21

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 through

July

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Multnomah Co: Sales Below $90K, % share of total

CondosSingle family

A Bit Easier to Get a Loan

19911992

19931994

19951996

19971998

19992000

20012002

20032004

20052006

20072008

20092010

20112012

20132014

2015-30-20-10

01020304050607080

Mortgage Lending StandardsSenior Loan Officer Survey

Recession Prime All

Tightening

Loosening

Demographics Suggest Further Shift to Multifamily…

1 3 5 7 9 11 13400,000

800,000

1,200,000

1,600,000

2,000,000

2,400,000

2,800,000

Oregon Population by Housing TypeCPS, 3 Year Average

Ownership Rental

1 3 5 7 9 11 1320%

22%

24%

26%

28%

30%

32%

34%

36%

38%

40%

Renter Share

1990s Average

…but Relatively High Rents Will Slow that Shift

19841985

19861987

19881989

19901991

19921993

19941995

19961997

19981999

20002001

20022003

20042005

20062007

20082009

20102011

20122013

50

75

100

125

150

175

Oregon Price to Rent Ratio2000 = 100

Portland Salem

Oregon Metropolitan Area Rents

25

Q2-2008

Q4-2008

Q2-2009

Q4-2009

Q2-2010

Q4-2010

Q2-2011

Q4-2011

Q2-2012

Q4-2012

Q2-2013$0.50

$0.55

$0.60

$0.65

$0.70

$0.75

$0.80

$0.85

$0.90

$0.95

$1.00

Salem Metro Average Rent Per Square Foot

Average Rent Per Square Foot

Source: Multifamily NW Q2-2008

Q4-2008

Q2-2009

Q4-2009

Q2-2010

Q4-2010

Q2-2011

Q4-2011

Q2-2012

Q4-2012

Q2-2013$0.60

$0.65

$0.70

$0.75

$0.80

$0.85

$0.90

$0.95

$1.00

$1.05

$1.10

Eugene/Springfield Metro Av-erage Rent Per Square Foot


Source: Multifamily NW

Q2-2008

Q4-2008

Q2-2009

Q4-2009

Q2-2010

Q4-2010

Q2-2011

Q4-2011

Q2-2012

Q4-2012

Q2-2013$0.50

$0.55

$0.60

$0.65

$0.70

$0.75

$0.80

$0.85

$0.90

$0.95

$1.00

Bend/Redmond Metro Average Rent Per Square Foot


Source: Multifamily NW Q2-2008

Q4-2008

Q2-2009

Q4-2009

Q2-2010

Q4-2010

Q2-2011

Q4-2011

Q2-2012

Q4-2012

Q2-2013$0.70

$0.75

$0.80

$0.85

$0.90

$0.95

$1.00

$1.05

$1.10

Portland/Vancouver Metro Av-erage Rent Per Square Foot


Source: Multifamily NW

OregonPermit Data

Rapid Growth from a Low Base

Jan-90 Jan-94 Jan-98 Jan-02 Jan-06 Jan-10 Jan-140

500

1,000

1,500

2,000

2,500

3,000Oregon Housing Permits (Monthly, SA 3 MMA)

Total PermitsSingle Family

Halfway Back

Jan-72 Jan-77 Jan-82 Jan-87 Jan-92 Jan-97 Jan-02 Jan-07 Jan-120

500

1000

1500

2000

2500

Oregon Single Family Units

Permits1972-2006 Average

Multi-Family Construction Persists

Jan-72 Jan-77 Jan-82 Jan-87 Jan-92 Jan-97 Jan-02 Jan-07 Jan-120

200

400

600

800

1000

1200

1400

1600

1800

Oregon Multi-Family Units

Permits1972-2006 Average

Permit Recovery Across the State

Columbia

Josephine

Klamath

Tillamook

Linn

Deschutes

Jackson

Douglas

Umatilla

Lake

Benton

Oregon

Baker

Clackamas

Harney

Morrow

-100% -80% -60% -40% -20% 0%

Housing Permits Relative to 2005

2012Depths of the Great Recession

Klamath

Josephine

Tillamook

Columbia

Harney

Yamhill

Deschutes

Douglas

Washington

Baker

Umatilla

Union

Oregon

Multnomah

Clackamas

Malheur

-100% -80% -60% -40% -20% 0%

Housing Permits Relative to 2005

2013Depths of the Great Recession

We Are Now Under-Building!

Jan-93 Jan-96 Jan-99 Jan-02 Jan-05 Jan-08 Jan-11 Jan-14-500

0

500

1,000

1,500

2,000

2,500

Oregon Single Family Housing Permits, SA 3MMA

May '10 - Jan '14 Moved Bubble Building

Bubble Building Single Family

32

For More Information

Standard Contact:

155 Cottage Street NE

Salem, OR 97301

(503) 378-3405

[email protected]

www.oregon.gov/das/oea

Social Media:

oregoneconomicanalysis.wordpress.com

@OR_EconAnalysis

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Oregon Economic and Housing Update - Mark McMullen