NAHB recently unveiled an index that tracks housing markets on the mend, the NAHB/First American Improving Markets Index (IMI). The IMI is intended to draw attention to the fact that housing markets are local and that there are metropolitan areas where economic recovery is underway. The index measures three readily available monthly data series that are independently collected and are indicative of improving economic health. The three are employment, house prices and single family housing permit growth.
For the eighth release 100 markets are currently classified as improving under a conservative examination of local economic and housing market conditions. Among these areas is the Portland-Vancouver-Beaverton, OR-WA metropolitan statistical area (MSA).
The health of the Portland housing market is due to the diversified nature of the Portland economy. Portland is a very large regional healthcare center, possesses the third largest port on the West Coast, and is an important distribution center. In addition, Portland also benefits substantially from the presence of the Portland State University, University of Portland, Oregon Health and Sciences University, and a large number of other post secondary educational institutions. Portland is also a major high-tech manufacturing center with its largest single employer being Intel . Because of that, there are hundreds of technology companies located in and around Portland. Lastly, U.S. Bancorp, Wells Fargo and many other firms have large regional facilities in town, and Portland is headquarters for Nike, Inc. and Adidas America, Inc.
According to home builder Tom Liesy, owner of T.A. Liesy Homes Northwest, “Portland is picking up because the number of homes for sale are very low, prices are starting to rise, and many are realizing that we will very soon run out of finished lots — as soon as this summer . All of this is causing pent-up demand to finally manifest itself.” He went on to say that “of late, move-up buyers with good incomes, good credit scores and good down-payments are looking to buy and if they can’t sell their existing house, they rent it.”
Comparing 2010 American Community Survey data for Portland to the US, offers strong evidence that Portland is doing well and some insight into why. The labor-force participation rate is almost four percentage points higher in Portland than in the rest of the country, and the percentages of persons employed in production, management, business, science and the arts are 10 percent higher than the national average. In addition, the number of persons with a bachelor’s degree is about 20 percent above the national rate, and the percentage employed in manufacturing is also about 20 percent higher than the national average. Lastly, because the local economy is doing well, the number of vacant housing units, be they owner-occupied units or rental units, is 44 percent lower than what it is for the nation as a whole.
According to Nate Bond, Vice President of Sales for ProBuild in the northwest, “the market is picking up because people are once again moving to Portland by choice from elsewhere. They come for the fresh water, because of the lifestyle, because of climate change issues, and also because many of the new homes being built here are energy efficient and green certified.” Whatever the cause, house prices are definitely recovering. Prices are up 3.8% since the trough in March 2011 and appear to be on track to continue to increase.
Improving economic conditions have resulted in payroll employment being down just 4.8% from its peak in April 2008 and up by 3.4% since the bottom in December 2009. Single family permitting activity is up 2.8% on a seasonally adjusted monthly average basis from the trough set in March 2009. While new homes are being built in many parts of the Portland MSA, activity is now primarily centered in the northeast part of the City, the west side suburbs like Beaverton, and the City of Happy Valley in Clackamas County.