Dave Fisher - The Bulletin

Dan Hobin can look down the hall from his Old Cigar Building office in downtown Bend and see a neighbor who works for Oracle, the Redwood Shores, Calif.-based database giant.

Another one works for Autobytel, the Irvine, Calif.-based car-buying Web site.

Aside from the telecommuters, Hobin’s own company, GS Search Marketing, a Web optimization company that helps small to medium-size businesses get noticed on the World Wide Web, has grown in the span of two years from a couple of partners and an employee to a company with 20 employees.

In microcosm, it’s a scene that seems to explain a lot about Central Oregon’s huge and relatively broad-based run-up in economic growth in the early years of the 21st century.

A new federal report, released Sept. 26, details local gross domestic product — the value of all goods and services produced and sold, or the total economic output — in each of the nation’s largest 363 metropolitan statistical areas.

Fueled by 17.6 percent growth in the population, total economic output in the Bend metro area, which includes all of Deschutes County, grew a whopping 33.2 percent, with inflation factored out, in the years between 2001 and 2005, according to the federal Bureau of Economic Analysis. That’s about three times the national growth rate.

The area’s white-hot 9 percent annual growth rate from 2004 to 2005 ranked it 16th on the list of the nation’s fastest-growing local economies, according to the bureau’s analysis — the first attempt of its kind to measure and compare total economic growth in local regions.

The data stopped at 2005, the last year for which it had broad-based, industry-specific data. But a later report, issued last month by the Milken Institute, a Menlo Park, Calif.-based economic think tank, tended to indicate that the region’s economic boom has remained relatively strong, even in the wake of a sagging housing market.

Milken’s annual Best Performing Cities report, designed to measure the relative strength of job growth and entrepreneurial business creation in each of the nation’s metro areas, ranked the Bend metro area No. 1 on its list of 179 small cities, beating out second-place finisher St. George, Utah, the headquarters of SkyWest Airlines, and the third-place city, Midland, Texas, a small city in the heart of the oil boom.

The Central Oregon economy has consistently ranked high on Milken’s list through the years because it has drawn a steady stream of newcomers in each of the last seven years, and it has continued to sprout new jobs to accommodate them, said Perry Wong, Milken senior managing economist. The region’s economy is skewed heavily toward construction and real estate, with 36 percent of its job creation tied to housing-related industries, he noted, but it also has shown “surprisingly strong” growth in high-tech jobs, which Milken’s analysts take as a key indicator that the region is capable of attracting, and holding, highly skilled workers in a diversified economic base.

“It’s just amazing,” Wong said. “When you have a town like that where the inflow is 12,000 and the outflow is maybe 5,000, there is nothing more you can ask for, really.

“It’s a very good performer,” he said. “I think any city in the U.S. would love to have that ranking.”

What fueled growth

As in much of the country, home prices soared in Central Oregon in the five-year period covered by the study. In Bend, the center of the metro area, median home prices jumped 52.5 percent from 2002 through 2005, according to the Central Oregon Association of Realtors. Redmond’s jumped 47.1 percent.

Real estate and construction soared along with the boom. According to the bureau’s numbers, construction spending rose 38.5 percent in the Bend metro area from 2001 through 2005. Real estate spending rose 30.8 percent. Altogether, Deschutes County added 18,310 homes to its housing stock between 2000 and 2006, according to the U.S. Census Bureau, a 33.5 percent increase that ranked the county 44th in the nation in housing growth.

Real estate and construction combined to account for 36.1 percent of the region’s $5.66 billion economy in 2005 alone, according to the bureau’s numbers, more than twice their share of the national economy.

Still, despite the run-up in prices, the construction and real estate sectors’ proportion of the overall Central Oregon economy actually dropped during the five-year span, from 36.8 percent in 2001 to 36.1 percent in 2005.

Other sectors, it seems, grew faster.

Other sectors

Manufacturing, driven by strong growth in metal fabrication and food processing, along with a 308 percent boomlet in computer and electronic manufacturing, gained 51.5 percent in inflation-adjusted dollars, rising from 7.7 percent of the economy in 2001 to 8.8 percent in 2002.

Driven by growth at St. Charles Medical Centers in both Redmond and Bend, and by an influx of physicians and practitioners, health care — the third-largest sector of the economy behind government and real estate — grew 35.7 percent, to 8.4 percent of the total.

The finance and insurance sector, partly driven by the real estate boom, shot up more than 59 percent, along with information services, a sector that includes a small but fast-growing software and Internet segment.

With local populations rising, the slowdown in the once hustling real estate market seems unlikely to sink the local economy, Wong said — unless housing prices begin to pinch off population growth.

Prices here have risen faster than in other cities in the region. The Office of Federal Housing Oversight, which runs regular comparisons of price changes in all of the nation’s major housing markets, shows that housing prices in the Bend MSA have grown much more rapidly than they have in the area’s traditional top population feeders — Portland, Eugene and Salem — in the past five years. The average price of a Bend home rose 92 percent compared with 68.8 percent in Portland, 70.7 percent in Eugene and 58.5 percent in Salem.

Still, home prices in California remain significantly higher than Central Oregon’s medians, particularly in the coastal cities. Deschutes County, with 149,000 people, has grown large enough to provide a hiring base for a broad array of small businesses and manufacturers, Wong said, but, like similarly fast-growing Western economies on Milken’s Top 15 list — St. George, Ceour d’Alene, Idaho, Bellingham, Wash., and Logan, Utah — it has remained small enough, so far, to maintain a quality-of-life edge over the bigger, older metro areas of the coast.

Despite the huge run-up from 2001-2005, computer and electronics manufacturing accounted for only 1.9 percent of the total local economy in 2005, according to the bureau’s numbers. Still, those that are here seem to be forging a unique local style.

One of Hobin’s software coders milks his cows in the morning on his Terrebonne ranch, then codes software in the afternoon. Another lives on land outside of Sisters. One learned his trade with Microsoft. The other is self-taught.

“We call ’em the cowboy coders,” Hobin said. “You wouldn’t find those kinds of people in San Francisco. But it’s one example of how the economy of the West is changing.”

As the high-tech sector picks up steam again in the main centers of Silicon Valley, Denver and Utah, Hobin figures it will grow here, too, because, sooner or later, the area will attract the right people.

“I think what it’s going to take are a few successes,” Hobin said. “Once people have seen it happen here, other people will think they can make it happen here. And realistically what’s going to make that happen? A CEO deciding to move here for the lifestyle. I don’t really see anyone coming here for the cost savings.”