There’s no way to know how long the national recession will continue its grip on Central Oregon’s construction industry, but at least there were a few positive signs in March.

Some builders, while not by any means seeing this as a return to the boom years of 2004-06, see demand for new homes returning at a time of low interest rates and dropping prices. They say there exist homebuyers who would rather buy new homes at relatively the same cost as foreclosed homes or ones bought through short sales that require bank approval.

There were 24 building permits issued in March in Bend, up from seven in February and 13 in March 2008, according to the Central Oregon Housing Market Letter, a monthly housing-related report. Of those permits, 16 were taken out by two builders: Hayden Homes and Pahlisch Homes, according to the report.

“If it hadn’t been for them, it would have been the same as the month before,” said Don Patton, publisher of the report. “For now, it seems to have been somewhat stabilized. But who knows where it is going to go?”

There were 16 permits issued in Central Oregon communities outside Bend: three in Redmond, 11 in Deschutes County and two in Jefferson County, all down from March 2008.

Even with Bend’s uptick, the number of permits taken out in Central Oregon was still down 35 percent from March 2008. Through March, the number of permits was down 58 percent from the first quarter of 2008. And last year, the number of permits fell 63 percent from 2007.

Still, the fact that two companies were pulling permits last month could be a sign that the market may have hit bottom, Patton said.

Bend-based Pahlisch Homes, which had not pulled a building permit since August, pulled nine permits in March and plans to file for 16 additional permits in the next few months, said Dennis Pahlisch, president of the company.

Pahlisch pointed to favorable loan terms ranging between 3.875 and 4.5 percent as a reason construction is starting again.

“These lenders are intelligent enough to know to keep things moving,” Pahlisch said. “They have got to offer good rates.”

The profit margins are not what they were three years ago, but home prices starting at $185,000 are enough to maintain cash flow, move existing product and keep people employed, Pahlisch said.

Pahlisch feels confident that while heavy job losses have taken their toll in Bend — Deschutes County’s unemployment rate stood at almost 15 percent last month, the highest among Oregon metropolitan areas — people who still have their jobs see this as an opportunity to buy.

Sellers of new homes are competing with a glut of foreclosed and short-sale properties, which have driven Bend’s median sales prices down 44 percent from their peak in May 2007, according to the latest data from the Bratton Appraisal Group.

In the first quarter of 2009, 49 percent of the 228 total home sales in Bend were either foreclosed homes or short sales, according to Wendy Adkisson, principal broker of The Garner Group in Bend.

Short sales require lender approval when the amount owed by the seller of a home exceeds the sales price.

About 11 percent of home sales in Bend in the first quarter were new-home construction, Adkisson said.

Bend has a 15-month inventory of single-family homes on less than an acre on the market, Adkisson said. But that number, which is a measurement of how long it would take to sell the existing number of homes at the current sales pace, is reduced to 9½ months when only measuring homes priced less than $300,000, Adkisson said.

“Most of the short sales are getting eaten up,” she said. “It is becoming a more balanced market.”

Brokers have seen increased activity among buyers, many of whom are either first-time homebuyers or investors, Adkisson said. Many of those want to buy homes that are new, instead of going through what can be a difficult short-sale process, she said.

“It can be a painful process for buyers,” Adkisson said of short sales, which can fall apart much easier than new-home purchases. “They want to know once they make their offer and it is accepted, they are going to get the house. With a short sale, you just don’t know.”

Another builder, Redmond-based Hayden Homes, pulled seven permits in March, six of which were used to build homes in two Bend subdivisions, said Dennis Murphy, company president.

Before March, the company had last taken out a building permit about 18 months ago, Murphy said. He said demand for new homes is increasing as builder costs are declining and prices become competitive with short sales or foreclosed homes.

Hayden Homes, which is building four homes in the Renaissance Ridge subdivision and two in the Crosswinds subdivision, has 1,200-square-foot homes in Crosswinds available for $149,000, Murphy said.

“In reality, there is a lot of fear and uncertainty in buying a home in that fashion,” Murphy said about buying foreclosed and short-sale homes. “People want an established homebuilder that is going to warranty their house.”

By selling new homes, Murphy said, “I guess we are bucking the trend.”

The ability for homebuilders to make a profit in the current environment is difficult, but it is more important to clear existing land inventory and keep people working, said Jerry Veenker, owner of The Hollman Co. of Wilsonville.

Hollman has built two homes in the Northcrest subdivision at the intersection of Patriot Lane and Boyd Acres Road in Bend and will start building three or four more in the next few weeks, Veenker said.

“There is no profit in building right now,” Veenker said. “It is just a matter of building to keep activity going.”

Future construction will depend on sales, Veenker said.

The company, like Pahlisch, has a program through which it can sell homes for a 30-year mortgage with fixed rates as low as 3.875 percent for qualified buyers, Veenker said.

“From a buyer’s standpoint, if they buy a short sale, they don’t get this kind of financing and they have to deal with the short-sale process,” Veenker said. “I just need to provide them close to the same price as a short sale. If they buy from me, they don’t have any problems.”