Hello Elizabeth;

Manzanita is an attractive shrub of western Oregon.  It seems to be gaining some traction as a horticultural plant, something that as the local forestry agent, I am not very familiar with. 

It does well in harsher, drier locations and can be found from the coast up to the pumice soils of the cascades, where I actually encounter it most frequently.  I don't think of it as native within the Willamette Valley.

So,I would expect it to be a good candidate for gardening in this area, even while pointing out that it appears to be somewhat outside its native range.

I will point out that we have been experiencing a series of unusually hot and dry summers that are stressing many trees and shrubs in the valley, native and not.  I have been at a loss to explain or predict how even very familiar species will fare in different situations. Also, these plants are likely produced from seed, so are distinct individuals.  In such situations it is not uncommon to see individuals in the same general area behave quite differently.

I'll also point out that yellowing and leaf drop are a normal part of plant growth, even among evergreens.  We get calls every fall when cedar cast their fronds, but I do not know when manzanita would cast its leaves. It is entirely normal for trees and shrubs to loose their leaves in the lower, inner (shady) parts of the plant.  It is probably what adds tot the visual  appeal of the plant, allowing you to see the red stems. I know there are a number of fungal foliar disease which could also be at play, most of which would not be fatal, but I am not familiar with

A long and very non specific answer, to say that nothing in certain, but what you are describing is probably more normal than not.  You'll just have to wait and see how they do.