It looks like sunburn to me but the soil looks very dry also. I don't know how intense the afternoon sun is in your area but I wonder if it could be a combination of too much direct sun and not enough water? Here in Florida Azaleas are grown in mostly bright shade because the intense sun would fry them.
Hopefully someone from your part of the country will come along soon and be able to offer advice but you might want to pose the question on the PNW forum:
http://garden.org/forums/view/... or the Pacific Coast Gardening Forum:
http://garden.org/forums/view/...
