Series: PD & R SUMMARY Published: August 1994 U.S. HOUSING MARKET CONDITIONS 2ND QUARTER 1994 U.S. Housing Market Conditions is published quarterly by the U.S Department of Housing and Urban Development, Office of Policy Development and Research. Henry Cisneros---Secretary Michael A. Stegman---Assistant Secretary, Office of Policy Development and Research Frederick J. Eggers---Deputy Assistant Secretary, Economic Affairs Maureen A. Kennedy---Deputy Assistant Secretary, Policy Development Duane T. McGough---Director, Housing and Demographic Analysis Division David E. Shenk---Director, Economic Market Analysis Division Katherine L. O'Leary---Director, Research Utilization Division Ronald J. Sepanik---Deputy Director, Housing and Demographic Analysis Division Bruce D. Atkinson---Economist Connie H. Casey---Economist Sue George Neal---Economist Randal M. Scheessele---Economist Edward J. Szymanoski---Economist Vanessa Void-Taylor---Research Utilization Specialist HUD Field Office Economist who contributed to this issue are: New England--John Reilly--Boston HUD Office Providence--Wendy Lucas--Boston Hud Office New York/New Jersey--David Burns--New York HUD Office Syracuse--Bill Coyner--Buffalo HUD Office Mid-Atlantic--Jan Vagassky--Philadelphia HUD Office Newport News/Virginia Beach--Francis Kenny-- Richmond HUD Office Southeast--Betty Almand--Atlanta HUD Office Atlanta--Lamar Littleton--Atlanta HUD Office Midwest--Joe McDonnell--Chicago HUD Office Columbus--Jack Brown--Columbus HUD Office Southwest--Linda Hanratty--Ft. Worth HUD Office Houston--Carol Ridgeway--Ft. Worth HUD Office Great Plains--Don Gebauer--Kansas City HUD Office Topeka--Larry Hoaglund--Kansas City HUD Office Rocky Mountain--Jim Coil--Denver HUD Office Denver--Jim Coil--Denver HUD Office Pacific--Rob Jolda--San Francisco HUD Office Phoenix--Lall Ramrattan--San Francisco HUD Office Northwest--Pamela Sharp--Seattle HUD Office Portland/Vancouver--Tom Aston-- Portland HUD Office Summary During the second quarter of 1994, housing market activity generally remained at the healthy levels seen in the first quarter. New and existing home sales continued at historically satisfactory rates, but may have exhibited signs of weakening in some markets toward the end of the quarter as new unsold inventories and prices of new and existing homes sold edged upward, and affordability declined slightly. Total permits, starts, and completions rose from the first to the second quarter, buoyed by multifamily production. However, starts, permits, and new sales declined in June, providing perhaps the first tangible signs of the effects of increases in interest rates. o Single-family starts and permits continued the strong showing of the first quarter, and were unchanged from those levels; single-family permits at a seasonally adjusted annual rate (SAAR) of 1,064,000 units were up 16 percent from a year earlier, and single-family starts at 1,189,000 were up 10 percent over a year earlier. Single-family completions at 1,200,000 units were 7 percent above the first quarter and 18 percent above the same quarter last year. o Multifamily (5 or more units in structure) construction continued to climb, as predicted here 6 months ago. Both permits and starts of multifamily units were up 30 percent above the first quarter; at 227,000 units (SAAR), permits were 59 percent over the same quarter last year, and starts at 222,000 units were 76 percent above the same quarter last year. Multifamily completions have not yet fully responded to the upsurge; at 142,000 units they were 24 percent above the first quarter but statistically unchanged from a year earlier. o New home sales slipped 5 percent in the second quarter to 651,000 units (SAAR), and were unchanged from a year earlier. Existing home sales at 4,060,000 were unchanged from the first quarter and were 13 percent above a year earlier. Mortgage interest commitment rates for 30-year, conventional, fixed-rate mortgages rose to an average 8.47 percent in the second quarter, up 16 percent from the previous quarter and 14 percent from last year. o Manufactured (mobile) home shipments and placements in the first quarter of 1994 were also above the previous quarter and year earlier levels, boosting total housing production (starts plus shipments) to 1,681,000 units (SAAR) in the first quarter of 1994 from 1,405,000 a year earlier. o Residential mortgage originations totalled $269.4 billion in the first quarter of 1994, down 10 percent from the fourth quarter of 1993 but up 39 percent from a year earlier. One-to-four family originations at $261.6 billion had exactly the same percentage changes from both periods as the total, while multifamily originations at $7.8 billion were down 25 percent from the preceding quarter and up 22 percent over last year. o Residential Fixed Investment in the second quarter was $283.7 billion (SAAR), up 2 percent from the first quarter and 17 percent from the second quarter of 1993. As a percent of Gross Domestic Product, it remained at 4.2 percent from the first quarter to the second, compared to 3.8 percent a year earlier. Homeownership-Past, Present, and Future Despite the major cultural and demographic changes in the United States over the last half century, homeownership remains a firm part of the American Dream. According to a spring 1994 Fannie Mae survey, 86 percent of Americans believe one is better off owning a home and 74 percent believe that one should buy a home as soon as one can afford it regardless of marital status or whether or not one has children. In this edition, U.S. Housing Market Conditions examines trends in homeownership from 1890 to 2000. Past The decennial census of 1890 was the first to ask basic housing questions and, in particular, whether one owned or rented. The census data since 1890 show three distinct eras of homeownership in America. In the 1890-1940 period, the homeownership rate fluctuated in the 43- to 48-percent range. From 1890 to 1920, the homeownership rate fell as immigration and urbanization offset the rise in income. Income growth increased the homeownership rate during the 1920s, but the Depression more than wiped out this gain so that the rate had fallen to a low of 43.6 percent by 1940. During the 1940-1960 period, the homeownership rate rose by over 18 percentage points, from 43.6 to 61.9 percent. This remarkable transformation was facilitated by higher incomes, a large percentage of households being in prime homebuying age groups, the FHA-led revolution in mortgage financing, the GI bill of rights, improved interurban transportation, and development of large-scale housing subdivisions with affordable houses. While all of these factors played an important role in making the United States a Nation of homeowners, it is important to note that a Department of Labor study (cited in the Housing and Home Finance Agency's Housing Statistics Handbook of 1948) reported a 53.2-percent homeownership rate for 1945. If this survey was correct, then approximately half of this change took place prior to many of these factors becoming fully effective and during a time when wartime needs virtually halted residential construction. Higher wartime incomes, the absence of many competing consumer goods, and shortages of rental housing may explain this wave of homebuying. Since 1960 the homeownership rate has remained in the 61- to 65-percent range. After slow growth from 1960 to 1980, the rate fell to 63.9 percent in 1990. Part of the decline between the 1980 and 1990 censuses can be explained by the undercount adjustment, a first-time ever adjustment by the Census Bureau. Without the undercount adjustment, the 1990 census would show a 64.2-percent homeownership rate. An important factor in explaining the trend over this period was the virtual absence of growth in real family income. Between 1980 and 1992, median family income grew only 2.7 percent in real terms. The Current Population Survey (CPS) shows that the homeownership rate declined slowly but steadily during the 1980s before stabilizing in the early 1990s (see Table 25 in the Historical Data section). The CPS reports a 63.8-percent home-ownership rate for the second quarter of 1994.1 Present Several facets of current trends in homeownership are noteworthy. First, the homeownership rate declined among many segments of the population. For example, Table 25 shows that the 1980 to 1993 national pattern is roughly duplicated by the pattern in the homeownership rates for all age groups except householders 65 and older. Second, blacks and Hispanics continue to have much lower homeownership rates than whites. The 1991 American Housing Survey (AHS) reports homeownership rates of 67.9 percent for whites, 42.8 percent for blacks, and 38.8 percent for Hispanics. Large racial differences are not new; the first AHS in 1973 found homeownership rates of 67.1 percent for whites, 43.4 percent for blacks, and 43.2 percent for Hispanics. While the white and black rates remained roughly stable over this period, the Hispanic rate dropped. Third, homeownership rates for married couples remained relatively stable between 1982 and 1993, but both single males with children and single females with children had substantial drops in their homeownership rates. At the same time, nonfamily households (single males, single females, and other two-person households) experienced rising homeownership rates. Future HUD's Office of Policy Development and Research (PD&R) used the 1991 AHS and recent household projections by George S. Masnick and Nancy McArdle of the Joint Center for Housing Studies to estimate what homeownership rates might be in the year 2000. Masnick and McArdle estimated the number of households in 2000 for each of 35 population categories based on new Census Bureau projections of population growth that take into account higher immigration rates than those assumed in previous census projections. The 35 categories are formed by 7 age classes and 5 family-type categories. Using data from the AHS, HUD divided the Masnick-McArdle household estimates for each of the 35 categories into white and minority components, which were further subdivided into 5 income classes. The 1991 AHS homeownership rates for all the subgroups within each category were applied to the appropriate household estimates to calculate the number of homeowners. Using this method PD&R calculated a homeownership rate in 2000 of 65.0 percent and a total of 68,195,000 homeowners out of 104,977,000 households. Based on the CPS estimate of 62,684,000 homeowners in the second quarter of 1994, this would be an additional 5,511,000 homeowners by 2000. This approach can be expanded to examine barriers to increased homeownership and explore the limits to possible progress. Unless the United States experiences unprecedented cultural or economic changes, it is unlikely that there will be any significant shifts in the population among the 35 age and family-type categories estimated by Masnick and McArdle. Therefore, any significant improvement in the national homeownership rate would have to derive from increases in the homeownership rates for the individual categories. With this in mind, PD&R analyzed each of the 35 age and family-type categories that were divided further into 350 subgroups based on race (white versus minority) and income (5 income classes). Within almost every category defined by age and family type, homeownership rates rise with income and are higher, at almost every income level, for whites than for minorities. The following table shows the typical pattern, using married couples with children with a head between 35 and 44 years old as an example. This analysis highlights the importance of income/affordability and race/ethnicity in determining homeownership rates. Under current economic conditions, whites in the $80,000+ income class probably have the highest homeownership rate consistent with the characteristics of a particular age and family-type category. Based on this premise, the aggregate homeownership rate for a particular age and family-type category can be increased only by reducing the income or minority differentials in homeownership rates within that category. The following table simulates what the national homeownership rate would be in 2000 if the income/affordability and racial/ethnic barriers could be reduced by varying degrees. For example, in the context of the married couples, 35-44 age category, a 50-percent reduction in the racial and the income differentials would have the following effects: the white $20,000-39,000 rate would rise to 87.5 percent, the minority $80,000+ rate would increase to 89.5 percent, and the minority $20,000-39,000 rate would get both an income and a racial adjustment to 78.75 percent. In the table, moving across the rows from left to right indicates the effect on the national homeownership rate of reductions in the racial differentials in 10-percent intervals; moving down columns shows how much the national homeownership rate would increase with a narrowing of differentials across income groups. The four corners of this table have specific meanings. o The upper left corner is PD&R's 65.0 percent projection assuming no improvement in the racial and income differentials. o The lower right corner (85.2 percent) is the rate that might be achieved by complete elimination of income and race differences within each age and family-type subgroup. Further substantial increases are possible only through other types of changes, such as a major increase in income, major new tax incentives for ownership, or other major reductions in the price of owner-occupied housing relative to rental housing. o The upper right corner is the rate achieved by eliminating racial differences but no income differences. This effect is small because minorities will compose only 22 percent of the households in 2000. o The lower left corner is the rate achieved by reducing all the income-related differences but none of the racial differences. Progress along this dimension produces much larger increases in the homeownership rate than equal progress along the race dimension because progress along the income dimension affects a much larger proportion (91 percent) of the population. While the preceding table shows a wide range of possibilities, the realistic set of possibilities is much narrower. Large reductions in the race/ethnicity and income/affordability differences would be very difficult to achieve for many reasons. HUD has already embarked on several approaches to reducing racial differences in homebuying through more aggressive enforcement of fair housing laws and fair lending requirements, and assertiveness in our oversight responsibility for government sponsored enterprises (GSE). Nevertheless, the racial differentials incorporate both current discrimination and the effects of past discrimination. While discrimination in housing and mortgage markets can be reduced, past experience shows that progress is slow. Moreover, racial differentials would persist even if there were no current discrimination because minorities have lower levels of wealth, as a result of past discrimination in education and employment. Progress in reducing differences in homeownership rates related to income is constrained both by limits on the effectiveness of policies to promote homeownership among low-income families and by the weaker financial incentives provided to a large segment of the population. Technological improvements can lower the cost of housing production and local government initiatives can lower the cost of land by eliminating unnecessary land use controls. But there are practical limits to these gains and commuting costs constrain development of low-cost land at the urban fringe. Housing counseling and efforts to simplify housing transactions can make homebuying easier for the uninitiated, and new technologies and new ways of doing business can make closing costs less expensive, but it is unclear how much progress can be made in this way. Subsidies and underwriting changes to make purchasing and financing easier face serious budget and cost constraints. Homeownership rates below 50 percent occur among the youngest households (those with a head younger than 25) at all income ranges and among the low-income, nonelderly households (those with incomes below $20,000 and younger than 55 and those with incomes below $40,000 and younger than 35). These groups have much weaker incentives to purchase a home. The young are typically very mobile and renting is often a cheaper alternative for those who expect to change residence in the near future. Because of lower marginal tax rates and the large standard deduction, the tax incentives to become homeowners are much weaker for lower income households. These groups with weak incentives will compose 25 percent of the population in the year 2000. PD&R's projections indicate that a modest increase in the homeownership rate to 65 percent will occur as the result of changing demographic conditions. Further increases are possible if racial/ethnic and income/affordability barriers can be reduced. However, large increases beyond 65 percent are unlikely without substantial institutional changes. National Data Housing Production Permits* Permits for the construction of new housing units rose 5 percent in the second quarter of 1994 to a seasonally adjusted annual rate of 1,351,000 units, and were 21 percent higher than in the second quarter of 1993. One-unit permits, at 1,064,000 units, were unchanged from the previous quarter, but up 16 percent from a year earlier. Multifamily permits (5 or more units in structure), at 227,000 units, were 30 percent higher than the first quarter, and 59 percent over the same quarter last year. Starts* Construction starts of new housing units in the second quarter of 1994 totalled 1,440,000 units at a seasonally adjusted annual rate, an increase of 5 percent from the previous quarter, and 16 percent over the second quarter of 1993. Single-family starts at 1,189,000 units, were statistically unchanged from the previous quarter, but were 10 percent above the year earlier rate. Multifamily starts reached 222,000 units, 30 percent higher than the previous quarter, and 76 percent over the same quarter last year. Under Construction* Housing units under construction at the end of the second quarter of 1994 increased to a seasonally adjusted annual rate of 746,000 units, 3 percent over the previous quarter and 16 percent above the second quarter of 1993. Single-family units under construction, at 584,000 units, were a statistically insignificant 1 percent above the previous quarter and 14 percent higher than the year earlier rate; multifamily units, at 144,000 units, were 16 percent higher than the previous quarter and 29 percent above the same quarter last year. Completions* Housing units completed in the second quarter of 1994, at a seasonally adjusted annual rate of 1,375,000 units, were 8 percent above the previous quarter and 17 percent higher than the same quarter last year. Single-family completions, at 1,200,000 units, were 7 percent and 18 percent higher, respectively, than the previous quarter and year earlier rates. Multifamily completions, at 142,000 units, were up 24 percent from the previous quarter and a statistically insignificant 10 percent above the same quarter last year. Manufactured (Mobile) Home Shipments* Shipments of new manufactured (mobile) homes to dealers rose to a seasonally adjusted annual rate of 308,000 units in the first quarter of 1994, up 8 percent from the previous quarter and 22 percent over the rate a year earlier. Housing Marketing Home Sales* Sales of new single-family homes totalled 651,000 units at a seasonally adjusted annual rate (SAAR) in the second quarter of 1994, 5 percent below the previous quarter but unchanged from the second quarter of 1993. The number of new homes for sale at the end of the second quarter increased 6 percent over the last quarter and 16 percent over the same quarter last year. At the end of the quarter, inventories represented a 6.6 months' supply at current sales rates, 35 percent above the end of the previous quarter and 27 percent higher than the end of the second quarter of 1993. Sales of existing single-family homes reported by the NATIONAL ASSOCIATION OF REALTORSþ for the second quarter of 1994 totalled 4,060,000 (SAAR), equal to the first quarter's level, but 13 percent above the second quarter of 1993. The number of units for sale at the end of the second quarter remained at nearly the same level as the previous quarter, but was 9 percent below the 1993 second quarter level. At the end of the second quarter there were 5.1 months' supply of units, 9 percent below the end of the previous quarter and 25 percent lower than the end of the second quarter of 1993. Home Prices The median price of a new home during the second quarter of 1994 was $129,900, unchanged from the previous quarter and 2 percent above the second quarter of 1993 (these changes are statistically insignificant). The average price of a new home in the second quarter was $153,000, unchanged from the previous quarter and 3 percent higher than the year earlier level. The price adjusted to represent a constant quality home, $153,100, was up an insignificant 2 percent from the previous quarter and up 3 percent from the same quarter last year. The median price of existing single-family homes in the second quarter of 1994 was $110,600, 3 percent above the levels of the first quarter of 1994 and the second quarter of 1993 according to the NATIONAL ASSOCIATION OF REALTORS. The average price of $137,700 was also 3 percent above the first quarter of 1994 and the second quarter of 1993. Housing Affordability Housing affordability is the ratio of median family income to the income needed to purchase the median-priced home based on current interest rates and underwriting standards, expressed as an index. The NATIONAL ASSOCIATION OF REALTORS composite index value of 130.8 (representing 130.8 percent of income needed) for the second quarter of 1994 fell 7 percent from the first quarter of 1994 and 2 percent from the second quarter of 1993. Notably higher interest rates coupled with slightly higher prices caused this decrease in housing affordability. The fixed-rate index fell by 10 percent from the first quarter of 1994 and by 7 percent from the second quarter last year. An 8-percent decline was posted by the adjustable-rate index from the previous quarter, and this index was 3 percent below the rate 1 year ago. Apartment Absorptions There were a scant 14,400 new, unsubsidized, unfurnished, multifamily (5 or more units in structure) rental apartments completed in the first quarter of 1994, down 15 percent from the previous quarter and 18 percent below the first quarter of 1993. Of the apartments completed in the first quarter of 1994, 81 percent were rented within 3 months (the absorption rate). This absorption rate was 9 percent above the previous quarter and 8 percent above the same quarter last year (both changes are statistically insignificant). The median asking rent of apartments completed in the first quarter was $570, about the same as the fourth quarter and the year earlier rents. Manufactured (Mobile) Home Placements Homes placed onsite ready for occupancy in the first quarter of 1994 totalled 276,000 at a seasonally adjusted annual rate, up 13 percent from the previous quarter, and up 25 percent from the first quarter of 1993. The number of homes for sale on dealers' lots at the end of the first quarter totalled 66,000 units, 5 percent above the previous quarter and 14 percent above the same quarter last year. The average sales price of the units sold in the first quarter was $32,500, unchanged from the previous quarter, but 13 percent higher than the year earlier price. Housing Finance Mortgage Interest Rates Mortgage interest rates increased dramatically during the second quarter of 1994. The contract mortgage interest rate for 30-year, fixed-rate, conventional mortgages reported by Freddie Mac was 8.47 percent in the second quarter, 117 basis points higher than the previous quarter and 102 basis points higher than the same quarter last year. Adjustable-rate mortgages (ARMs) in the second quarter were going for 5.30 percent, 98 basis points above the previous quarter and 64 basis points above the same quarter last year. Fixed-rate, 15-year mortgages, at 7.96 percent, were up 116 basis points from last quarter, and were 103 basis points above the same quarter last year. The FHA rate tracks the conventional rate very closely. FHA 1-4 Family Mortgage Insurance Applications for FHA mortgage insurance on 1-4 family homes were received for 254,000 (not seasonally adjusted) properties in the second quarter of 1994, down 33 percent from the previous quarter and down 44 percent from the second quarter of 1993. Endorsements, which are insurance policies issued, totalled 379,700, down 4 percent from the first quarter of 1994 but up 66 percent from the second quarter of 1993. The 6-percent increase in purchase endorsements was offset by a 12-percent drop in refinancing in the second quarter of 1994, once again demonstrating the strong influence of refinancing on total endorsements. PMI and VA Activity Private mortgage insurers reported issuing 315,200 policies or certificates of insurance on conventional mortgage loans during the second quarter of 1994, up 4 percent from the first quarter and up 8 percent from the second quarter of 1993; these numbers are not seasonally adjusted. The Department of Veterans Affairs reported the issuance of mortgage loan guaranties for 157,300 single-family properties in the second quarter of 1994, nearly the same as in the first quarter and an increase of 63 percent from the second quarter of 1993. Mortgage Originations by Type, 1-4 Family Units The total value of mortgage originations for 1-4 family homes was $261.6 billion in the first quarter of 1994, down 10 percent from the fourth quarter of 1993, but up 39 percent from the first quarter of 1993. The value for privately insured mortgages fell by 13 percent, and mortgages without insurance dropped by 14 percent. On the other hand, FHA insured and VA guaranteed mortgages increased in volume by 27 and 8 percent, respectively. Compared to the first quarter of 1993, all four categories increased: 74 percent for FHA, 77 percent for VA, 45 percent for privately insured mortgages, and 32 percent for mortgages without insurance. The market shares for both FHA and VA increased in the quarter to 11.3 and 5.4 percent, respectively. Uninsured mortgages continue to dominate the market with 69.8 percent of the value of new mortgages, and privately insured mortgages represent 13.5 percent. Residential Mortgage Originations* Residential mortgage originations totalled $269.4 billion in the first quarter of 1994, down 10 percent from the fourth quarter of 1993, but up 39 percent from the first quarter of 1993. The financing volume for multifamily units (5 or more units) totalled $7.8 billion in the first quarter, down 25 percent from the final quarter of 1993, but up 22 percent from the first quarter of last year. Mortgage Originations by Lender, 1-4 Family Units There were some significant shifts in the distribution of mortgage originations across the major lender groups. The volume handled by commercial banks in the first quarter dropped to $63.2 billion, 22 percent lower than the fourth quarter of 1993. Savings and loans made $35.5 billion in loans, down 34 percent for the quarter. Mutual saving banks also lost volume, dropping 30 percent from the fourth quarter. Mortgage companies continued to dominate the market with $152.6 billion in new originations in the first quarter, up 8 percent from the last quarter. Changes in market shares mirror the changes in volumes: mortgage companies increased their share to 58.3 percent, commercial banks dropped to 24.1 percent, mutual saving banks fell to 3.2 percent, and savings and loans dropped to 13.6 percent. While "other lenders" show large percentage increases in both volume and share, they represent less than 1 percent of the market. Delinquencies and Foreclosures Total delinquencies were 4.12 percent at the end of the first quarter of 1994, up 1 percent from the fourth quarter of 1993 but 4 percent lower than the first quarter of 1993. Ninety-day delinquencies were at 0.76 percent, also up 1 percent from the fourth quarter of 1993 and down 3 percent from the 1993 first quarter level. During the first quarter of 1994, 0.31 percent of loans entered foreclosure, the same rate as in the previous quarter and in the first quarter of 1993. Residential Fixed Investment and Gross Domestic Product* Residential Fixed Investment (RFI) for the second quarter of 1994 was $283.7 billion, up 2 percent from the first quarter of 1994 and 17 percent from the second quarter of 1993. As a percent of Gross Domestic Product (GDP), RFI was 4.2 percent, the same as in the first quarter of 1994, but 11 percent higher than in the second quarter of 1993. Housing Inventory Housing Stock* The estimate of the total housing stock as of the second quarter of 1994, 110,470,000 units, shows a minor increase from the first quarter of 1994. The numbers of units occupied, owned, or rented all increased by statistically minor amounts. While vacancies showed a decrease, it too was statistically insignificant. Comparisons with the 1993 second quarter estimates may be heavily influenced by the introduction of new estimation weights based on 1990 census counts. Vacancy Rates The national rental vacancy rate in the second quarter of 1994 fell slightly to 7.4 percent, 1 percent lower than the first quarter of 1994 and 3 percent below the second quarter of 1993. The homeowner vacancy rate, at 1.4 percent, remained unchanged from both the previous quarter and year earlier levels. Homeownership Rates The national homeownership rate was 63.8 percent inthe second quarter of 1994, the same as in the first quarter of 1994 and statistically unchanged from the second quarter of 1993. It should be noted that the Census Bureau introduced 1990 census counts adjusted for the undercount estimates into the estimation of the quarterly homeownership rate series for 1993 and 1994. The new estimates of the homeownership rates are about 0.5 percent below estimates based on 1980 census weights. Regional Activity The regional summaries generally show a continuation through the first half of 1994 of improving market conditions. HUD's field economists' reports show even larger increases in single-family home production. The largest increases have been in the Rocky Mountain and Pacific regions, with increases of 36 percent and 23 percent, respectively. Significant improvement also was noted in the New York/New Jersey, Midwest, and Great Plains regions. All regions reported increased sales volume during the first half of 1994. The Columbus, Ohio, HUD office reported single-family mortgage insurance activity in the Columbus area was up 59 percent this fiscal year. HUD's Richmond office has insured 26,000 single-family homes so far this fiscal year, compared to 15,250 homes at this time in fiscal year 1993. The HUD economists reported that while sales were strong the first half of the year, they had begun to slow during the second quarter in a number of areas, reflecting the increased interest rates. However, interest rates have had little impact on the boom markets of the Pacific, Northwest, and Rocky Mountain regions where sales volume is 10 to 20 percent above 1993 levels. Rental housing markets are also improving, as evidenced by rapid absorption of new units. Except for New England, all regions showed increases in multifamily units authorized by building permits. The largest increases have been in the Southwest where the number of units more than doubled, and the Southeast and Pacific regions, both of which had 56-percent increases. New England Employment growth continued at a moderate pace throughout New England during the second quarter of 1994. For the region as a whole, nonagricultural employment is up over 2 percent for the second quarter of this year over last year. Massachusetts led the way with an increase of 3 percent. All other States had modest gains except for Connecticut, where employment remained flat. Business optimism is high due to increased activity in the construction and service sectors. Employment increased 6 percent in construction over the last 12 months and 5 percent in the service sector. Manufacturing remains weak, with all States reporting job losses. There was an overall drop in manufacturing employment of 2 percent from 1 year ago, with most of the decline in durable goods. Unemployment rates for April 1994 were below the national average in all States in the region. Vermont had the lowest unemployment rate (4 percent) and Maine the highest (6.3 percent). Residential building permit activity increased from 17,342 units in the first 6 months of 1993 to 18,428 units for the same period in 1994. Single-family units permitted showed a 7.2-percent gain, but multifamily units declined by about 2 percent. The Boston Consolidated Metropolitan Statistical Area (CMSA) continued to lead the way in New England with a total of 7,392 units, a 10-percent increase over the same period in 1993. Existing home sales were strong during the first quarter of 1994. New Hampshire led with a 20-percent increase over the first quarter of 1993 and Massachusetts recorded a 19-percent increase. Rhode Island was the only State in the region to register a decline, a modest 4 percent. Boston recorded a 6.3-percent increase. Most of the major rental markets in New England are balanced. The exceptions are Hartford and Providence, which have high rental housing vacancy rates. Boston and the southern part of New Hampshire have current rental vacancy rates in the 5- to 6-percent range. Rental vacancy rates should continue to decline, reflecting the low levels of rental housing production and the economic recovery that is taking place in Massachusetts. Spotlight on Providence, Rhode Island The Providence metropolitan area lost 42,700 jobs from March 1990 to March 1992. Since then the local economy has slowly recovered, as reflected in 26 consecutive months of job growth. By May 1994 the area had gained back almost half of the jobs lost. The employment reductions were caused, in large part, by plant closures at Raytheon and the Aquidneck Shipyard. The economy was further hurt when the collapse of the Rhode Island Share and Deposit Indemnity Corporation (RISDIC) triggered the closing of 45 credit unions in which 30 percent of Rhode Island's residents held accounts. Manufacturing employment continues to slide, primarily due to cutbacks in defense-related durable goods and in the jewelry/silverware industry. More recently gains in service industry jobs have offset declines in manufacturing and construction. Trade employment grew by 3.8 percent from a year ago (May to May), concentrating in food stores, restaurants, and apparel/ accessory stores. Residential building activity in the Providence area has declined substantially since 1986. The number of units authorized by building permits fell from a high of 8,690 units that year to 2,913 units in 1993. For the first half of 1994, permits totalled 1,315 units, down 3.3 percent from the first half of 1993. Single-family permits comprised 92 percent of the total. The rental housing market has been soft since 1989. Rental vacancy rates have remained in the 8- to 9-percent range, and rents have shown virtually no upward movement. Vacancies are concentrated in the larger, older projects, as people move to newer units now available at reasonable prices. The rental market is not expected to improve in the next couple of years despite the low levels of rental housing production, because of the large supply of existing condominiums that are being offered for rent. Sluggish single-family construction, combined with an improving employment base, could produce the climate for moderately renewed single-family housing demand in the next few years. The most positive sign is that Providence's median sales price for the first quarter of 1994, as compared to the first quarter of 1993, rose 2.8 percent after falling for at least 3 consecutive years. New York/New Jersey New York State and New Jersey continue a slow recovery. Between March 1992, the bottom of the recession, and March 1994, New Jersey regained 77,100 jobs, constituting 30 percent of the 262,000 jobs lost between March 1990 and March 1992. Still New Jersey ranked in the bottom among the States in terms of job growth. The recent job growth has been weighted heavily to high-salary professional and technical employees. The services sector during this 2-year period added 69,600 jobs to the 19,700 jobs gained during the prior 2-year period. In contrast the State's wholesale and retail trade sector has recaptured only 12.5 percent of the 86,100 jobs lost during the recession. An encouraging sign is that between March and May 1994 there has been a seasonally adjusted increase of approximately 5,000 jobs in the construction industry. Overall job growth in New Jersey has been hampered by continued losses in the manufacturing sector. Between March 1992 and March 1994, 22,700 jobs were lost in manufacturing. Factory employment has declined by 22 percent in the past 5 years to around 500,000 compared with an 8.8-percent decline for the Nation. The recent increase in construction employment and a slowdown in the decline of manufacturing jobs are encouraging signs. Also, nonresidential construction contracts awarded during the first 4 months of 1994 increased 17.8 percent from the same period a year ago. New York State's seasonally adjusted employment as of June 1994 was 8,000,000, up negligibly from 7,961,000 in 1993. The unemployment rate was 7.0 percent in June 1994 compared to 7.7 percent in June 1993. In New York City there were 2,972,000 persons employed in June 1994 compared with 2,950,000 in June 1993. The unemployment rate for New York City was 8.5 percent in June, down from the June 1993 rate of 9.4 percent. The recovery has been slow, and the dollar volume of private construction as of May 1994 was approximately 9.5 percent below that of a year ago. The vacancy rate in midtown Manhattan office buildings declined sharply in June 1994 to 13.9 percent from 16 percent a year earlier. Business failures have also declined significantly in 1994. Wall Street has been the moving force behind New York City's recovery. Nearly one-third of all the wages earned are produced by the finance, insurance, and real estate sector, even though those services account for only 14 percent of the jobs. The wealth generated by Wall Street during the past 3 years has finally achieved a modest filtering effect upon employment in other sectors of the city's economy. The recent increase in interest rates, however, could adversely affect the securities industry whose continued job growth appears necessary for New York City to prosper. Several firms in the securities industry have recently announced hiring freezes or slowdowns. Additionally, it is expected that there will be continued employment losses at banks and insurance companies, although at a more moderate pace than in recent years. As a consequence, it is widely believed that New York City's employment growth for the remainder of the year will be a very modest 10,000 to 15,000 jobs. In New Jersey building permits were issued for 10,268 units during the first 6 months of 1994, a 39.5-percent increase over the same period a year ago. Single-family activity accounted for 90 percent of the total. There were a total of 27,746 units permitted in New Jersey in 1993, a 28-percent increase from 1992. In New York State 12,916 units were permitted in the first 6 months of 1994. Single-family activity during the period declined by about 5 percent from the same period a year ago. There were 3,045 multifamily units permitted during the same period, an increase of 40.9 percent from the comparable period a year ago. In the first quarter of 1994, existing homes sold in New York State amounted to a seasonally adjusted annual rate (SAAR) of 143,000, a 6.2-percent increase over the same period a year ago. Between the first quarter of 1993 and the first quarter of 1994, home sales increased 42.4 percent in Westchester County and 21.5 percent in Long Island. In New Jersey existing home sales in the first quarter of 1994 were 155,000 (SAAR), a 17.5-percent increase over the first quarter of 1993. According to the New York State Association of Realtors, the median sales price of a single-family home in New York State in the first quarter of 1994 was $142,515, a 6.5-percent increase over the 1993 first quarter price. In upstate New York the median sales price increased 5.5 percent during this period to $127,107. In the Nassau/Suffolk area, the median sales price increased 4.1 percent to $179,900. In Westchester County the median sales price was $344,396, a 4.9-percent decline from the previous year. According to the New Jersey Association of Realtors, the median sales price of a single-family home in New Jersey in the first quarter of 1994 was $155,500, an 8.3-percent increase from the comparable period a year ago. Spotlight on Syracuse, New York The Syracuse area is experiencing a slow economic recovery, although restructuring of larger corporations and job losses relating to the defense industry continue to adversely impact employment levels. The metropolitan area is the center of manufacturing, education, and medical services within central New York. The area's economic base is further diversified by its role as a regional center for State government. After experiencing extensive job losses between 1990 and 1992, the largest in the manufacturing sector, employment increased slightly in 1993. As of June 1994, the unemployment rate was 6.2 percent, down from 6.9 percent 12 months earlier. Employment growth is expected to continue for the remainder of 1994 in the nonmanufacturing areas of services, trade, finance and insurance, and government. Manufacturing employment, which represents close to 15 percent of the total jobs in the metropolitan area, is expected to continue to decline. The purchase of General Electric's aerospace division by Martin-Marietta has created concern that some or all of local production (2,900 jobs) may be relocated to out-of-State locations. Other large corporations such as NYNEX, Niagara Mohawk, and Fleet Financial Group continue to restructure their employment levels. The Miller Brewing Company recently announced plans to close its brewery this year, resulting in the loss of 900 high-wage jobs. On a more positive note, more than $6 million in Federal, State, and local financial incentives were used recently to retain the Carrier Corporation's compressor division in the Syracuse area. The corporation is the largest manufacturing employer in the area with more than 4,200 employees as of the end of 1993. The outlook for the facility is positive due to the increased demand for replacement of CFC-based commercial and industrial cooling equipment. Nationally more than 65,000 units are expected to be replaced over the next 5 years. Residential sales activity within the Syracuse/Onondaga County area increased from 843 units in the first quarter of 1993 to over 1,000 units in the first quarter of 1994. The increased sales activity is attributed to prevailing low interest rates and continued pent-up demand for housing by first-time homebuyers. During the first quarter of 1994, the median sales price of an existing single-family unit in the Syracuse area was $82,100, a decline of 4 percent over the first quarter of 1993. In Onondaga County the median sales price has declined 7.3 percent to $92,936. Housing construction activity within the Syracuse metropolitan area has averaged 2,100 units per year since 1990. This level of residential housing development is approximately 15 percent below the average annual level from 1980 to 1989. Single-family housing development comprises almost 85 percent of all post-1990 residential housing constructed within the Syracuse metropolitan area, the majority in Onondaga County. Multifamily housing development has decreased significantly, averaging less than 270 units since 1990. This volume compares with an annual average of 450 units during the 1980s and 1,200 annually during the 1970s. The Syracuse area has some of the more affordable housing costs in the State. Based upon a Housing Opportunity Index developed by the National Association of Home Builders (NAHB), the area ranked number two in the entire State, and 19th nationwide, with almost 90 percent of all homes sold being affordable to households with a median family income of $41,400. Mid-Atlantic Regionwide sales of both new and existing homes remain relatively good despite interest rate increases and the slow-to-modest pace of economic recovery in the region. Median sales prices for existing homes in the first quarter of 1994 have shown little change over thosefor the comparable period in 1993. In the first 6 months of 1994, building permits were authorized in the Mid-Atlantic States for 56,700 single-family and 6,850 multifamily units. This represents a modest 3.8-percent increase in single-family activity from the comparable 1993 period, while multifamily activity was about equal to the pace in 1993. Seasonally adjusted sales volume for existing homes increased 4 percent in Maryland for the first half of the year. Permit activity in single-family houses, 13,700 units, was also up by close to 5 percent. The median sales price in the Baltimore area increased 3 percent to $115,700. Baltimore, with 5,600 single-family units permitted, had a significant increase of activity (14.9 percent) in the first half of the year. Home sales continue to be strong in Virginia with existing home sales up about 3 percent in the first quarter of 1994 versus the first quarter of 1993 to a seasonally adjusted 97,400 units annually. Sales of new and existing units in June were 7 percent higher than a year ago. Single-family permit activity of 3,350 units for the Richmond metropolitan area is about 10 percent ahead of comparable 1993 levels. Increases in the number of sales greater than 10 percent were noted in the Richmond-Petersburg market as well as in Danville, Lynchburg, Bristol, and parts of Northern Virginia. Virginia is in the top seven States in the country in volume of mortgage loans originated. FHA activity in the Richmond HUD office remains strong with nearly 26,000 home loans processed to date this fiscal year. Single-family activity of 21,250 units permitted in the first half of the year in Virginia was 6.2 percent over 1993 levels. Multifamily activity in the State was 88 percent above the 1993 activity for this period. In Pennsylvania single-family permit activity of 18,250 units for the first 6 months of 1994 remains unchanged from 1993 levels. Multifamily activity is down about 10 percent compared to the first half of 1993, after a substantial 14-percent increase between 1992 and 1993. The seasonally adjusted volume of sales of existing homes, 219,000 units as of the first quarter of 1994, is about 2 percent over the first quarter of 1993. Pittsburgh showed a modest increase of 4.9 percent in single-family permits of 2,825 units for the first half of the year. Home sales for the first 6 months trailed 1993 by 5.9 percent, a direct result of increasing interest rates. The average sales price and average number of days it took to sell properties remained similar to a year ago. Plans were recently announced for three upscale rental complexes in the Pittsburgh area. The rental complexes range in size from 200 to 300 units each. Two other apartment developments are planned in the city. The median sales price of existing homes in the Philadelphia area is essentially unchanged at $116,800. The number of listings for townhouses in the $51,000 to $90,000 price range continues to increase in the city, while suburban locations are offering bonuses of up to $5,000 for single-family, four-bedroom homes in the $240,000 to $330,000 range. Housing conditions have not changed materially in West Virginia during this quarter. Subdivisions are under construction in the Clarksburg area in anticipation of the opening of the FBI building. Upscale subdivisions continue to grow in the Teays Valley area of Putnam County, and growth in the eastern panhandle continues. Employment is about one-half percent higher than last year, although the State has a high unemployment rate of about 9 percent. The sales market in the Washington, D.C., metropolitan area housing market is in the top 10 in single-family activity in the Nation. In the first 6 months of the year, permits were issued for 13,400 units, about equal to last year's level at this time. The median sales price of $154,900 for existing homes is essentially unchanged from the first quarter of 1993. However, in the first 6 months, existing sales increased 7 percent, and sales of new homes increased by 9 percent. Some outlying suburban areas, particularly in Northern Virginia, are showing increases in sales volume of 10 to 30 percent. Spotlight on Norfolk-Virginia Beach-Newport News Despite uncertainties in the military sector and layoffs in shipbuilding and repair, the economy has continued to perform relatively well. Job gains are noted at over 1 percent in 1993 and these trends continue this year. Continuation of layoffs at Newport News Shipbuilding and Drydock Company will bring the workforce down by another 7,000 over the next 2 years (in addition to the loss of 13,000 jobs at the yard since the mid-1980s) even with the start of construction of a nuclear aircraft carrier expected next year. The tourist sector has shown marked improvement since 1992, reflecting an improved national picture, and local efforts are underway to capture a larger share of the national tourist dollar. Nauticus, a national maritime museum, opened in downtown Norfolk in June, and the development of a $270 million upscale mall anchored by Nordstrom and Macy's in downtown Norfolk was recently announced as well. Other major attractions such as Colonial Williamsburg, Busch Gardens, and Virginia Beach have shown a mixed picture in recent years, but early 1994 data indicate a banner year. The overall forecast is for continued slow growth in the economy at about 1 percent annually. Both sales and rental markets have shown marked improvement since 1992 due to the continued economic growth and to the halt to the high volumes of speculative construction in the 1980s. Construction of sales units is primarily from contracts or custom building, except for several small-scale townhouse developments in planned communities. Communities planned around golf courses and waterfronts continue to be popular in the Williamsburg area and Chesapeake for the move-up buyer able to afford homes costing $200,000 or more. These areas are marketed nationally to retired military and other retirees able to afford homes in this price range. Some development of first-time homebuyer products is underway in outlying areas in the $70,000 range, but the overbuilding of townhouses in the 1980s for the first-time buyer saturated this market and has made builders cautious. The annual volume of single-family construction has dropped to about half the peak levels of the 1980s but is showing signs of stabilizing or increasing slightly this year. The rental market has also improved since 1992, when Operation Desert Storm pulled 40,000 troops out of the area and rental vacancies hit the double-digit range. Current rental vacancies are estimated at 7.8 percent, still indicating some market softness. Multifamily construction peaked at 4,200 to 8,300 units a year (1984 through 1988). Due to longer planning and startup periods, the brakes could not be applied as quickly to large projects once the economy started to cool. Apartments and townhouses continued to be added through the end of the decade resulting in market softening and builder losses on townhouse complexes. Apartment construction ground to a virtual halt in the early 1990s and, at present, the only apartment construction is either tax-credit projects or those built to appeal to a particular elderly market niche. Virginia Beach and Chesapeake continue to account for the bulk of sales construction, comprising 88 percent of all Tidewater development and half the metropolitan total. Within this framework, however, development has shifted since 1991 with more single-family construction in Chesapeake. This shift reflects the availability of land and water as well as improved accessibility due to highway construction. Much of the recent development has been geared to the move-up market, with new units priced over $150,000. There is some development for the first-time homebuyers priced in the $70,000 and 80,000 range being built in outlying areas (Isle of Wight and Suffolk), but even these areas have some high-priced development in areas near the water. Southeast Growth in employment in the Southeast continued to exceed that of the Nation as a whole during the second quarter. The construction and service sectors provided the biggest job growth. Georgia again led the way with a 5-percent increase in employment between May 1993 and May 1994. However, in April, Delta Airlines announced it will cut up to 15,000 jobs from its workforce by June 1995. About one-third of the airline's workers are based in Atlanta, and a proportionate local cut is expected. Florida, Mississippi, North Carolina, and Tennessee each had employment gains of 3 percent or more. Alumax, Inc., the third largest aluminum company in the United States, will bring 500 new jobs to Jackson, Tennessee, when it locates a new auto parts manufacturing plant there. In Knoxville, Ceramaspeed, an English company that makes heating elements for glasstop stoves, is expected to hire 400 employees over the next 3 years. South Carolina, Alabama, and Kentucky lagged behind the rest of the region with growth rates of less than 2 percent. But in South Carolina, Greenville and Spartanburg in the northwest corner of the State should continue to benefit from the construction of the BMW plant and its related suppliers moving into the area. The BMW plant is scheduled to move 400 employees into the new $400 million, 1.2 million-square-foot manufacturing center in Greer in early July. In Puerto Rico total employment increased by less than 1 percent from May 1993 to May 1994. The unemployment rate for May for five of the eight States was below the national average. North Carolina had the lowest jobless rate at 4.0 percent. Tennessee recorded a record low unemployment rate of 4.4 percent. The rate was above 6 percent in Puerto Rico, Mississippi, Florida, and South Carolina. Total residential building permit activity in the region in the second quarter was 17 percent greater than the first quarter of 1994. The number of units permitted in the region for the first 6 months of 1994 increased by 19.6 percent compared with the same period in 1993. Single-family activity of 149,475 units represented a 13.7-percent increase. Multifamily activity was up by more than 56 percent to 33,418 units. With over 14,000 multifamily units permitted through the first 6 months of 1994, activity in Florida far exceeds that of any other State in the Southeast. North Carolina comes in second with some 5,400 units. Within Florida the Fort Lauderdale, Miami, and Naples areas are the most active multifamily markets. In Georgia multifamily activity increased over 92 percent in the first 6 months of 1994. In Kentucky multifamily activity has picked up in Louisville with almost 686 units permitted. In Nashville, where apartment rents are rising and vacancy rates have declined significantly, 765 units had been permitted by the end of June. Outside the resort areas of Hilton Head and Myrtle Beach, the multifamily market remains sluggish in South Carolina. In Mississippi the number of multifamily units permitted quadrupled. The northern suburbs of Jackson are most active, and significant development is being planned for DeSoto County just south of Memphis. Birmingham, Florence, Tuscaloosa, Mobile, and Montgomery are contributing to multifamily activity in Alabama. Data on sales of existing homes indicate the sales volume for the first quarter of 1994 was up 17 percent compared with the first quarter of 1993. During the second quarter, existing home sales slippedas increasing interest rates began to impact the market. For 32 metropolitan areas for which information is available, the median sales price declined or remained the same in 20 of those areas between the fourth quarter of 1993 and the first quarter of 1994. From the first quarter of 1993 to the first quarter of 1994, the biggest increase was recorded in the Biloxi-Gulfport area where median home values soared by 19.1 percent. Birmingham, Louisville, Pensacola, and Tallahassee recorded increases of at least 10 percent. While sales of new homes continued strong through May, it is expected that June sales will also reflect the impact of increased interest rates. Information on delinquency rates of 1- to 4-unit residential mortgage loans indicates that the percent of loans with installments past due 90 days or more exceeded the national average of 0.75 percent in all States except Florida and Kentucky. Georgia, Tennessee, Mississippi, and Puerto Rico had the highest rates with more than 1 percent past due. Spotlight on Atlanta, Georgia Employment in the Atlanta metropolitan area continues to show strong growth, increasing by 5.5 percent in 1993 and 5.3 percent in the most recent 12-month period, well above the national rate of expansion. Job growth has been strong in business services and trade, traditional strengths of the Atlanta economy. Construction employment has responded to the strong recovery in the single-family housing market and the major construction projects associated with Atlanta's hosting of the 1996 Olympic games. Despite several recent high-profile layoff announcements by major employers (Delta Air Lines, Lockheed Aeronautical Systems Company, TWA, and IBM), employment growth in the metropolitan area is expected to remain relatively strong due to Olympics-related employment and several recent employment announcements related to Atlanta's emerging role as a telecommunications center. MCI is expected to add 1,000 jobs in Atlanta, Dial Page will add up to 400 new jobs, and Voice Com is transferring an undetermined number of jobs from the San Francisco area. Although absorption of office space in other major submarkets has increased recently, the vacancy rate remains very high, 24.4 percent, in the downtown area. The Atlanta MSA experienced a major rebound in single-family construction in 1993. Atlanta finished the year as the busiest single-family market in the Nation, with 32,000 units permitted. Single-family activity has remained strong in the first 6 months of 1994 despite the effect of rising interest rates. Through June single-family permits were 12 percent ahead of the same period in 1993. All of the major suburban markets have participated in the strong recovery, with the highest rates of growth occurring in the outlying counties. As of the first quarter of 1994, the median sales price of existing homes has increased modestly by about 6 percent to $93,200 compared to the same period a year ago. The Atlanta metropolitan area was severely overbuilt with multifamily housing in the 1980s. By 1990 the soft market conditions resulted in a virtual halt to construction. From 1989 to 1992, the rental vacancy rate in the area remained in the 11- to 12-percent range. There was little significant improvement in the rental market until the past 12 months. Almost all of the major suburban rental markets have significantly strengthened in the past year. Through the first 6 months of 1994, almost 2,700 multifamily units had been permitted in the MSA, compared with 940 units for the same period in 1993. However, vacancy rates continue to be excessive in some submarkets. Rental market conditions within the city of Atlanta remain unchanged. The market remains soft. The modest increase in population in the city expected over the next several years will help to absorb the existing surplus, but balanced rental market conditions are still several years away. In the first 6 months of 1994, permits were issued for only 200 multifamily units. The city hopes to bring residents downtown with plans to build at least 150 apartment units as part of a complex with retail shops near city hall. Midwest Employment growth in the Midwest has been unusually strong; Michigan, Ohio, Illinois, and Wisconsin experienced record nonagricultural employment in May, and Indiana and Minnesota near record job levels. Manufacturing continues to lead the region's economy. Residential building activity in the first 6 months of 1994 was strong overall, and apartment construction is showing signs of improvement after several years of low production. Private surveys of business conditions in June show continued strengthening of local economies in the Detroit and Milwaukee metropolitan areas. The region's employment outlook for the third quarter is robust, particularly in areas related to automobile and capital goods manufacturing. Record employment in Michigan reduced the unemployment rate to 5.7 percent in May, a 20-year low. Motor vehicle production in Michigan, which continues to boost the State's economy, is up 20 percent in the first 5 months of 1994. In suburban Chicago Motorola Corporation is planning to build a second plant for manufacturing cellular telephones that will employ 2,000 to 3,000 workers by the year 2000. Strong growth in construction and manufacturing employment helped lower Indiana's unemployment rate to 4.8 percent in May, a 4-year low. Over the next 2 years, Indianapolis will gain 500 to 600 jobs from 2 firms relocating to the metropolitan area--Alisun America, a tanning bed manufacturer, and Roadrunner Distribution Services, a trucking firm. Minnesota continues to have the region's lowest unemployment rate, 3.5 percent for May, and is gaining employment at a faster pace than the region as a whole--3 percent annually compared to 2 percent. Wisconsin's economy added 44,000 jobs during the 12 months ending May 1994, primarily in manufacturing, services, and construction. Single-family construction in the region in the first 6 months of 1994 was strong. Through June building permits were issued for 93,000 single-family units, a 12.4-percent increase over the comparable 1993 period and the highest level in more than 10 years. Stimulated by strong job growth, home construction in Michigan is up 26 percent over last year. All nine Michigan metropolitan areas showed increases in single-family activity in the first 6 months of 1994. Especially active was the Detroit metropolitan area, where single-family permits totalled 7,004 units, up 24 percent from a year ago. Ohio and Illinois also showed significant percentage gains in activity of 10 percent and 13 percent, respectively, and together with Michigan lead the region in volume of single-family construction. In Indiana single-family permit activity totalled 14,872 units through June, a 14-percent increase over the same period last year. Especially active communities are Fishers and Carmel in the Indianapolis metropolitan area. Wisconsin reported the smallest gain in single-family activity, a 7.4-percent increase, and Minnesota showed a slight 1.6-percent decline from last year. Homebuilders in Chicago's inner-city neighborhoods are using lotteries to select prospective buyers who qualify for the city's affordable housing program. More than 300 income-qualified buyers applied for 50 single-family units built in Chicago's Pilsen community, and the number of prospective homebuyers far exceeded the 28 affordable homes built in the uptown neighborhood since last August. Prices of new homes average $80,000 and are marketed to households with incomes between $25,000 and $35,000. About 200 affordable homes have been constructed under the city's new homes program during the last 3 years. Regionally existing home sales totalled 825,500 (SAAR) as of the first quarter, an 8-percent decrease from the previous quarter but a 6-percent increase over the first quarter of 1993. In the Chicago area, where mortgage rates for 30-year, fixed-rate loans increased by 2 percent since October 1993, homebuilders reported 34 percent fewer sales contracts in the last week of June compared to late October. In Minnesota the increase in rates resulted in a drop in HUD/FHA single-family mortgage insurance cases from 8,000 in October to 2,400 in May, primarily reflecting a decline in refinanced loans. The region's single-family home foreclosure rate improved in the first quarter, declining to 0.68 percent from 0.75 in the previous quarter. Multifamily housing activity in the region is significantly ahead of last year. In the first 6 months of 1994, permits were issued for 21,340 units compared to 18,900 in the same period of 1993, a 13-percent increase. Every State but Wisconsin shared in the increase. Multifamily housing volume in Indiana totalled 2,538 units in the first 6 months of 1994, up 27.5 percent from the same period a year earlier, and the highest number of units since 1990. In Minnesota multifamily housing activity increased 59 percent. Low vacancies and improving rents in the Twin Cities and Rochester metropolitan areas have stimulated builder interest in FHA multifamily insurance programs. In Ohio multifamily activity was up 21.7 percent in the first 6 months. Nearly 80 percent of the increase occurred in two markets--Columbus and Toledo. In Chicago's downtown rental market, where occupancy is 95 percent and rents have increased 7 percent to 10 percent since last year, a developer is planning 250 to 300 units of new rental housing and has inquired about HUD/FHA mortgage insurance. Throughout the region rental markets are generally strong. Private surveys of 23 market areas show occupancy in the 93- to 95-percent range in the second quarter of 1994, unchanged from the previous quarter. Spotlight on Columbus, Ohio Columbus' diversified economy provides stability without wide employment swings experienced by other Midwest cities. The six-county metropolitan area has enjoyed healthy job growth of 1.5 percent to 2 percent during the last 2 years. Computers, government, and health care are the fastest growing sectors of the local economy. Columbus' unemployment rate for May 1994, at 4.7 percent, was the lowest among Ohio's metropolitan areas. In 1993 Columbus ranked fourth in the Nation for corporate expansion. Banc One Corporation is expanding its headquarters, adding an estimated 1,800 jobs; CompuServe, an online computer service based in Columbus, is increasing its workforce by 300. The city's foreign trade zone in south Columbus and computer-linked business center for North America (Info Port) are attracting new companies to the metropolitan area, many to Rickenbacker Air Industrial Park on thecity's south side. A global trade summit planned for October is expected to boost the Columbus economy. Scheduled attendees include the United Nations Secretary General and the U.S. Secretary of Commerce. Spiegel Company completed construction of a catalog distribution center at Rickenbacker, which will employ 1,500 to 2,500 persons. An $8 million welding center, run jointly with the Edison Welding Institute and the U.S. Navy, also will be located in Columbus. The center will focus on producing high-quality, low-cost parts for the military. Single-family construction in the metropolitan area in 1993 was strong. Building permits were issued for 7,500 units in 1993 compared to 6,600 in 1992 and 6,000 in 1991. The upward trend continued into 1994, with single-family permits in the first 6 months increasing by 7 percent over the same period in 1993. Especially active areas are Dublin, Grove City, Gahanna, and Westerville in Franklin County, areas experiencing significant population growth. Since 1989 homeownership has increased at a faster pace in the Columbus area than in other Midwest communities, due partly to renters taking advantage of low mortgage rates and Columbus' affordable housing stock. The median sales price for existing single-family homes in the first quarter of 1994 was $92,800, up 6 percent from the same period last year. In 1993 FHA insured over 8,300 homes in the Columbus MSA for a total mortgage amount of $588 million. Included in the total were 1,436 new homes with a total mortgage amount of $122.2 million. FHA single-family insurance activity in the area in fiscal year 1994 through March is 59 percent greater than the same period in fiscal year 1993. After several years of low production, apartment construction is showing signs of improvement. Multifamily housing volume in the metropolitan area in 1993 totalled 3,800 units compared to 2,900 in 1992. Building permits in the first 6 months of 1994 were issued for 1,629 multifamily units, up 15 percent from the year earlier period. Increased multifamily production is occurring primarily in suburban areas where occupancy is 95 percent overall and rents are increasing by 3 to 4 percent annually. In west suburban Columbus, a HUD/FHA-insured rental project of 160 units achieved 97-percent occupancy in 7 months. New rental developments in suburban communities are drawing tenants from the city of Columbus, which has caused increased rental vacancies on the city's north side. Southwest Employment growth in the first 5 months of 1994 averaged 2.8 percent in the Southwest region. New Mexico again led the region with 4.3 percent. All job sectors in New Mexico were up, with the biggest gains recorded in services, trade, and construction. Texas had the second highest percentage growth, 3.2 percent. Almost 37 percent of the 238,000 new jobs created in Texas in the last 12 months were in services. Employment increased 2.3 percent in Arkansas, and in Oklahoma and Louisiana by less than 1.5 percent. Residents of Louisiana hope that the 16 new gaming facilities that began opening early in 1994 will replace some of the jobs and revenue lost in the oil and gas industry. Yet to come, the world's largest gaming facility in downtown New Orleans. Some experts worry that the market may not support all of the gaming facilities either already operating or under construction in the Gulf Coast area, especially if Texas legalizes gambling in some of its major metropolitan areas. During the first 6 months of 1994, single-family building permit activity in the Southwest (53,650 units) increased 17.3 percent over the same period in 1993. Activity increased in every State, with New Mexico leading (38.2 percent), followed by Arkansas (18.1 percent), and Texas (15.2 percent). Existing home sales in the first quarter of 1994 surpassed 1993 first quarter sales in all five States with the highest increase in Louisiana (22 percent) and the lowest in Arkansas (7.6 percent). From the first quarter of 1993 to the first quarter of 1994, the median sales price of existing homes increased in all major metropolitan areas in the Southwest. The largest percentage gains were in Oklahoma City at 11.6 percent and in Austin/San Marcos, Texas, at 10.3 percent. Shreveport and New Orleans, Louisiana, had the smallest increases, 4.1 percent and 3.3 percent, respectively. The very limited apartment construction in most major metropolitan areas over the past several years has allowed rental occupancy rates to climb to between 90 and 95 percent--high enough to justify new construction. Reflecting the recovery in the region's economy and substantial improvement in the major rental markets, multifamily building activity continued to increase dramatically in the first 6 months of 1994. Multifamily units permitted totalled 18,346, a 116-percent increase over the same period in 1993. Activity more than doubled in every State but Louisiana, which saw a decline. Texas, with 77 percent of all multifamily units, and Arkansas, with 13 percent, continued to dominate apartment construction in the Southwest. Dallas, Houston, Austin, San Antonio, and El Paso lead the region in construction. New apartments are also being built in booming areas, such as the border towns of Laredo and McAllen, the Fayetteville-Springdale-Rogers area in northwest Arkansas, and Albuquerque, New Mexico. In Austin and Albuquerque, rental occupancy remains in the 97- to 98-percent range, but current and planned construction is likely to bring these markets more in balance within the next year. Spotlight on Houston, Texas Houston, the oil and gas capital of the world, is home to NASA, the Port of Houston, and one of the largest medical centers in the United States. All these industries face uncertain futures. Dramatic fluctuations in world oil prices, technological advances, and a continuing decline in the domestic oil industry have continued to reduce energy-related employment. Job losses have moderated of late, but higher world oil prices are unlikely to translate into new employment as oil companies continue to emphasize cost cutting. A revised version of NASA's space station narrowly escaped cancellation for yet another year. Employment growth in the world-class Houston medical sector is anticipated to slow as technological advances and managed care drive efficiency measures. For the first 5 months of 1994, nonagricultural wage and salary jobs were up 30,000 (1.8 percent) over 1993, in line with the increase between 1992 and 1993. Relatively lower-paid service and trade jobs continue to be generated. Casino gambling is being considered as a possible economic catalyst for downtown Houston and several Gulf Coast locations. Prison construction is also under discussion. The North American Free Trade Agreement (NAFTA) with Mexico, Canada, and the United States should strengthen the Houston economy. The Port of Houston is the United States' main port for imports and exports with Mexico. An estimated 85 percent of all international visitors to Houston last year were from Mexico. The Houston Multiple Listing Service (MLS) reports that the 34,776 homes sold in 1993 was the highest number since 1988 when sales were driven by the huge inventory of bargain-priced foreclosed homes in the area. The trend in sales activity has continued in 1994, fueled by low interest rates and affordable home prices. Sales for the 12-month period ending May 1994 totalled 32,825. In the first quarter of 1994, the median sales price of $84,800 for existing homes in Houston was one of the lowest of the top 20 metropolitan areas in the country. Only Pittsburgh andDetroit showed lower sales prices. In the first 6 months of 1994, single-family permits in the Houston metropolitan area totalled 6,100 units, up 9 percent from the same period in 1993. Homebuilding activity has been concentrated in the fast-growing areas of Fort Bend County to the west of the city of Houston and in the NASA/Clear Lake area to the southeast of Houston. Commercial real estate construction, located primarily in west and northwest suburbs of the metropolitan area, increased 10 percent in 1993. From 1991 through 1993, multifamily activity in the Houston area has averaged 3,025 units annually. In the first 6 months of 1994, the number of multifamily units permitted totalled 3,517, compared with 3,150 units for all of 1993. As a result of this increased activity, approximately 6,600 new units may enter the market in late 1994 and early 1995. Nearly all of these projects are targeted to the upscale rental market. Current occupancy in the rental market is about 92 percent. Given limited job growth in the Houston area, even the modest number of new units under construction may lower occupancies and limit rent increases over the next 12 months. Great Plains Total nonagricultural wage and salary employment in the Great Plains region grew 2.2 percent in 1993, with 118,300 jobs being added. Employment growth has continued in 1994 at an even faster rate, 2.8 percent from May 1993 to May 1994. Missouri, which has grown at an annual rate of 3.2 percent, provided the bulk of the job growth so far in 1994, with 74,300 additional jobs. Nearly half of the growth has been in the services category, which expanded by 34,400 jobs. Employment growth in the St. Louis area has accounted for 83 percent of the increase, or 28,680 jobs. Construction, retail trade, health services, and business services all have shown strong gains in employment in St. Louis. Bolstering construction employment are construction of the Kiel Center hockey facility and the 70,000-seat capacity indoor stadium addition to the St. Louis Convention Center. In addition, renovation and retooling of Chrysler, Ford, and General Motors automobile assembly plants have added to area construction employment. Iowa, which grew at a 2.8-percent rate, had the second fastest growth rate in the region, adding 34,550 jobs. Growth in the services category added 10,500 jobs to the employment level. In 1993 the 2-year downward trend in manufacturing jobs was reversed. For the first 5 months of 1994, manufacturing jobs were 7,100 above the comparable 1993 period. In Kansas wage and salary employment increased by 29,100. By adding 11,900 jobs, services accounted for a substantial share of the growth. Retail trade and State and local government added 7,400 jobs between them. Nebraska, which grew at a 1.8-percent rate, had the slowest growth rate in the region. Agriculture is in a much improved condition this year as compared to a year earlier when the 1993 flood caused major agricultural damage. In 1994 the situation is considerably different because rain has not delayed planting and weather conditions have generally been favorable. Early reports indicate that excellent yields are anticipated. During the first 6 months of 1994, permits for new residential construction in the Great Plains region increased 18.1 percent above the same period in 1993, slightly less than the national increase of 18.9 percent. Single-family units set the pace with 22,778 units permitted, an 18.9-percent increase over the 1993 level of 19,164. The gain in single-family construction ranged from 22.7 percent in Missouri to 4.4 percent in Nebraska. Activity in Kansas and Iowa showed strong increases of 21.8 and 17.1 percent, respectively. Multifamily activity in the first 6 months of 1994 totalled 5,816 units, an increase of 15 percent. The relatively low level of multifamily activity and slow recovery reflect the slow population growth of the region, as well as the lingering effects of overbuilding in the 1980s. The improving economic conditions and continued low levels of construction are gradually reducing excess vacancies. Many rental markets remain somewhat soft, but concessions are lessening and small rent increases are occurring in most parts of the region. Spotlight on Topeka, Kansas Government is the largest employer in Topeka, the capital of Kansas, accounting for 25 percent of all wage and salary employment. The next largest source of jobs is the health care industry with 10 percent. State revenue declined in the 1980s because of sharp downturns in three main statewide industries--agriculture, oil and gas production, and aircraft manufacturing--greatly limiting growth in State government employment. Employment growth in the medical field also slowed in the 1980s. Since 1990 employment growth has increased somewhat from the pace of the 1980s. Wage and salary employment has risen by an annual average of almost 1 percent, led by services and government. In the 12 months ending in May 1994, employment growth has increased to 2.4 percent. This has been the broadest and largest increase in the 1990s, with increases in manufacturing and all nonmanufacturing industries except government and finance and real estate. The steady economic growth is reflected in a moderate rise in housing production. Construction of single-family units rose to a total of 606 units in 1993, just under the high of the past 15 years. The authorization of 322 units in the first 6 months of 1994 is at a level that could surpass the previous record. The local real estate board reports that more units are sold each month on fewer listings and that the number of sales have increased over each of the past 5 years. Sales in 1993 totalled 2,400 and the median sales price was $67,500. Construction of multifamily housing since 1990 has been limited to 2- to 5-unit buildings and small projects of under 100 units financed with tax credits. A 120-unit apartment project for the elderly was financed with an FHA-insured loan. As a result of the low level of production, averaging less than 200 units annually, the rental market has tightened slightly. The vacancy rate, however, recently increased from 4 to 5 percent, primarily the result of families taking advantage of low mortgage rates to buy homes. The low level of rental housing construction should cause the rental vacancy rate to decline once again in the coming year. Rocky Mountain Recent employment gains in Rocky Mountain States have kept up the strong pace set in early 1994. Manufacturing gains remain modest but construction continues to expand in all States except Colorado. Colorado's construction employment is down by a modest 1,500 jobs from 1 year ago. The size of the decline is remarkable since the workforce at the $3.2 billion Denver International Airport is down to under 400 from its peak in mid-1993 of 11,000 workers. Utah's construction job level is up over 20 percent from last year. This helped boost Utah's total employment increase to 6.7 percent, the highest among Rocky Mountain States. Colorado and South Dakota posted annual gains of over 3 percent, while Montana's and North Dakota's gains were closer to 2 percent. May unemployment rates ranged from 2.9 percent in South Dakota to 6.0 percent in Wyoming. May rates were down in all States except South Dakota and Utah; small increases occurred in these two States. Wyoming's rate was equal to the U.S. rate; all other States have rates well below the national rate. Gains in building activity during the first half of 1994 are ahead of the pace for 1993. Total activity in the Rocky Mountain region in the first 6 months of 1994 was up 31.3 percent from the same time period in 1993. The number of single-family permits issued was up 35.5 percent. Multifamily activity for the year to date is 14.5 percent greater than the same period in 1993. Multifamily activity picked up considerably in Colorado in April and May, but the year-to-date activity is still higher in Utah at 2,205 units. Both States should show continued increases throughout the summer. Single-family activity also is booming in Colorado and Utah. The present rate of permit activity in Colorado, 15,377 units, would push the 1994 total above the peak of the past decade reached in 1983. Utah's 1993 single-family total exceeded the peak of the past decade and the number issued so far in 1994, 10,686 units, is 53 percent ahead of that pace. Most major rental markets remain tight or balanced. Denver's apartment vacancy rate has levelled out in the 4- to 5-percent range as new apartments in initial rent-up have pushed vacancies up in the short run. Rental markets in Salt Lake City and Colorado Springs remain very tight. The latest surveys in these two areas both show apartment vacancy rates of less than 3 percent. Rent increases have eased somewhat but remain well above the overall rate of inflation. Home sales in the first quarter of 1994 were up from 1 year ago but markets vary widely by State. Sales in Utah were 23.7 percent ahead of 1 year ago while activity actually declined in South Dakota. Colorado sales were 14.4 percent ahead of the pace a year ago and Wyoming posted a 17.5-percent gain in sales. Sales were up a modest 2.9 percent in North Dakota and 8.9 percent in Montana. The median sales price was up 15.5 percent in Denver and increases were also high in Salt Lake City (19.0 percent), Fargo (16.2 percent), and Colorado Springs (10.6 percent). Spotlight on Denver, Colorado Employment in the Denver area was up 3.5 percent in 1993 after a 2.6-percent gain in 1992. The construction industry again posted the largest percentage gain among major employment sectors. Gains in several nondurable manufacturing sectors failed to offset continued layoffs in the aerospace industry. Expansion in the trucking industry helped produce a modest gain in transportation. The recent increase in population in-migration has helped boost the trade sector to its highest annual growth rate of the past 10 years. Finance, insurance, and real estate posted strong gains. The services sector led all industries with a gain of 10,900 jobs. Engineering and management service firms have consistently contributed to gains in services during the past 2 years. The surge in job growth in 1993 brought the unemployment rate down to 4.7 percent for the year. In May 1994 the unemployment rate remained at a modest 4.8 percent. The construction of the $3.2 billion Denver International Airport (DIA) provided a substantial economic boost to the Denver area in the early 1990s. The onsite workforce expanded slowly after ground breaking in 1989 but was up to 3,000 workers by mid-1992. The construction workforce jumped to a peak of almost 11,000 by mid-1993 and has decreased steadily since then. At present there are under 400 workers, most finishing work on tenant retail establishments. Despite the drop in construction jobs, the Denver economy remains vigorous. As airport construction has wound down, other projects such as the Denver Public Library expansion, Coors Field, and a light-rail transit system have kept the construction sector active. These projects have not replaced all the jobs lost at DIA but the declines in overall construction employment have so far been modest. Denver's expansion has continued in 1994 but the growth rate has slowed slightly to about 3.2 percent. Job gains in business services continue to push the services sector to impressive gains. The local economy still faces layoffs at the Rocky Flats nuclear trigger production plant and a reduction at Continental Airlines, but much of this will be offset by the addition of manufacturing jobs at Martin Marietta. Existing home sales have been increasing since 1988 but the number surged in the past 2 years. Sales were up 26 percent in 1992 and 15 percent in 1993. Price gains have accelerated for single-family homes. During 1991 and 1992, the average price was up about 6 percent. The average for 1993 was $126,200, up 9.6 percent. During the first half of 1994, sales have continued to increase but the rate of increase has slowed to 9 percent. For the first time in years, active listings in June 1994 were up from 1 year ago. Construction of new homes has increased in each of the past 4 years. Permits were up 25 percent in 1993 after a 50-percent increase in 1992. This increase has continued in the first 6 months of 1994; single-family permits are up 32 percent from the same time period in 1993. The increases in sales and building activity, coming on top of a wave of refinancing, have substantially boosted FHA home mortgage activity in the Denver area. The number of homes insured in 1993 was more than double the number in 1990. The overall Denver metropolitan area rental market is reasonably balanced. The metropolitan area vacancy rate has levelled out and remained in the 4- to 5-percent range since mid-1992. The vacancy rate of 4.9 percent in the second quarter of 1994 is up slightly from the first quarter and up from the 4.2-percent rate of a year ago. The recent increase was caused primarily by recently completed apartments in initial rent-up. Rents are increasing but the pace has slowed since late 1992. About 1,600 apartment units have been completed in the immediate Denver area in the past year. Projects have successfully preleased units and most are occupied as soon as they are completed. Virtually all of these units and units now under construction are in the top end of the market. Large units, extensive community facilities, washers and dryers in units, and attached garages have become more typical. This concentration of units at the top of the market is likely to cause increased competition in 1994 and 1995. A major softening of the market is not expected, but some concessions or discounts are likely. Demand for more moderately priced units remains strong. There are about 2,400 apartment units now under construction, and this number should increase significantly by midyear. This pace of construction should allow the market to maintain a reasonable balance, but it will become more competitive. Reflecting the increased competition and large pipeline of units under construction, multifamily permit activity in the area has declined substantially. In the first 6 months of 1994, permits were issued for 900 units compared with over 1,525 units for the same period in 1993. Pacific Performance of the California economy was mixed in the second quarter. Modest increases in services and construction have been offset by continuing erosion of durable manufacturing, particularly aerospace and defense. Seasonally adjusted employment has been level in the first half of the year. Nonagricultural wage and salary employment in the second quarter was off by about 70,000 jobs over a year earlier. Only the Central Valley and some smaller inland metropolitan areas have gained jobs over the last year. The June unemployment rate of 8.3 percent has improved considerably from its peak of over 10 percent in January. Arizona continued its strong economic performance in the second quarter, with nonagricultural wage and salary employment up about 60,000 jobs or 3.8 percent over the second quarter of 1993. The gains are concentrated in services, especially health and business services, retail trade, and construction. Construction employment has been up for 27 months but the year-to-year gain is beginning to moderate. Manufacturing and government have been only modest contributors to growth. Phoenix and Tucson are growing at similar rapid rates. As of the second quarter, Nevada added an average of about 46,000 jobs over the last 12 months, a 6.9-percent increase. Las Vegas has the highest growth rate in the country in percentage terms. Another round of casino hotel construction in Las Vegas and rapid in-migration created strength in hotel-gaming- recreation services and construction, though job gains are broadly based across sectors. Las Vegas dominates the growth of the State, but Reno is also gaining jobs in excess of national rates. The tourist industry in Hawaii is beginning to rebound, as the May visitor count was up moderately, the fourth consecutive month of improvement. The weakening dollar is assisting overseas tourism. Yet the Hawaiian job base continued to erode slightly in the second quarter, with declines primarily in construction, military spending, and sugar production. Nonagricultural wage and salary employment was off 2.1 percent or 11,400 jobs in May compared to a year earlier. The largest drop took place in Honolulu. Residential construction is advancing moderately in California. The number of single-family units authorized was up 13.3 percent in the first 6 months of the year, below the national rate of 15 percent. The San Francisco Bay area, Sacramento, and most Southern California areas increased sharply. Permits were off significantly, down 20 percent in Los Angeles due to the sluggish economy and earthquake disruption. Multifamily activity in the State showed some slight improvement. In the first 6 months of 1994, permits were issued for some 9,400 units compared with 7,900 for the same period in 1993, and 14,300 units for all of 1993. However, market conditions in many areas of the State still do not favor new construction. Rising demand has fueled dramatic housing construction in the major markets of Arizona and Nevada, where single-family permits were up 40.5 and 39.2 percent, respectively, through June. As with their employment growth, these States are showing among the country's greatest increases this year. In multifamily activity the number of units is almost double in Arizona and almost triple in Nevada than that of the first 6 months of 1993. The Las Vegas area consistently leads the Nation in per capita production of single-family units. Hawaii production trends are mixed but up moderately overall, with single-family permits lagging behind last year's level and the dominant multifamily sector up sharply. The California sales market solidified its strong recovery with second quarter existing sales up 24 percent from a year earlier. Statewide the median sales price has been fairly stable recently at around $184,000, off about 2 percent from the second quarter of 1993. The improvement is broadly based, as most areas of the State are displaying double-digit sales gains year to year. While the level of sales is considered strong, it is nonetheless off slightly from the first quarter, consistent with a modest impact of rising interest rates. Sales of new and existing homes improved sharply throughout the rest of the region during the first half of the year. In Arizona existing sales are expected to surpass the record set in 1993. In Nevada sales are up over 50 percent in early 1994. These areas continue to attract in-migrants from California, as well as other parts of the country. In Honolulu existing sales are up over one-third in the second quarter compared to the same quarter of the previous year. Rental markets in California remain balanced to soft. The San Francisco Bay area rental market is balanced, with a vacancy rate of around 6 percent. The Fresno area is balanced, while Sacramento remains on the soft side with about an 8-percent vacancy rate. The Los Angeles area remains slightly soft where the overall rental vacancy rate has been rising steadily for the last 4 1/2 years and is currently around 7 percent, with some submarkets reporting higher rates. The Lancaster-Palmdale submarket in north Los Angeles County is much softer with a vacancy rate of around 14 percent, primarily a result of the aerospace-defense cutbacks. To the south, the rental market in Orange County is more balanced with a vacancy rate around 5 percent. San Diego's rental market is also somewhat soft with an rental vacancy rate in the 7 percent vicinity. The rental market in the northern part of San Diego County continues to be significantly softer than the county as a whole. A combination of military cutbacks, a weak regional economy, and past overbuilding have resulted in a soft market in both the Riverside and San Bernardino areas with rental vacancy rates in the 13- to 14-percent range. Spotlight on Phoenix, Arizona The Phoenix metropolitan area, comprising Maricopa and Pinal Counties, displays economic growth among the Nation's highest. June nonagricultural wage and salary employment was up almost 42,000 jobs since June 1993, a 4-percent increase. An unemployment rate of 4.9 percent was below the national level. Most job gains occurred in services, mainly business and health services, retail trade, and construction. The latter sector added 10,000 jobs over the past year because of the boom in single-family home construction. Employment in State and local government declined, while manufacturing showed modest growth due to strength of high-tech industries and building-related manufacturing. The area is a leading center for high technology, notably semiconductor fabrication, instruments, and communications equipment. Intel recently decided to build a semiconductor plant near its existing facility in Chandler. When completed the plant will provide 2,000 jobs. Continued rapid and diversified job growth is projected in the Phoenix area for the remainder of the year. As a result of the rapid economic expansion and continued attraction of the area for retirees, population growth has increased significantly. Arizona State University (ASU) estimates in-migration to the area in the first quarter of 1994 alone of 11,000 people compared to an average 7,000 persons per quarter from 1987 to 1993. The current level of in-migration is expected to continue through 1995. California is the leading source of new residents, but the area is also drawing heavily from other surrounding States and the Midwest. The employment growth is supporting an extremely strong housing market. The Phoenix metropolitan area is fourth highest in the country in units permitted in relation to its population. About 98 percent of the building activity within the two-county metropolitan area occurs in Maricopa County. Total housing units authorized in the first 6 months of the year were up 48.6 percent over the same period in 1993. Single-family production comprises about 87 percent of the activity. During the first 6 months of 1994, permits were issued for 15,351 single-family units, a 43-percent increase over the comparable 1993 period. Sales in the first 6 months of 1994 have topped those for the same period in 1993, which was the record year for home sales. Existing home sales for the second quarter are 33 percent greater than this time in 1993. New home sales did even better, up around a half. Sales are strongest in the Southeast Valley, a center of employment growth. The median single-family sales price in June was about $89,000, up only 2 percent from $87,000 a year earlier. ASU estimates a median sales price of $117,000 for a new single-family detached home in the area, a moderate 4-percent increase over a year earlier. Some upward pressure on new sales housing prices is expected to occur due to the reduced supply of bargain-priced subdivision lots from distressed lenders, increasing land prices, and reported shortages of skilled building labor. Employment and in-migration have supported rental demand as well as single-family sales. Just a few years ago, the rental market was still massively overbuilt with 15-percent vacancy rates, a major factor in the collapse of the local savings and loan industry. The rental market in the Phoenix area is currently balanced but tightening. The overall vacancy rate has declined to about 6 percent. Some submarkets such as northwest and west-central Phoenix are still relatively soft with rates in the 7- to 8-percent range. The market is much tighter in the fast-growing southeast area where rates of less than 4 percent are common. With many builders and lenders still wary of apartments and single-family sales so impressive, multifamily construction is still relatively low, though clearly on the upswing. From 1990 through 1992, multifamily activity averaged 1,600 units annually. In 1993 2,257 multifamily units were permitted and activity in just the first 6 months of 1994 totalled 2,395 units. Northwest Employment growth in the Northwest was strong throughout 1993 and the first quarter of 1994, but has remained basically unchanged during the second quarter of 1994. For the past 12 months, employment increased by an estimated 98,200, or 2.3 percent. This increase reflected an annual rate of 5.2 percent in Idaho, 2.9 percent in Washington, 2.7 percent in Oregon, and 1.9 percent in Alaska. In Washington growth has stopped recently because of the continued downsizing in the aerospace industry. Boeing is cutting close to 7,000 jobs throughout its Puget Sound workforce during 1994. Since 1990 employment in the industry has declined by almost 24,000. Rising interest rates and stalled economic conditions this quarter had no visible impact on single-family building activity, as measured by building permits. Approximately 31,100 single-family units were permitted in this region during the first 6 months of the year, 16.1 percent greater than the same period in 1993 and slightly above the national growth rate of 15 percent. The increase in single-family activity ranged from 20.7 percent in Washington (with 17,492 units) to 2.3 percent (787 units) in Alaska. The 8,291 single-family units in Oregon represented a modest increase of 7.1 percent. Single-family activity in Idaho, primarily Boise, continues strong with 4,700 units permitted, a 19.1-percent increase over the comparable 1993 period. The primary reason for the continued strength in the housing market is the significant in-migration during the past 6 years, mostly from California. The Census Bureau estimates that the population of every State in the region will grow by at least twice the national rate of 11 percent from 1990 to 2000. At present, strong employment growth and housing demand tend to be concentrated in a few major markets: Portland-Vancouver, Spokane, Richland-Kennewick-Pasco (the Tri-Cities), and Boise. Single-family sales volume was significantly ahead of the same period a year ago in all major market areas except for Salem, Oregon. Home sales were up 42.2 percent in Seattle, 26 percent in Tacoma, 19.5 percent in the Tri-Cities, and 18.9 percent in the Portland-Vancouver area. Four metropolitan areas in this region--Spokane, Boise, Eugene-Springfield, and Portland--ranked among the top 16 U.S. markets with the greatest percentage change in median sales prices for the 12-month period ending in March. In Spokane, the median price increased 14.7 percent to $90,700; in Boise, 12.6 percent to $97,300; in Eugene-Springfield, 12.1 percent to $90,100; and in Portland, 11.6 percent to $111,200. FHA single-family mortgage insurance activity in this region also increased dramatically during the past year and a half. Between 1990 and 1992, FHA activity declined nearly 38 percent as a result of high interest rates and inadequate maximum mortgage limits. In 1993 approximately 47,085 units were insured and it appears that activity in 1994 will surpass last year. During the first 6 months of 1994, 33,398 FHA loans have been insured. Rental market conditions in the major markets in Oregon, Idaho, and Alaska remain balanced to tight. In contrast market conditions were mixed throughout Washington. The rental market in the Tri-Cities remains tight with rents increasing by 10 percent or more when units turn over. Tacoma and Bremerton are slightly soft with vacancy rates over 6 percent. The soft market in Bremerton is the result of declines in the military and defense industry. The rental market in Bellingham is softening due to the impact of the recession in Canada and the subsequent significant decline in retail trade and services related to cross-border shopping. Rents in these three areas have been flat over the last 12 months and the use of concessions is on the rise. The rental vacancy rate remained unchanged at 5.9 percent in Seattle and has declined slightly in Spokane to 5.0 percent. The number of multifamily housing units permitted in the first 6 months of 1994, 9,322, represented a 30-percent increase compared to the same period in 1993. Except for Alaska all States showed an increase. Activity increased 66 percent in Oregon, 47 percent in Idaho, and 15 percent in Washington. Over 70 percent of the multifamily activity in Oregon was in Portland. Spotlight on Portland-Vancouver The Portland-Vancouver PMSA has experienced significant economic growth since 1990. Diversity of the manufacturing base and service industries accounts for some of this area's employment success story during the 1990s. Of equal importance is the Portland-Vancouver area's attraction as a desirable urban environment for families and retirees. Nonagricultural wage and salary employment growth has averaged about 2.0 percent annually during this period. Recently the rate has accelerated to 2.5 percent per year. Since the second quarter of 1993, 19,650 jobs have been added. During the second quarter of 1994, the seasonally adjusted unemployment rate averaged 4.6 percent, 1.3 percentage points below the previous quarter. Construction employment was up by 3,300 jobs over the past 12 months as new construction in the residential sector as well as such projects as the 20,000-seat professional basketball arena and 20-mile westside light-rail project continued the strong demand for construction workers. Employment growth in electronics topped 2,000 jobs, in part, due to hiring at Intel's Hillsboro facility and Hewlett-Packard's plant in Vancouver. In the services sector, growth since 1990 has added nearly 56,000 jobs to the Portland-Vancouver economy. During that period wholesale and retail trade accounted for nearly 4,200 jobs created in the service industries, while finance and social services added 1,000 jobs each. Since the second quarter of 1993, 12,700 service jobs have been created. In response to steady job growth in the local labor market, population growth has been increasing annually at an average of 44,000 persons. As of July 1, 1993, the population of the area was estimated to be 1,647,000. Approximately two-thirds of the growth in population is due to in-migration. California is the leading source of new residents, but the area is also drawing heavily from Washington State and the remainder of the West. Data from local multiple listing services reflect the sustained strong sales market conditions in the Portland-Vancouver area. Between 1990 and 1993, the median sales price for existing homes in the metropolitan area went from $79,500 to $106,000, a 33-percentincrease. Sales of single-family homes during the second quarter of 1994 totalled 6,763, up 19 percent compared to the same quarter a year ago. Active listings totalled 10,897 homes, down 10.7 percent from the 12,200 homes for sale 1 year ago. Market supply at the end of the quarter stood at 4.8 months, considerably below the 6.4 months of supply reported for the second quarter of 1993. Single-family permit activity remained strong during the first 6 months of 1994, with 6,150 units authorized, a 19.1-percent increase over the same period 1 year ago. Activity in the second quarter of 3,368 units marked the highest quarterly total since 1988. Not since the multifamily boom of 1989 and 1990, when apartment production averaged around 2,000 units quarterly, has the market been so active. In 1991 and 1992, multifamily activity averaged about 2,900 units annually. In 1993 permits were issued for 3,100 units, and in the first 6 months of 1994, permits have been issued for some 2,100 multifamily units. The Portland-Vancouver rental market has rapidly absorbed new units entering the market. The estimated areawide rental vacancy rate as of the second quarter of 1994 was 4.5 percent, up slightly from the previous quarter's 4.1 percent. However, absorption of the increased supply of apartment units is expected to continue at a satisfactory rate in view of the current population growth rates. 1. As noted in Table 25, the CPS estimates after 1993 cannot be compared to the pre1993 estimates because the older estimates are based on sampling weights derived from the 1980 census and have no undercount adjustment. These rates and the other rates discussed below have confidence intervals from sampling of about +/- 0.4 percentage points, plus unknown errors from nonsampling sources.