MENU TITLE: U.S. Housing Market Conditions Series: PD&R Published: August 1995 U.S. Housing Market Conditions U.S. Department of Housing and Urban Development Office of Policy Development and Research 2nd Quarter 1995 August 1995 Summary Housing production declined again in the second quarter of 1995, as measured by housing permits, starts, and completions. However, the continued decline in mortgage interest rates had at least two salutary results: new home sales increased smartly in the last 2 months of the second quarter, and the homeownership rate in the second quarter increased more than at any time in the last 16 years. o Housing production has so far stubbornly refused to rebound, despite a decline of more than 100 basis points in mortgage interest rates in 6 months, just as it previously had refused to decline in the face of rising interest rates. Housing permits were down 1 percent in the second quarter after an 8-percent decline in the first quarter. Housing starts were down 3 percent after a 14-percent decline. Housing completions were down 6 percent after no change the quarter before. o An exception to the decline in housing production seen in conventional housing was the continued increase in manufactured (mobile) home shipments and placements. Shipments were up 5 percent in the second quarter, following a 10-percent increase in the first quarter. Placements were up 4 percent, following a 10-percent increase the previous quarter. o Single-family permits were down 1 percent in the second quarter, following a 9-percent decline in the previous quarter. Single-family starts were down 3 percent and 15 percent in those same quarters. o New home sales rose 11 percent in the second quarter (driven by a 19-percent increase from April to June), following a 10-percent decrease in the first quarter. Most of these sales appeared to be drawn from builders' completed inventory, improving the inventory overhang by 16 percent. o Multifamily (five-plus) permits declined 2 percent in the second quarter, after a 5-percent decline the previous quarter. Multifamily starts appeared to soften somewhat in the second quarter after a 12-percent decline the quarter before. The market absorption of newly completed rental apartments declined in the second quarter after softening the prior quarter; declining interest rates also seem to be reducing the demand for rentals, taking some of the bloom off multifamily construction for the rental market. o The homeownership rate increased by half of a percent in the second quarter to 64.7 percent. The last time an increase this large or larger occurred was in 1979. o The recent increase in homeownership was not dependent on new production. Inventory estimates show an increase of 618,000 in owner-occupied units and a decrease of 458,000 in renter-occupied units. Clearly, the increase in homeownership occurred as the result of conversion of existing rental units to owner occupancy. ------------------------------ New in this issue This issue contains six new Historical Data tables. Three of these new tables contain data on household formation and demographics that play key roles in housing demand: Table 24 presents the net change in number of households by age of householder, Table 25 shows net change by type of household, and Table 26 contains net change in number of households by race and ethnicity of householder. The other three new tables present new information on homeownership based on special tabulations by the Bureau of the Census: Table 30 shows homeownership rates for regions of the country and metropolitan status, Table 31 presents homeownership rates by race and ethnicity, and Table 32 contains homeownership rates by household type. With the addition of these tables, the numbering of the tables from the May 1995 issue has been altered. ------------------------------ Regional Perspective Home sales in the second quarter have been slower than last year in almost all regions; however, sales rebounded late in the quarter, and continued improvement is expected into the Fall. Sales of moderately priced homes to first-time buyers are showing the most improvement. Homes sold to move-up buyers in the higher price ranges are moving much more slowly. Builders have cut back to clear their inventories, as reflected in the lower building permit totals. New England, New York/New Jersey, and the Southwest regions showed the smallest declines in single-family units permitted. Multifamily housing building activity continues to show strong increases throughout much of the country. The exception is California, where rental markets are still weak. The Southeast, Rocky Mountain, and Northwest regions show the strongest gains, with the number of multifamily units permitted in the first half of 1995 up more than 30 percent from the first half of last year. In the Midwest the number of multifamily units authorized in the first half of 1995 was the highest 6-month total since 1990. In the Atlanta, Dallas-Ft. Worth, Denver-Boulder, and Phoenix areas, multifamily building activity has more than doubled. While most rental markets are balanced and some are tight, occupancy has declined during the second quarter, as a large number of new units have entered the market. In the Southeast and Southwest regions, rental market conditions are expected to continue to soften somewhat over the remainder of the year. Vouchers and Certificates: How Well Do They Work? Both the Administration and Congress are considering proposals that would dramatically alter how the Federal Government provides housing assistance to low-income households. Beginning with public housing in 1937 and continuing with new programs in the 1960s and 1970s, the Federal Government subsidized the construction and rehabilitation of rental housing reserved exclusively for use at reduced rents by low-income persons and families. In 1974 the Federal Government began to allow low-income households to find rental units in the private market and to pay some or all of their rent and utility payments. The two approaches have come to be called "project-based" and "tenant-based" to distinguish whether the subsidy is tied to the housing unit or the household. In project-based programs, if a tenant family moves, they lose their subsidy. In tenant-based programs, if a tenant family moves, they take their subsidy with them. The proposals under consideration by the executive and legislative branches would convert some or most project-based programs to tenant-based programs. Therefore, it is important to understand how well tenant-based programs work. HUD currently has two variants of the tenant-based approach, the Section 8 certificate program and the Section 8 voucher program. Drawing on recent studies by HUD's Office of Policy Development and Research and a forthcoming report, a great deal of information is available on how well these programs work. Because the differences between the Section 8 certificate and voucher programs are minor relative to the differences with project-based programs, this paper discusses them jointly. Where do they work well? Critics of tenant-based programs have argued that they don't work well in certain areas--rural markets, metropolitan markets with low vacancy rates, or suburban markets--or for certain groups-- the elderly, large families, or the handicapped. Critics also contend that many families won't use tenant-based programs because of the difficulty in finding units that meet both the rent and quality requirements and that have landlords who are willing to participate in the programs. Data from the 1991 American Housing Survey (AHS) show that Section 8 certificate and voucher holders are found in all regions and in urban, suburban, and nonmetropolitan areas.1 The distribution of program participants among the four Census Regions is very close to the distribution of the population of renters whose incomes would qualify them for these programs. Only in the Northeast is there any substantial difference.2 Fourteen percent of Section 8 certificate and voucher holders live in the Northeast, compared to 19 percent of income-eligible renters. The Section 8 certificate and voucher programs are actually more suburban and nonmetropolitan programs than central city programs. The proportion of program participants who live in suburbs--31 percent--equals the proportion of income-eligible suburban renters. The proportion of program participants in nonmetropolitan areas is greater than the proportion of income-eligible nonmetropolitan renters, 29 percent vs. 18 percent. The suburban share may surprise some critics. In metropolitan areas HUD sets a rent level, called the Fair Market Rent (FMR), that determines which units are available under the Section 8 certificate and voucher programs.3 Because the FMR is based on rents throughout the metropolitan area, the FMR tends to be somewhat high relative to rents in the central city and somewhat low relative to rents in the suburbs. However, analysis of data from the 1990 census shows that moderately priced units, affordable under the FMR, can be found throughout metropolitan areas. In Table 1 HUD selected 12 diverse metropolitan areas and looked at rents, census tract by census tract. Eliminating a relatively small number of tracts with fewer than 10 two-bedroom rental units, HUD found that at least 70 percent of the census tracts in each metropolitan area had an adequate supply of modest-price units; that is, at least 30 percent of the two-bedroom rental units in a tract had rents lower than the FMR. Although an early concern with the Section 8 certificate and voucher programs was the number of households that received certificates or vouchers but never used them, the success rate among program participants has improved. In 1993, 87 percent of enrollees in the Section 8 certificate and voucher programs, outside of New York City, successfully found a unit and received benefits. The most recent comparison point was the 1985-87 period, when a study of large urban public housing authorities found that 73 percent of program enrollees, outside of New York City, were successful. New York City is treated separately because rent control reduces moves by renters and because the New York City sample was disproportionately elderly and handicapped.4 In New York City the success rate improved between the two studies from 33 percent to 62 percent. Among elderly households 86 percent of participants, outside of New York City, found units and received payments.5 Over the past 20 years, most of the operational feasibility questions about tenant-based assistance have been answered positively. The Section 8 certificate and voucher programs provide assistance to almost 1.5 million households throughout the country. Whom do they serve? The Section 8 certificate and voucher programs serve a broad cross section of low-income households. The racial and ethnic composition of Section 8 certificate and voucher holders matches almost perfectly the racial and ethnic composition of income-eligible renter households. Sixty-four percent of Section 8 certificate and voucher holders are white, compared to 66 percent of eligible renters; 31 percent are black, compared to 30 percent of eligible renters; and 11 percent are Hispanic, compared to 13 percent of eligible renters. Program participants have very low incomes. The median household income for Section 8 certificate and voucher holders in 1991 was $7,906, compared to $8,180 for eligible renters and $18,918 for all renters. In 1991, 48 percent of Section 8 certificate and voucher holders reported having wage or salary income; 45 percent received welfare or SSI payments. Among participants in the project-based programs, 36 percent reported having wage or salary income and 34 percent received welfare or SSI payments. The Section 8 certificate and voucher programs serve families with children very well. Families with children represent 54 percent of all Section 8 certificate and voucher holders, compared to 43 percent of income-eligible renters. Single-parent households with children formed 32 percent of Section 8 certificate and voucher households, compared to 22 percent of income-eligible renters. Among project-based households 38 percent were families with children, and 22 percent were single-parent families. The most striking difference between how participants and administrators have used project-based and tenant-based programs is the family/elderly split. As noted the Section 8 certificate and voucher programs serve families with children to a much greater degree than project-based programs. The opposite is true with respect to elderly households. Among Section 8 certificate and voucher holders, 21 percent have members 65 years old or older, compared to 26 percent among income-eligible renters and 41 percent for the project-based programs. Greater difficulty in using certificates and vouchers cannot explain the lower elderly participation because elderly households have a success rate almost equal to that of the typical household. An important explanation is the proportion of small units in the project-based buildings. Fifty-one percent of the units are either efficiencies or one-bedroom units; this compares to 28 percent of the units in the Section 8 certificate and voucher programs. What housing options do they offer? Section 8 certificates and vouchers differ fundamentally from their project-based alternatives in that they provide households with the option of receiving assistance in the unit in which they live. A recent HUD study estimated that 5.3 million income-eligible renters had severe housing problems in 1991, of which 3.9 million lived in adequate, uncrowded housing but were burdened by having to pay more than 50 percent of their income for rent.6 Solving the housing problems of these 3.9 million households does not require their moving, although many might choose to move if they had the opportunity. Actual Section 8 certificate and voucher program experience shows, outside of New York City, that 30 percent of participants rent in place. (In New York City, 61 percent rent in place.) Outside New York City, 70 percent of Section 8 certificate and voucher holders move when they enter these programs.7 As explained earlier units affordable under the Section 8 certificate and voucher programs are available throughout a metropolitan area. Unfortunately, little is known about where these households choose to move. Another recent HUD study used data from a General Accounting Office analysis of the location of Section 8 households in four metropolitan areas: Oklahoma City, OK; Seattle, WA; Washington, DC; and Wilmington, DE.8 The analysis included both movers and households who elected to rent in place. In these four sites, 45 percent of households receiving certificates and vouchers obtain housing in census tracts where the poverty rate is less than 10 percent, and 91 percent obtain housing in tracts where the poverty rate is less than 30 percent. Fifty-nine percent of the households choose units in tracts where the black population is less than 20 percent. The comparable rates for participating black households are 36 percent in tracts where the poverty rate is less than 10 percent, 87 percent in tracts where the poverty rate is less than 30 percent, and 36 percent in tracts where the black population is less than 20 percent. Recognizing the limits of having only four sites, the study observed that the neighborhoods chosen by Section 8 certificate and voucher holders are generally less poor and less segregated than the neighborhoods surrounding conventional public housing projects. The Section 8 certificate and voucher programs provide participants with a wider range of housing types from which to choose. In particular Section 8 certificate and voucher holders tend to make greater use of single-family structures than their counterparts in project-based programs. Thirty percent of Section 8 certificate and voucher holders choose to live in single-family detached structures, compared to 25 percent of all renters and 3 percent of all project-based participants. The high utilization of single-family structures reflects both the options available and the higher percentage of Section 8 certificate and voucher holders who have children. Conversely, only 7 percent of Section 8 certificate and voucher holders live in buildings with 50 or more units, compared to 9 percent of all renters and 34 percent of all project-based participants. Section 8 certificate and voucher units compare favorably in quality with private market rental units. The 1991 AHS contains detailed data on the physical and neighborhood characteristics of rental units, both HUD-assisted units and private market units. Across the various questions, there appears to be no meaningful differences between Section 8 certificate and voucher units and all renter units in the frequency of problems with the units or their neighborhoods. In most cases certificate and voucher units have the same or a lower frequency of occurrence of specific problems. In other cases the frequency of occurrence is only one percentage point higher for certificate and voucher units. Out of 38 unit and neighborhood condition comparisons, the only exceptions are "problems with neighbors," with residents of certificate and voucher units reporting this problem 3 percentage points more than all renters (18 percent vs. 15 percent); and "trash, litter, and junk on streets and nearby properties," with residents of certificate and voucher units reporting this problem 5 percentage points more than all renters (22 percent vs. 17 percent). Only the problem with trash difference is statistically significant. An important AHS finding is that Section 8 certificate and voucher holders who move seem to be happy with the move. Fifty-four percent say that their new unit is better than their old unit, and 47 percent say their new neighborhood is better. Only about 15 percent rate their new home or neighborhood as worse. Conclusions Based on the experience of the Section 8 certificate and voucher programs, tenant-based assistance passes all the major tests. Participant success rates are high; the programs are used effectively in many different settings, both regional and urban versus rural; and rental options are available throughout metropolitan areas. Tenant-based assistance appears to be especially effective both in serving families with children and in helping households living in adequate housing but paying an excessive portion of their income on housing. There are some unanswered questions. Little is known about how well the Section 8 certificate and voucher programs work for households with a disabled member. However, a recent analysis of HUD program data found that Section 8 certificate and voucher programs had a higher percentage of nonelderly households with disabilities (15 percent) than public housing (12 percent). More needs to be learned about how effectively participants use the option to move to improve their living environment and how to make this a more effective option. But the little that is known about mobility suggests that Section 8 certificate and voucher holders live in less poor and less segregated neighborhoods than their public housing counterparts. Notes 1. At HUD's request the Bureau of the Census matched renter households from the 1991 AHS with lists of Section 8 certificate and voucher holders from Public Housing Authorities. The match identified 652 AHS households as participants in the Section 8 certificate and voucher programs. The results discussed here are contained in a forthcoming HUD report Characteristics of HUD-Assisted Renters and Their Units in 1991 by Connie H. Casey. 2. The Northeast Census region includes Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York, New Jersey, and Pennsylvania. 3. Certificate holders cannot choose units with rents higher than the FMR. Voucher holders can choose units with rents higher than the FMR but must pay the full difference between the unit's rent and the FMR. 4. During the study period, the New York City Public Housing Authority used 80 percent of its Section 8 certificates and vouchers for homeless individuals and families. The study sampled from the remaining recipients were predominately elderly and handicapped. 5. The two studies referenced here are: Stephen D. Kennedy and Meryl Finkel, Section 8 Rental Voucher and Rental Certificate Utilization Study, Final Report, prepared by Abt Associates for the U.S. Department of Housing and Urban Development, Washington, DC, October 1994. Mireille L. Leger and Stephen D. Kennedy, Final Comprehensive Report of the Freestanding Housing Voucher Demonstration, prepared by Abt Associates for the U.S. Department of Housing and Urban Development, Washington, DC, May 1990. 6. Worst Case Need for Housing Assistance in the United States in 1990 and 1991: A Report to Congress, U.S. Department of Housing and Urban Development, Washington, DC, June 1994. 7. The Final Comprehensive Report of the Freestanding Housing Voucher Demonstration found that in 1987, 12 percent of the households already receiving assistance chose to move to a new unit during the first year of the study (see Volume I, page 171). 8. John Goering, Helene Stebbins, and Michael Siewert, Promoting Housing Choice in HUD's Rental Assistance Programs: A Report to Congress, U.S. Department of Housing and Urban Development, Washington, DC, April 1995. ------------------------------ 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 G. Cisneros....Secretary Michael A. Stegman....Assistant Secretary, Office of Policy Development and Research Frederick J. Eggers....Deputy Assistant Secretary, Economic Affairs Paul A. Leonard....Acting 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 Randall M. Scheessele....Economist Edward J. Szymanoski....Economist Vanessa Void-Taylor....Research Utilization Specialist Robert R. Callis....Bureau of the Census HUD Field Office Economists who contributed to this issue are: New England: John R. Reilly....Boston HUD Office New London-Norwich: Michael W. Lackett....Boston HUD Office New York/New Jersey: David S. Burns....New York HUD Office Glens Falls: William Coyner....Buffalo HUD Office Mid-Atlantic: Frances A. Kenney....Richmond HUD Office Richmond-Petersburg: Frances A. Kenney....Richmond HUD Office Southeast: Bette L. Almand....Atlanta HUD Office Knoxville: Alexander Aiken....Knoxville HUD Office Midwest: Joseph P. McDonnell....Chicago HUD Office Madison: Leonard F. Forschner....Milwaukee HUD Office Southwest: Linda L. Hanratty....Ft. Worth HUD Office Fayetteville-Springdale: Carol A. Ridgeway....Ft. Worth HUD Office Great Plains: Donald J. Gebauer....Kansas City HUD Office Wichita: Lawrence W. Hoaglund....Kansas City HUD Office Rocky Mountain: James A. Coil....Denver HUD Office Colorado Springs: George H. Antoine....Denver HUD Office Pacific: Willard F. Sprague....San Francisco HUD Office Fresno: Pamela J. Leong....San Francisco HUD Office Northwest: Pamela R. Sharpe....Seattle HUD Office Eugene-Springfield: Thomas E. Aston....Portland HUD Office ------------------------------ National Data Housing Production Permits Permits for the construction of new housing units declined 1 percent in the second quarter of 1995 to a seasonally adjusted annual rate of 1,252,000 units and were 8 percent lower than in the second quarter of 1994. One-unit permits, at 931,000 units, were down 1 percent from the previous quarter and down 14 percent from a year earlier. Multifamily permits (5 or more units in structure), at 258,000 units, were 2 percent below the first quarter but 13 percent higher than the same quarter last year. Starts Construction starts of new housing units in the second quarter of 1995 totalled 1,265,000 units at a seasonally adjusted annual rate, 3 percent below the first quarter of 1995 and 12 percent lower than the second quarter last year. Single-family starts at 998,000 units were 3 percent below the previous quarter and 16 percent below the year-earlier rate. Multifamily starts totalled 234,000 units, 2 percent lower than the previous quarter but 7 percent over the same quarter last year (both of these changes are statistically insignificant). Under Construction Housing units under construction at the end of the second quarter of 1995 were at a seasonally adjusted annual rate of 761,000 units, 3 percent lower than the previous quarter but 2 percent above the second quarter of 1994 (both of these changes are statistically insignificant). Single-family units under construction, at 539,000 units, were 5 percent below the previous quarter and 8 percent below the year-earlier rate. Multifamily units, at 200,000 units, were a statistically insignificant 3 percent higher than the previous quarter but 39 percent above the same quarter last year. Completions Housing units completed in the second quarter of 1995, at a seasonally adjusted annual rate of 1,305,000 units, were 6 percent below the previous quarter and a statistically insignificant 5 percent below the same quarter last year. Single-family completions, at 1,067,000 units, were 9 percent lower than the previous quarter and 11 percent below the year-earlier rate. Multifamily completions, at 203,000 units, were a statistically insignificant 11 percent above the previous quarter and 35 percent above the same quarter last year. Manufactured (Mobile) Home Shipments Shipments of new manufactured (mobile) homes to dealers were at a seasonally adjusted annual rate of 343,000 units in the first quarter of 1995, 5 percent higher than the previous quarter and 14 percent over the rate a year earlier. Housing Marketing Home Sales Sales of new single-family homes totalled 675,000 units at a seasonally adjusted annual rate (SAAR) in the second quarter of 1995, 11 percent above the previous quarter and a statistically insignificant 2 percent above the second quarter of 1994. The number of new homes for sale at the end of the second quarter numbered 347,000 units, unchanged from the last quarter and 11 percent over the same quarter last year. At the end of the quarter, inventories represented a 5.8 months' supply at the current sales rates, 16 percent lower than the previous quarter and a statistically insignificant 3 percent below the second quarter of 1994. Sales of existing single-family homes reported by the NATIONAL ASSOCIATION OF REALTORS for the second quarter of 1995 totalled 3,570,000 (SAAR), up 1 percent from the first quarter's level but 12 percent below the second quarter of 1994. The number of units for sale at the end of the second quarter fell to 1,760,000, 3 percent below the previous quarter and 4 percent below the second quarter of 1994. At the end of the second quarter, there was a 5.6 months' supply of units, 7 percent below the previous quarter and unchanged from the second quarter of 1994. Home Prices The median price of a new home during the second quarter of 1995 was $133,000, a statistically insignificant 2 percent above both the previous quarter and the second quarter of 1994. The average price of a new home in the second quarter was $158,600, a statistically insignificant 3 percent above both the previous quarter and the same quarter last year. The price adjusted to represent a constant quality home, $157,300, was up 1 percent from the previous quarter and up 4 percent from the same quarter last year (both changes are statistically insignificant). The median price of existing single-family homes in the second quarter of 1995 was $111,000, 3 percent above the first quarter but nearly the same as the second quarter of 1994 according to the NATIONAL ASSOCIATION OF REALTORS. The average price of $137,500 was 2 percent above the first quarter value but the same as in the second quarter of 1994. 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 for the second quarter of 1995 shows that the family earning the median income had 124.4 percent of the income needed to purchase the median-priced existing home. This is 1 percent below the first quarter of 1995 and 2 percent below the second quarter of 1994. This is the result of the increase in the median home price being offset by a slight rise in median family income and a 14-basis point decrease in the composite interest rate used in the index during the last quarter. The fixed-rate index improved from both the first quarter of 1995 and from the second quarter last year. The adjustable-rate index fell by 2 percent from the previous quarter and 7 percent from the rate 1 year ago. Apartment Absorptions There were 26,100 new, unsubsidized, unfurnished, multifamily (5 or more units in structure) rental apartments completed in the first quarter of 1995, down 26 percent from the previous quarter but 83 percent above the first quarter of 1994. Of the apartments completed in the first quarter of 1995, 67 percent were rented within 3 months (the absorption rate). This absorption rate was 13 percent below the previous quarter and 21 percent below the same quarter last year. The median asking rent for apartments completed in the first quarter was $600, 6 percent higher than the previous quarter and 4 percent higher than a year earlier (both changes are statistically insignificant). Manufactured (Mobile) Home Placements Homes placed on site ready for occupancy in the first quarter of 1995 totalled 325,000 at a seasonally adjusted annual rate, up 4 percent from the previous quarter and up 19 percent from the first quarter of 1994. The number of homes for sale on dealers' lots at the end of the first quarter totalled 76,000 units, 4 percent above the previous quarter and 15 percent above the same quarter last year. The average sales price of the units sold in the first quarter was $34,830, unchanged from the previous quarter but 8 percent higher than the year-earlier price. Builders' Views of Housing Market Activity The National Association of Home Builders conducts a monthly survey focusing on the level of sales activity experienced by builders and their expectations for the near future. At the end of the second quarter, builders viewed the level of current sales activity for single-family detached homes as better than at the end of the previous quarter. The percentage reporting "good to excellent" rose from 17 to 24 while those reporting "poor" fell from 33 to 28. These attitudes are still worse than at the end of the second quarter of 1994 when "good to excellent" was reported by 39 percent and "poor" was reported by 14 percent. The level of activity for attached single-family homes can also be viewed as improving. Builders reporting "good to excellent" rose from 7 to 13 percent while those rating sales activity as "poor" fell from 48 to 45 percent. There was little change, however, from the second quarter of 1994--no change in the "good to excellent" category and a slight increase in those giving a "poor" rating from 43 to 45 percent. Prospective buyer traffic in the second quarter of 1995 rose from the first quarter of 1995. Builders rating traffic as "high to very high" rose from 9 to 15 percent while the percentage reporting "low to very low" fell from 58 to 48 percent. The current view shows a worsening from the second quarter of 1994 with "high to very high" falling from 21 to 15 percent and "low to very low" increasing from 36 to 48 percent. Builders' views concerning future sales expectations for single-family detached units improved in the second quarter of 1995 with those rating expectations as "good to excellent" rising from 19 to 27 percent, offsetting the slight increase in those reporting "poor." This improvement is in contrast to the decline from the second quarter of 1994 when those reporting "good to excellent" stood at 35 percent and those reporting "poor" were only 11 percent. Future sales expectations for single-family attached homes showed improvement in the second quarter of 1995 while the change from the second quarter of 1994 was mixed. Housing Finance Mortgage Interest Rates Mortgage interest rates for all categories of loans fell during the quarter while changes from last year were mixed. The contract mortgage interest rate for 30-year, fixed-rate, conventional mortgages reported by Freddie Mac was 7.95 percent in the second quarter, 86 basis points lower than the previous quarter and 49 basis points lower than the same quarter last year. Adjustable-rate mortgages (ARMs) in the first quarter were going for 6.12 percent, 53 basis points below the previous quarter but 83 basis points above the same quarter last year. Fixed-rate, 15-year mortgages, at 7.48 percent, were down 96 basis points from last quarter and 45 basis points from the same quarter last year. The FHA rate fell 84 basis points during the quarter and 17 basis points from the same quarter last year. FHA 1-4 Family Mortgage Insurance Applications for FHA mortgage insurance on 1-4 family homes were received for 228,700 (not seasonally adjusted) properties in the second quarter of 1995, up 41 percent from the previous quarter but down 10 percent from the second quarter of 1994. Endorsements or insurance policies issued totalled 127,000, down 4 percent from the first quarter of 1995 and down 67 percent from the second quarter of 1994. Refinancing continued to decline, posting a 36-percent decline from the first quarter of 1995 and a 96-percent drop from a year earlier. PMI and VA Activity Private mortgage insurers reported issuing 222,000 policies or certificates of insurance on conventional mortgage loans during the second quarter of 1995, up 21 percent from the first quarter but down 30 percent from the second quarter of 1994; these numbers are not seasonally adjusted. The Department of Veterans Affairs reported the issuance of mortgage loan guaranties for 52,000 single-family properties in the second quarter of 1995, down 17 percent from the first quarter and down 67 percent from the second quarter of 1994. Mortgage Originations by Loan Type, 1-4 Family Units The total value of mortgage originations for 1-4 family homes was $125.4 billion in the first quarter of 1995, down 8 percent from the fourth quarter of 1994 and down 52 percent from the first quarter of 1994. The values for nearly all loan types fell: privately insured mortgages by 25 percent, FHA-guaranteed mortgages by 22 percent, and VA-guaranteed mortgages by 19 percent. However, mortgages without insurance increased by 1 percent. During the first quarter of 1994, all four categories decreased leading to an overall decline of 52 percent: 64 percent for FHA, 56 percent for VA, 42 percent for privately insured, and 52 percent for uninsured mortgages. The market shares for FHA, VA, and privately insured mortgages fell in the quarter to 8.6, 5.0, and 16.4 percent, respectively. Uninsured mortgages increased their dominance of the market with a share of 70.0 percent. Residential Mortgage Originations by Building Type Residential mortgage originations totalled $133.7 billion in the first quarter of 1995, down 7 percent from the fourth quarter of 1994 and down 50 percent from the first quarter of 1994. A nearly identical pattern exists for single-family mortgages. The financing volume for multifamily units (5+) totalled $8.3 billion in the first quarter, up 6 percent from the previous quarter and 9 percent from the first quarter of last year. Mortgage Originations by Lender Type, 1-4 Family Units Mortgage companies increased their volumes during the first quarter to $68.8 billion, increasing their market share to 54.9 percent. While the first quarter's results mark an increase from the last quarter, mortgage companies' volumes are still below last year's levels. All other classes of lenders experienced a declining volume of originations except those in the "other lender" group. Mutual savings banks wrote $3.7 billion, down 41 percent from the previous quarter. Savings and loans made $18.7 billion in loans, down 27 percent for the quarter. While mortgage companies increased their share, commercial banks' share fell to 25.7 percent and savings and loans' share fell to 14.9 percent. Mutual savings banks' share fell slightly to 3.0 percent while "other lenders," which represent less than 2 percent of the market, experienced a slight increase. Delinquencies and Foreclosures Total delinquencies were 3.91 percent at the end of the first quarter of 1995, down 6 percent from the fourth quarter of 1994 and down 5 percent from the first quarter of 1994. Ninety-day delinquencies were at 0.71 percent, down 3 percent from the fourth quarter of 1994 and 7 percent from the 1994 first quarter level. During the final quarter of 1994, 0.32 percent of loans entered foreclosure, down 3 percent from the previous quarter but 3 percent above the first quarter of 1994. Housing Investment Residential Fixed Investment and Gross Domestic Product Residential Fixed Investment for the second quarter of 1995 was $276.5 billion, down 4 percent from the first quarter of 1995 and 3 percent from the second quarter of 1994. As a percent of Gross Domestic Product, Residential Fixed Investment was 3.9 percent, down from 4.1 percent last quarter and 4.2 percent in the second quarter of 1994. Housing Inventory Housing Stock The estimate of the total housing stock as of the second quarter of 1995, 112,743,000 units, shows a 0.3-percent increase from the first quarter of 1995 and a 2.1-percent rise from last year. The number of occupied units increased by a statistically insignificant amount last quarter but is 1.7 percent above last year. The number of homeowner units increased by 1.0 percent for the last quarter and by 3.2 percent from last year, while renters declined from last quarter and last year. Vacant units increased by 1.8 percent during the last quarter and by 5.0 percent from last year. Vacancy Rates The national rental vacancy rate in the second quarter of 1995 increased slightly during the quarter to 7.7 percent, the same change as from the second quarter of 1994. The homeowner vacancy rate, at 1.6 percent, was up 7 percent from the previous quarter and up 14 percent from the year-earlier level. Homeownership Rates The national homeownership rate reached 64.7 percent in the second quarter of 1995, up 0.5 percentage points from the first quarter and 0.9 percentage points from the second quarter of 1994. It should be noted that the Census Bureau introduced 1990 census counts into the estimation of the quarterly homeownership rate series for 1993 and 1994. The new estimates of the homeownership rates are about 0.5 percentage points below estimates based on 1980 census weights. Taking this estimating change into account, 64.7 percent may be the highest figure in the last 14 years. Regional Activity The following summaries of housing market conditions and activities have been prepared by economists in the U.S. Department of Housing and Urban Development's (HUD's) field offices. The reports provide overviews of economic and housing market trends. Each regional report also includes a profile of a selected housing market that provides a perspective of current economic conditions and their impact on the local housing market. The reports are based on information obtained by HUD economists from State and local governments, housing industry sources, and from their ongoing investigations of housing market conditions carried out in connection with the review of HUD program applications. New England Employment growth in New England continued at a modest pace during the second quarter of 1995; however, downsizing in defense-related industries has continued to affect the region. Manufacturing has received a boost from the declining dollar and increased sales to overseas customers. Tourism has been growing throughout New England, especially in the Massachusetts Bay Area. The unusually dry Spring and Summer have been beneficial to seacoast businesses, with motels and restaurants reporting solid year-over-year gains. Some visitors to Boston and Cape Cod have come from foreign countries and are taking advantage of the cheaper dollar. Gains in retail trade, business services, and construction continued to lead the employment growth as they did during the first quarter. From May 1994 to May 1995, employment increased by 2 percent in New Hampshire (10,900), Maine (11,000), and Massachusetts (59,000). Employment gains in the Boston area were much lower (1 percent) during the same 12 months. In Connecticut employment growth during the past 12 months was a negligible 0.3 percent, as declines in defense-related industries offset gains in other sectors. Since 1988 Connecticut has lost 30,300 private, defense-related jobs. From May 1994 to May 1995, Vermont had an increase of 3,950 jobs (1.5 percent); Rhode Island was the only State in the region that had a decline in employment, losing 1,500 jobs. Unemployment rates continued to decline in all New England States during 1995. New Hampshire had the largest decline with the rate dropping from 4.6 percent in May 1994 to 3.6 percent in May 1995. Residential building activity for the first 6 months of 1995, as measured by building permits, was slightly below the same period of 1994. Single-family permits (15,707) declined about 6 percent but multifamily activity (1,797 units) increased by 4 percent. The gains in multifamily permits can be attributed to the rebounding of the rental market in the region. Maine and New Hampshire had solid 6-percent gains in total units permitted. Vermont also showed an increase of 3 percent. Connecticut, Massachusetts, and Rhode Island had declines of 8, 9, and 7 percent, respectively. Existing home sales for the first 6 months of 1995 were down in every State with the exception of Rhode Island where sales remained flat. Sources report that traffic and sales rebounded in June. Sales volume is expected to improve into the Fall, although sales for 1995 are expected to be below 1994 levels. As a result of slower sales, median sales prices have increased only modestly in most areas. Most New England rental markets are balanced but tightening. Vacancies are still high in Hartford, especially for low-rent units. Recent construction and rehabilitation of rental units throughout the region have been targeted toward the upper rent ranges. Strong demand for upscale units in central cities has been reported by local realtors. First-time renters are doubling up in order to afford the new, amenity-rich units. The rental market in the Boston Primary Metropolitan Statistical Area (PMSA) tightened considerably during the second quarter of 1995. Vacancy rates have declined to 3 percent or lower in the high-rent submarkets. An increase in multifamily permit activity in and around Boston is expected during the remainder of the year. Spotlight on New London-Norwich, Connecticut The New London-Norwich metropolitan area, located in the southeastern corner of Connecticut, is continuing its transition from a defense-dominated economy to a more diversified one. Wage and salary employment was 129,600 as of May 1995. The unemployment rate as of May was 4.9 percent. The recovery has been led by the development of the Foxwoods Casino on the Mashantucket Pequot Indian Reservation. Since the opening of the casino in 1992, employment has been on an upward trend and unemployment has declined. Job growth in casino employment, tourism, and trade has more than offset jobs lost as a result of cutbacks in defense manufacturing and the U.S. Navy. However, the new jobs are lower paying than those they replaced. The impact is reflected in only modest growth of the sales market, but a surge in the rental market. Defense-related employment is expected to continue to decline further, and there will be continued growth in the service economy led by the expansion of gaming facilities. Building permit activity in the New London-Norwich area has been increasing slowly since 1992, as the market has absorbed the surplus of rental housing built in the late 1980s. Through May 1995 the number of housing units permitted was 28 percent higher than the same period in 1994. Sales market activity has been very stable over the past 2 years, averaging around 300 homes monthly. The median sales price has stayed around the $110,000 level. On the other hand, the rental market has improved significantly. The rental vacancy rate climbed to 10 percent as a result of overbuilding and employment declines in the early 1990s. Since 1990 multifamily construction has accounted for only 13 percent of all new housing units. The cutback in supply and the increased demand from the new workers has caused the vacancy rate to fall to 5 percent or less in most projects. Because of the recent large rent increases, the local community and the Navy are becoming concerned about the dwindling availability of affordable rental housing. New York/New Jersey Job growth in New Jersey improved considerably in the past 12 months, with employment at 4,140,000 as of June 1995, 4 percent higher than a year ago. The New Jersey unemployment rate has declined from 7.0 percent to 6.7 percent in the past year. Employment in New York State declined about 1.5 percent to 8,434,000 from June 1994 to June 1995. New York State's labor force is essentially unchanged over the last 2 years. New York City's employment, at 2,865,000 in June 1995, has declined 2.4 percent over the past 12 months. The city's unemployment rate is currently at 8.1 percent. The city's economy has recently been adversely affected by layoffs on Wall Street and in local government. According to a recent report from the New York State Department of Labor, local government layoffs between April 1994 and April 1995 amounted to nearly 30,000. In addition, 5,000 jobs were eliminated on Wall Street in the first half of 1995. It is expected that the substantial growth in health, education, and social services in the last few years is likely to cease due to Federal and State cutbacks in welfare and other social programs. It was recently announced that the Coffee, Sugar, and Cocoa Exchange and the Cotton Exchange, two of the oldest commodity exchanges, have signed letters of intent to negotiate with the State of New Jersey on moving to Jersey City. The move will cost New York City approximately 5,000 jobs. The city has not matched the rich incentives offered by New Jersey, including $17 million in Economic Development Authority grants and loans. The Manhattan rental housing market has become extremely tight. Owners are no longer offering brokers a fee to rent out apartments, thereby increasing the pressure on brokers to collect a full fee from tenants, which is normally 15 percent of a year's rent. One of the city's most active rental agencies reports that two-thirds of the apartments it finds for renters belong to individual owners in cooperative or condominium buildings. The tight conditions of the Manhattan rental market are attributable to the very low levels of citywide rental housing construction since 1990. From 1992 through 1994, multifamily building permits for structures with 5 or more units averaged only 1,166 units annually. In the first 5 months of 1995, permits have been issued for only 287 multifamily units. In Manhattan the 1,000-unit development known as West End Towers, the first FHA-insured market-rate rental project since 1989, has been renting up at a considerably faster rate than originally projected. After 7 months occupancy in the 850 units completed to date is currently 85 percent. Because of tax abatements and tax-exempt financing, 200 of the units are set aside for low-income families at affordable rents. The market-rate rents range from $1,225 for a studio apartment to $2,825 for a two-bedroom apartment. According to the New York State Association of Realtors, single- family home sales for the State in the first quarter of 1995 were down 9.1 percent from the same period a year ago. The median sales price in the first quarter of 1995 was $139,482, a decline of 2.6 percent from the same period a year ago. The Long Island sales market has softened the past 12 months, reflecting slow job growth and the loss of high-paying jobs in the defense industry. Data from the Multiple Listing Service (MLS) of Long Island show that as of April the median sales price of $176,000 in Nassau County was essentially unchanged from a year ago. In Suffolk County the median sales price fell 5 percent to $134,900. The lower priced homes attractive to first-time buyers are doing better than the higher priced homes aimed at move-up buyers. In New Jersey the Board of Realtors reports that single-family home sales in the first quarter of 1995 declined 9 percent from the same period a year ago. The median sales price for the first quarter of 1995 was $145,900, the same as a year ago. In New York State, single-family building permit activity in the first 6 months of 1995 amounted to 9,868 units. This total is essentially unchanged from the same period in 1994. Multifamily permit activity increased 28 percent to 3,411 units in the first half of 1995. In New Jersey single-family permits for the first 6 months of 1995 totalled 8,082 units, a 13-percent decline from the same period in 1994. Multifamily units permitted, however, increased 77 percent to 1,820 units. Spotlight on Glens Falls, New York The Glens Falls metropolitan area is located north of the Albany-Schenectady-Troy area. The economy of the Glens Falls area is dependent upon manufacturing (particularly paper products), the medical/health care industry, seasonal tourism, and Canadian cross-border trade. Major employers in the area include Glens Falls Hospital; Finch, Pruyn and Company (pulp and paper products); International Paper Company; Continental Insurance Company; and the General Electric Company. Unemployment rates tend to be high during the Winter and relatively low in the Summer. In May 1995 the unemployment rate for Glens Falls was 6.3 percent, about the same as the New York State rate. On an annual basis, however, Glens Falls tends to exhibit a higher unemployment rate than the State and other Upstate areas. In the 12 months ending May 1995, total non-agricultural employment in the Glens Falls area increased by 1,100 jobs (2.2 percent) to 50,200. There have been significant gains in construction (300), services (700), wholesale and retail trade (400), and government (500). These gains were partially offset by reductions in manufacturing. According to recent Census Bureau estimates, the population of the Glens Falls, New York, metropolitan area increased by 3 percent, from 118,539 to 122,121 between April 1990 and July 1994. The population growth in the area is due in great part to workers employed in Saratoga County (one of the primary growth areas of the adjacent Albany-Schenectady-Troy metropolitan area) moving to the less expensive Glens Falls area. The Warren County Association of Realtors reported that from 1990 to 1993 existing sales averaged about 700 homes annually. In 1994 sales increased to 772. A total of 190 existing homes were sold in the area during the first quarter of 1995, a 35-percent increase over first quarter of 1994 sales. FHA insurance activity has been an increasing part of the market in recent years. The number of homes with FHA-insured mortgages increased each year from 131 in 1991 to 445 in 1994. Existing sales prices have remained relatively stable in the Glens Falls area. Between 1990 and 1994, the average sales price for existing homes in the metropolitan area increased from $82,720 to $87,610, or 6 percent. Residential construction is concentrated in the towns surrounding Glens Falls, especially the town of Queensbury to the north. Building permit data indicate that residential construction activity averaged about 540 units per year between 1990 and 1994. Approximately 90 percent of the activity was single-family houses. In the first 6 months of 1995, single-family construction has declined compared to the same period in 1994. The new housing is priced below $100,000. The rental market in the area is balanced, despite the fact that there has been virtually no large-scale multifamily rental housing constructed in the metropolitan area since the early 1980s. Rents in apartment complexes average approximately $500 for one-bedroom units and $600 or more for two-bedroom units. Only minimal rent appreciation has occurred in the area recently. Mid-Atlantic The Mid-Atlantic economy has slowed this year and is now growing at about half the national rate. As a result of Defense, Federal, and local government cutbacks, growth in the Washington metropolitan area has slowed substantially, while growth in Pennsylvania has been sluggish for some time. West Virginia and Virginia are exhibiting a much stronger pace, benefitting from Federal agency relocations and gains in banking and services. Unemployment was uniformly down in both rural and urban centers. The unemployment rate in Virginia (4.4 percent) was the lowest in 5 years. The most significant decline has been in West Virginia, where the May 1995 rate of 7.5 percent represented a 16-year low. In Pennsylvania, with the fifth highest rate nationally, the reduction to 5.9 percent was entirely the result of a decline in the labor force. Single-family building permit activity (47,202 units) in the region was down almost 17 percent in the first 6 months of 1995 compared with the same period in 1994. Activity in Virginia was off the most, 20 percent below the first half of 1994 levels. However, multifamily activity continued to increase in the three largest States. In Pennsylvania the number of multifamily units permitted was up 27 percent and in Maryland by 18 percent. Virginia, with 4,456 multifamily units, was up 24 percent and constituted over half of the multifamily units for the region. The sales market remained sluggish throughout the region, both in existing and new homes. However, sales have begun to improve in June. Homeownership programs for first-time home-buyers are bolstering the market in Virginia and Maryland (including one Baltimore program that pays closing costs for city workers who buy homes in the city). In the Pittsburgh area, home sales were down by 3 percent in the first 6 months, but June sales were up 11 percent over June 1994. The same pattern holds in Virginia, where home sales were down 7 percent in the first 6 months of this year, but June figures were nearly 12 percent higher. Recent gains were widespread throughout the State, including the close-in, overbuilt suburbs of northern Virginia where sales were up 6 percent over last June. The Washington metropolitan area remains one of the Nation's largest areas of homebuilding activity, following Atlanta and Phoenix. However, as a result of the oversupply of new units and much slower sales pace, the area is a buyers' market and many builders have begun to offer concessions or absorb price increases in materials. Major metropolitan rental markets are showing a mixed picture this Summer. Significant improvement in occupancy is noted in the Richmond and Baltimore areas where the use of concessions has declined. In the Washington metropolitan area, the number of multifamily units permitted (2,900) in the first half of 1995 was up 84 percent over the same period in 1994. Builder interest is evident in the Baltimore, Richmond, and Hampton Roads markets, although production has not rebounded yet. In the Philadelphia area, vacancy rates are in the 3-percent range, but a surplus of rental housing continues in the city. Concessions are especially prevalent in the northeast sector of the city. Long-term stability and balanced market conditions tend to characterize the industrial areas of Pittsburgh and western Pennsylvania. Apartment vacancies in the Pittsburgh area are holding steady at less than 5 percent. The rental market has tightened considerably in central West Virginia (Fairmont/Morgantown/Clarksburg area) due to the recent opening of the FBI center that added 2,000 employees. Spotlight on Richmond-Petersburg, Virginia The economy of Richmond-Petersburg metropolitan area has become much more diversified in the past 20 years. The three largest industries historically (State government, tobacco, and chemical production) that once accounted for 1 of every 5 jobs now comprise 1 in 10. Reflecting the continuing transition from a manufacturing job base to a service economy, the fastest growing sectors in the area are currently trade, services, and finance. Included in the latter are several large banks and mortgage centers that have expanded in the last several years. The city of Richmond and the surrounding counties of Henrico and Chesterfield account for three-fourths of the metropolitan area's population. All three are about the same size (200,000 persons). However, Richmond has been losing population, while Henrico and Chesterfield continue to grow, accounting for virtually all of the recent population and household growth. Despite population decline, the city is still the major employment center of the region with nearly half of all private-sector jobs and a substantial share of the growth in employment. Ongoing losses in tobacco and other blue-collar industries have been more than offset by the addition of higher paying jobs in medical, legal, and finance sectors. City efforts to retain and expand its job base with the use of tax abatements and other development incentives have been successful, including the recent move of Crestar Bank into south Richmond. Crestar is committed to a $60 million investment in a 400,000-square-foot building that will consolidate regional mortgage and banking operations and bring 1,600 workers into the area. Office, retail, and warehouse vacancies are at the lowest levels in the last 5 years, and rents are starting to increase. Of the half-million square feet of preleased office space under construction, the 335,000-square-foot Signet Bank operations center is the largest. Retail space demand is strong, especially along the West Broad corridor and major arterials in Chesterfield County. Vacant industrial space is at an all-time low level. Further development will be stimulated by the addition of a major Motorola computer chip manufacturing plant in the northwest region. Starting with 1,000 employees and scheduled to employ 5,000, Motorola could easily surpass Philip Morris as the area's largest private employer. Completion of the plant is several years away. About 1,000 of the employees are expected move from other plants in the country. Builders are already landbanking lots in anticipation of the increased housing demand related to Motorola. With average production worker wages of about $35,000 per year, increased housing demand is likely for a variety of housing/tenure types. Future residential development will likely follow the Route 288 corridor as it is completed. Chesterfield County has 15,000 lots ready for residential development. The sales market has remained relatively stable, with sales down only 3 percent in the first 6 months of 1995 compared with a 7-percent drop for the State as a whole. Sales in June were up 18 percent over June 1994 levels in both the Richmond and Petersburg areas and are indicative of a strong Summer rebound that is expected to continue. Average home prices are holding steady at about $122,000 in the Richmond area and in the low $90,000 range in the Petersburg area. While there is some townhouse development in the $60,000-80,000 range (mostly in the western suburbs) appealing to first-time buyers, single-family detached homes above $150,000 constitute the major portion of new home demand. New custom and speculative homebuilding in the active subdivisions is oriented to the move-up buyers and generally starts in the low $200,000 range, increasing to $400,000 north of the James River and $300,000 south of the river. Planned communities built around golf courses, lakes, and other amenities are also popular. Production of single-family housing (2,688 units), as measured by building permits, was down 19.5 percent in the first 6 months of this year. However, activity is expected to pick up this Summer and end the year about 10 percent below 1994 levels. The rental market has returned to balanced conditions, with rental vacancies now about 5 percent, about half the level of 5 years ago. After peak building periods in the mid- and late 1980s, apartment construction has been nominal. In the first half of 1995, permits have been issued for only 269 multifamily units. Rents are starting to increase in the face of greater demand and three luxury projects are planned or under construction in the fast-growing northwest and southwest quadrants. Southeast Growth in employment in the Southeast has continued at a moderate pace. South Carolina led the Southeast with an increase of 3.9 percent during the May 1994 to May 1995 period, followed by Georgia (3.1 percent), Kentucky (2.7 percent), and Florida and Puerto Rico (both with 2.0 percent). Only Mississippi and North Carolina had growth rates less than the national rate. The unemployment rate for May was below the national rate of 5.7 percent in all areas except Alabama, Mississippi, and Puerto Rico. North Carolina had the lowest unemployment rate at 4.3 percent. Georgia, South Carolina, and Tennessee had unemployment rates below 5 percent. The short-term outlook for the region remains optimistic. In the 12 months ending May 1995, wage and salary employment in the region grew by 621,800 jobs. The services, construction, and trade sectors provided the biggest job growth. Construction employment increased 10 percent in both Mississippi and Georgia for a total gain of 18,300 jobs. Construction employment also provided the biggest percentage increase in Alabama, North Carolina, and Tennessee. In Florida and South Carolina, increases in service employment were greatest, and in Kentucky wholesale and retail trade provided the biggest increase. Georgia-Pacific will be moving 550 employees to Atlanta, and Vanity Fair Mills is moving 160 employees from Alabama and 140 employees from New York to Atlanta. Plans have been announced for the largest casino so far in the State of Mississippi. Diamond Lakes will be located on 2,000 acres in Desoto County near the Tennessee State line, making it the closest casino to Memphis. With completion scheduled for late 1997, the plans include a hotel, golf course, retail shops, a residential area, and possibly a theme park. In South Carolina AMP, Inc., a manufacturer of electronic connectors, will build a manufacturing plant in Rock Hill that will initially employ 500 people within 2 years and eventually as many as 1,000. Wal-Mart Stores, Inc., will build a $30 million regional distribution center in Greene County, Tennessee, that will add 600 jobs to the area starting in the Summer of 1996. In Greenwood, South Carolina, Fuji Film wants to add 250 workers to its current workforce of 700, but has been unable to hire locally because of the extremely low unemployment rate. The firm is advertising as far away as Atlanta for employees. Douglas, Georgia, was chosen by the Tecumseh Products Company for the location of a new $40 million engine and carburetor plant that will add 500 jobs. The total number of single-family units permitted (134,550) in the 8 States in the first 6 months represented a decline of 10 percent over the same period in 1994. Activity in Georgia (28,922 units) and Alabama (6,395 units) increased 9 and 8 percent, respectively. All the other States reported declines in activity, with Florida having the largest drop, 23 percent. Data on sales of existing homes indicate the sales volume for the first quarter of 1995 was down in all southeastern States compared with the first quarter of 1994. However, as interest rates began dropping in April and May, sales of existing homes began to rebound. Generally, there are no concessions or incentives being offered to attract buyers. In the 32 metropolitan areas for which information is available, sales prices have generally been increasing at a slower rate or declining only slightly. In most areas of the Southeast, condominium sales are not well established, with developments generally limited to the lower-priced starter homes and high-priced units for empty nesters. However, in Dade County, Florida, sales of existing condominiums increased dramatically in the first quarter of 1995, from 370 a year earlier to 1,031 this year. The largest volume of sales was in the $100,000 to $150,000 range. Activity was concentrated in the North Miami Beach area, the Miami Springs area west of the airport, and the Surfside-Miami Beach area. Multifamily permit activity continued to show strong growth throughout the region with the number of units permitted (45,196) 35 percent above the first half of the 1994 level. Georgia, with 8,750 units, continued to lead the region with the largest percentage gain of 222 percent. Activity in Florida (17,815 units) was up 24 percent. In North Carolina activity continued strong at 5,600 units, about equal to the comparable 1994 period. The number of multifamily units permitted was up by 55 percent in Tennessee, 33 percent in Mississippi, 40 percent in Alabama, and 35 percent in South Carolina. In the Orlando area, occupancy in apartment units has fallen in response to new units coming on the market. In the Fort Lauderdale area, rents have increased only 2.5 percent in the last 12 months. In the Jacksonville area, occupancy continues to improve, but a new wave of rental construction (1,300 units) has yet to come on the market. In the Raleigh-Durham area, rents continue their upward spiral, increasing nearly 4 percent in the last 6 months. Local analysts expect, however, that the trend will abate somewhat in response to competitive pressures as a large number of new units comes on the market in the next few months. There are currently some 8,200 units under construction in the area. The Charlotte Apartment Association reported an overall apartment vacancy rate of 4.2 percent in their latest survey, but expects the rate to increase to about 7 percent within 2 years as some 2,900 units currently under construction and another 5,300 now in development enter the market. There are also possible oversupplies of rental housing under construction in the Birmingham and Montgomery market areas in Alabama. While occupancy remains high, the number of units under construction points to a possible excess within 2 years. Market conditions for rental housing in the Atlanta MSA have continued to tighten, with some developments in desirable neighborhoods reporting waiting lists for the first time in years. Tighter market conditions have encouraged a strong increase in production, with the number of multifamily units authorized by building permits (6,689) in the first 6 months of 1995 almost triple the number in the same period of 1994. In Mississippi most rental markets are in equilibrium, but the Gulf Coast market is moving toward softer market conditions. In Nashville it is estimated that some 3,500 apartment units are planned or under construction for the area. While market conditions warrant the present level of activity, a continued pace could lead to overbuilding. Spotlight on Knoxville, Tennessee The Knoxville metropolitan area is known as the gateway to the Great Smoky Mountains National Park, the Nation's most visited national park. The six-county metropolitan area has experienced moderate population and employment growth over the past 4 years. Between 1990 and 1994, the population increased 7.7 percent to 631,097. Total employment in the area increased 7.5 percent between 1990 and 1994 to 331,100. The unemployment rate was a low 3.3 percent for 1994. The Knoxville metropolitan area has a well-diversified economy, with government, education, manufacturing, and tourism playing leading roles. The University of Tennessee, with 28,000 undergraduate and graduate students, currently employs over 4,000 faculty and staff, and the university's medical center employs another 4,100. Martin Marietta Energy Systems, Inc., a producer of nuclear fuel for power plants and weapon systems, with 15,900 employees, is the largest manufacturing employer. Levi Strauss & Company, with 3,550 employees, is the second largest manufacturing employer. Other leading manufacturers are Alcoa with 2,400 employees; Phillips Electronics with 1,350 employees; and DeRoyal Industries, a manufacturer of medical supplies, with 1,550 employees. Other leading employers are Fort Sanders Alliance with 4,000 employees and the State of Tennessee with 2,600 employees. Several new plants are planned for the Knoxville area. Alliance Engines, a jet turbine overhauler, has leased a 48,600-square-foot building in Blount County and plans on hiring 350 employees within 5 years. Matsuo Industries USA, Inc., a Japanese automotive parts manufacturer, will locate a 20,000-square-foot plant in the Jefferson City Industrial Park that will employ 200 workers. Daikwuin Corporation, a producer of automatic drive trains, will build a plant in the East- bridge Industrial Park that will employ 240 workers. In the first 6 months of 1995, almost 1,369 single-family housing units were permitted in the Knoxville metropolitan area, a 7.3-percent increase over the same period in 1994. Single-family activity is highest in Anderson, Blount, and Sevier Counties. The decline in interest rates has helped to expand sales of new single-family homes in the second quarter of 1995. New homes in the $125,000 to $175,000 price range are selling best. Homes over $200,000 are selling more slowly. The inventory of unsold new homes is declining with the increase in sales. Condominiums below $125,000 are selling briskly to buyers priced out of the new single-family homes sales market. Sales of existing homes have remained relatively healthy during the first 6 months of 1995, only about 5 percent below the same period last year. According to the Knoxville Association of Realtors, the median sales price for existing homes in June was $85,000, up 5.2 percent over the median price in June 1994. The Knoxville rental market experienced very soft market conditions beginning in the late 1980s. As a result multifamily construction declined to an average of about 400 units annually between 1990 and 1994. With the substantial cutback in production, the rental market has shown improvement the past 2 years. Currently, rental vacancies are in the 2- to 3-percent range. Apartment managers have been raising rents about 5 percent. Knoxville is expected to continue its moderate population and economic growth. Both the sales and rental housing markets should remain in balance. Midwest The economy in the Midwest remains relatively strong. Employment growth in the second quarter of 1995 slowed to 2.1 percent annually, down from 2.8 percent in the previous quarter. Private surveys of business conditions as of May and June in the local economies in Chicago, Cleveland, Milwaukee, Detroit, and Cincinnati show a continuation of the slowdown that began in the first quarter. Unemployment rates in the region were up slightly in May in all States but remain below the national average. The rates ranged from a low of 3.9 percent in Minnesota and Wisconsin to 5.7 percent in Michigan. Manufacturing gains, which have led the region's recovery, were mixed, with strong gains in capital goods manufacturing offsetting the weaknesses in the automobile industry. Michigan, the region's leading job producer, reported a healthy 3.2-percent annual employment gain for the 12 months ending May 1995. However, automobile sales and production in the State in the first 5 months of 1995 were down 10.2 and 7.4 percent, respectively, from a year earlier. Employment growth in Wisconsin in the second quarter slowed to just under 3 percent annually as manufacturing activity weakened. In Milwaukee manufacturers reported production and new orders in May were at their lowest level in over a year. In 1994 Ohio, for the second year in a row, outranked all other States in new business facilities and expansions. The majority of new projects in Ohio (64 percent) were in manufacturing. There were 911 new facilities and expansions in Ohio in 1994 compared with number two North Carolina with 539 new projects. The Toledo metropolitan area is currently experiencing the highest level of employment in its history. Expansions of existing firms and the addition of new firms accounted for some 4,400 jobs in the past year. Chrysler Corporation will spend $110 million to upgrade a Jeep production plant and will build a truck maintenance facility, resulting in the retention of some 5,300 jobs. Minnesota's economy continues to perform well. As of May nonagricultural employment had increased by 56,000 from the previous year. Eighteen percent of that growth occurred in nonmetropolitan labor markets. Economic conditions are particularly strong in the Minneapolis-St.Paul area, which has experienced strong growth in business services and construction employment and has an extremely low unemployment rate (2.7 percent). Single-family home construction and sales of new homes began to strengthen in some Midwest markets in the second quarter, but overall activity in the first 5 months of 1995 was well below last year's strong performance. Building permits in the region were issued for 81,840 single-family units in the first 6 months of 1995 compared with 93,001 units for the same period of the previous year, a 12-percent decrease. Builders in the Minneapolis-St.Paul area reported that single-family sales activity has improved. To increase affordability and sales, builders have begun to shift from single-family detached units toward duplexes and townhouses. Currently, the median sales price for new single-family detached homes in the Twin Cities area is $134,900. Sales prices for the most popular single-family town-house units range from $80,000 to $120,000. In Illinois the slowdown in home sales continued in April and May, with sales down 15 and 10 percent, respectively, from year-earlier figures. However, sales picked up significantly in June. Chicago area builders reported increased sales as mortgage rates fell below 8 percent. Contracts were signed for 3,180 new homes in the Chicago area, a 12-percent increase over the second quarter 1994 level. Existing sales were also up substantially in June. Buyer traffic in the Cleveland area increased in the second quarter of 1995, but home sales did not. The city of Columbus and an eight-bank consortium recently announced an $8 million Downtown Housing Loan Fund to turn vacant buildings into prime living space. Each bank will contribute $1 million to provide loans to builders and developers for rehabilitation or construction of housing in the downtown area. In the first 6 months of 1995, FHA insured 41,400 homes in the Midwest region for a total mortgage amount of $3 billion. Multifamily housing construction activity in the Midwest region for the first 6 months of 1995 continued to increase. Through June building permits were issued for 24,361 units, a 14-percent increase over the comparable 1994 period and the highest 6-month total since 1990. Michigan, with 3,657 units, showed the largest percentage increase of 50 percent. Illinois (4,858 units) and Indiana (3,182 units) reported gains of 20 and 25 percent, respectively. Activity in Ohio was strong at 5,642 units, up 4 percent from the first half of 1994. Wisconsin (4,734 units) and Minnesota (2,288 units) also reported modest gains of 2 and 4 percent, respectively. As of the second quarter of 1995, the region's rental markets are strong, with occupancy rates around 95 percent. In Chicago's suburban Lake and Dupage Counties, absorption continues to be good for new, high-rent apartments. Rents average $840 for a one-bedroom apartment and $1,150 for a two-bedroom unit. Young professionals are the typical tenants attracted to these large, amenity-rich units. Multifamily housing activity is picking up in downtown Cleveland. Recent developer interest is due to Cleveland's strong local government support, including property tax abatements for 15 years. The substantial development of cultural, recreational, and entertainment facilities has made the area attractive. There have been several renovations of older commercial space into new luxury apartments, which have been absorbed quickly. Absorption has been outstanding at new projects in downtown Minneapolis and in suburban locations. The rental market continues to tighten, and the latest data for the Twin Cities show an apartment vacancy rate of 3 percent. Spotlight on Madison, Wisconsin The Madison area has one of the strongest economies in the region due in great part to the University of Wisconsin and the State government. The university has a significant impact on the local economy. The largest local employer, with 28,800 State workers, the university generates a $600 million annual payroll and accounts for 11 percent of the area's nonagricultural employment. In 1990 expenditures by the university totalled $1.1 billion in the metropolitan area, including $226 million by its 42,000 students. More than 50 startup companies in the State employing over 8,000 persons trace their origin to university research in health care, computer science, and engineering. The university's Biotechnology Center has become increasingly important in the local economy for stimulating growth in new biotechnology firms. The unemployment rate in the Madison area for May was 1.8 percent. Labor shortages are widespread and have prompted the State of Wisconsin to step up recruiting throughout the country. Population in the Madison area, currently estimated to be around 400,000, has increased by over 6 percent since the 1990 census. Prospects for future employment growth in the metropolitan area are favorable. The State expects record employment of 258,000 for the Madison area by November 1995, an anticipated 4.1-percent gain over 1994. All sectors are expected to grow, led by manufacturing, high technology, and construction. Boosting construction employment is the $67 million convention center being built in downtown Madison, a 300,000-square-foot shopping mall under development in west Madison, and four office buildings. Madison's tight labor market may constrain employment growth, particularly for skilled workers where the shortage is most acute. From 1992 through 1994, an average of 2,100 single-family building permits were authorized annually in the Madison metropolitan area, well above the average of 1,100 a year in the 1980s. Especially active areas are Fitchburg, Sun Prairie, and Cottage Grove Village. Home construction started to slow in late 1994 and continued to slow into the first 5 months of 1995, with single-family permits (559 units) off 31 percent from a year earlier. Sales of low and moderately priced homes have remained relatively healthy through the first half of 1995. Softer conditions and declining sales have been noted in the upper end of the market ($175,000 to $300,000) during the second quarter. However, builders report brisk sales of modest-priced new homes ($125,000 to $160,000) throughout the metropolitan area. Multifamily housing construction in the Madison area is strong and accounts for a high percentage of residential building activity. In 1994 building permits were issued for 1,950 multifamily units, up 15 percent from 1993 and the highest level in more than 15 years. In the past 10 years, multifamily units have represented half of the 27,950 units permitted in the area, well above multifamily housing's share in other Midwest markets. Madison's rental market remains strong, despite a temporary increase in vacancies in late 1994. Rental housing vacancies increased in 1994 due to the large number of units that entered the market. In east and west Madison, where most apartment construction is occurring, the rental vacancy rates in December 1994 were 7.6 and 8.5 percent, respectively, up sharply from 4.4 and 2.1 percent in December 1992. The rental vacancy rate for the Madison area is estimated to be around 5 percent currently and is declining. In response to the softer market in late 1994, builders cut back significantly. Multifamily permits for the first 5 months of 1995 are 28 percent below the same period last year. Southwest Employment growth in the Southwest in the second quarter of 1995 continued its steady improvement, with a growth rate of 3.9 percent annually. Trade and services represented over 61 percent of total jobs added in the past 6 months. Employment in New Mexico, spearheaded by Albuquerque's growth, was up 5 percent. Despite Mexico's devaluation of the peso and the impact on trade, employment growth in Texas remains ahead of previous projections, at 3.7 percent annually. Higher interest rates reduced homebuyer traffic and sales in the latter half of 1994 and the first quarter of 1995. However, the second quarter of 1995 saw a resurgence. New home prices appear to be holding steady with no concessions being offered. Single-family building permits (51,544) were down only 4 percent for the first 6 months of 1995 in the region compared with the same period in 1994. While sales of existing homes in Texas continue to be down from last year's torrid pace, the sales of waterfront property along the Texas coast continue to climb despite the peso devaluation and higher mortgage rates. Louisiana has very few new speculatively built homes and no significant price concessions. The average new home price ranges from $80,000 to $130,000. In May flooding in the New Orleans area damaged more than 34,000 homes, forcing a number of households to rent temporarily. Most of these units have already been repaired and the owners have moved back. In many Southwest markets, manufactured housing is increasing in popularity. The new generation of manufactured homes is more expensive, but is a competitively priced alternative to traditional site-built housing. Shipments of manufactured housing rose by 16.4 percent in New Mexico in 1994. The 5,861 manufactured homes shipped into New Mexico last year represented 39.3 percent of all new homes in the State. In addition to first-time homebuyers, retirees are also a big part of the market for manufactured housing. The condominium market remains relatively weak in the Southwest region. Some renewed interest has been seen in the New Orleans, Houston, Galveston, and Dallas markets. New units are generally over $100,000. Small infill townhouse and zero-lot-line developments, some in gate communities, are also beginning to appear in these markets. Multifamily building activity in 1995 has continued to increase but at a more modest pace than between 1993 and 1994. The number of units permitted (21,606) in the first 6 months of 1995 was up 18 percent over the same period in 1994. In the first half of 1995, permits were issued for 7,509 multifamily units in the Dallas-Fort Worth area, a 234-percent increase over the comparable period in 1994. To date the rental market has not shown signs of the soft market conditions and overbuilding that occurred in the mid-1980s. However, occupancy rates have declined in the Albuquerque and Santa Fe areas due to the large number of new apartments entering the market. It is expected that occupancy rates also will decline slightly in the Dallas-Fort Worth and Austin areas over the next 12 months as new projects continue to be completed. The scheduled closing over the next 5 years of Kelley Air Force Base in San Antonio will cause some decline in occupancy rates, particularly in the southwestern part of that market. The rental markets in Louisiana are balanced with occupancy rates above 93 percent, except in the city of New Orleans, which has an overall 90-percent occupancy rate. The east New Orleans submarket still is very soft, with occupancy percentages only in the upper 80s. Spotlight on Fayetteville-Springdale-Rogers, Arkansas The Fayetteville-Springdale-Rogers metropolitan area (Benton and Washington Counties) in northwest Arkansas is the fastest growing area in the State and among the fastest growing areas in the country. The population as of 1994 was estimated to be 242,464 compared with 210,908 in 1990, a 15-percent increase. More than half of all the jobs added in Arkansas from 1990 through 1994 were in the Fayetteville-Springdale-Rogers area. Total employment in 1994 averaged 127,300, a 20.4-percent increase in employment in 5 years. The unemployment rate as of May was estimated to be a very low 2.4 percent. All industries in the area are reporting labor shortages, particularly for entry-level jobs at $7 an hour. Poultry processing, centered around the Springdale and Rogers areas, is the major industry in the metropolitan area, employing over 15,000 workers. The larger processors include Tyson Foods, Cargill, Hudson Foods, and Georges Inc. The Hudson Foods plant is going through an expansion that will raise employment to about 900 by January 1996. The shortage of local labor has forced the industry to recruit immigrant labor from the Texas-Mexico border. In the last several years, an estimated 10,000 Hispanics have relocated to the Springdale-Rogers area. The largest private-sector employer in Arkansas is Wal-Mart Stores, Inc., headquartered in Bentonville and employing an estimated 10,000 persons in the metropolitan area. The second largest employer is Tyson Foods, Incorporated, which is headquartered in Springdale. Springdale is also the region's ground transportation hub, with Federal Express, United Parcel Service, and Airborne Express all located within a block of each other. Other major employers in the area include Campbell's Soup, Levi Strauss, Washington County Regional Medical Center, and the Veterans' Hospital. Fayetteville is home to the University of Arkansas, with a student body of 14,000 and a faculty and staff of over 4,000. To attract new industry, particularly higher wage, higher skilled jobs, the city of Fayetteville and the university created the Genesis Technology Incubator, which has spawned industries ranging from computer technology to biotechnology-engineering. From 1990 through 1994, building permits were issued for 7,052 single-family units and for 6,168 multifamily units in the metropolitan area. In the first 5 months of 1995, permits have been issued for 1,129 single-family homes and 844 multifamily units. Current levels of single-family construction are meeting the additional demand for sales housing, and sales of both new and existing homes have remained strong through the first 6 months of 1995. Most homes are sold within 30 days of listing. Local sources indicate that the price range of most of the new homes in the area is $80,000 to $100,000 in the Fayetteville area and $70,000 to $80,000 in the Springdale-Rogers submarket. The rental market in the Fayetteville-Springdale area is extremely tight, despite the large number of units built since 1990. The main housing problem is the shortage of affordable rental housing for the rapidly growing population of minimum-wage and low-wage job holders. The shortage of affordable housing has led to overcrowding in some rental projects. In response to the shortage, one poultry processor has begun constructing apartments for its employees. Great Plains Employment gains have continued in the Great Plains region into 1995. Unemployment remains low in all four States. Nebraska's 2.4-percent unemployment rate as of May 1995 was one of the lowest in the Nation. Iowa was next with 3.0 percent, followed by Kansas with 4.4 percent, and Missouri with 4.8 percent. For the 12 months ending May 1995, employment in the Great Plains increased by 201,000 jobs. Missouri led the region with nearly 86,700 new jobs. Riverboat gambling has become a major growth industry in the State, adding over 6,500 jobs. The gambling inauguration was on May 27, 1994, with two boats opening for business in the St. Louis area. One riverboat, the Admiral, with 1,200 employees, represents the largest new employer in the city of St. Louis in recent years. In June 1994 boats began operations in the Kansas City and St. Joseph areas. Through June 30, 1995, State and local tax revenues received directly from the gaming industry have totalled slightly over $87 million. Iowa, with 42,900 new jobs, was the second leading job producer in the region. In eastern Iowa near Muscatine, IPSCO Steel is building a $375 million rolled steel and mill plate manufacturing facility. Hiring is now taking place for trainee positions. Major production will begin in the second quarter of 1996 with estimated employment of 375 persons. IPSCO Steel qualified for the State of Iowa's New Jobs and Income Program, which doubles job training dollars and increases tax credits. To receive these incentives, IPSCO must pay hourly employees a median hourly wage of at least $16.13. Additionally, IPSCO must offer full benefits to 80 percent of the employees at the facility. Nebraska, which added 33,200 jobs, had the highest percentage increase in jobs, 4.3 percent. This compares to 3.6 percent for the Great Plains region as a whole. Kansas added 38,400 jobs during the 12 months ending May 1995. Alcoa recently announced it would begin construction of a $9 million facility in Hutchinson for polishing aluminum fuselage sheet metal for aerospace use. The facility will employ up to 90 persons. During the first half of 1995, permits for new residential construction in the Great Plains region totalled 24,320 units, down 15 percent from the same period last year. Single-family permit activity was off 19 percent. The higher interest rates and slower sales were largely responsible for the lower activity. However, heavy single-family production in 1993 (40,071 units) and 1994 (42,960 units), which exceeded any production since 1978, partially satiated some of the pent-up demand for sales housing. All four States showed declines in single-family activity, ranging from 15 percent in Kansas to 24 percent in Nebraska. Over the first 6 months of 1995, multifamily permit activity was almost unchanged, increasing slightly from 5,816 units in 1994 to 5,896 in 1995. Generally, rental housing vacancy rates have been declining and concessions have disappeared, except in weak submarkets. In the Kansas City area, the vacancy rate for garden apartments has declined to about 5.5 percent. Omaha's rate is reportedly below 5 percent; Des Moines has a balanced market; and Iowa City, the home of the University of Iowa, has a tight rental market. Parts of the cities of Kansas City, Kansas, and Kansas City, Missouri, have been designated as one of the four HUD Enhanced Enterprise Communities that were approved nationally. The 19.6- square-mile area was awarded a $22 million HUD Economic Initiative Grant, along with $3 million in Social Services Block Grants. In addition, the State of Missouri has set aside tax credits and funds for loans for the area. The Enhanced Enterprise Community will provide incentive investment funds to create business expansion and jobs in the area, a fund to aid residents of the area to obtain needed job skills, and a neighborhood empowerment fund available to residents. Included in the plan elements are completion of construction of the Westside Business Park, construction of the first phase of the 18th Street East Industrial Park, and renovation of the historic Union Station for reuse as a science museum. Spotlight on Wichita, Kansas The Wichita economy is dominated by the aircraft manufacturing industry, made up of Cessna, Raytheon/Beech, Learjet, Boeing, and numerous aircraft parts supply companies. Boeing, the largest with 15,500 employees (half the industry total), has reduced its workforce by 8,400 employees since 1989. These layoffs were caused by slower sales of commercial aircraft and cost cutting. The other three aircraft manufacturers produce planes for both general aviation and the military. Recently, employment levels have been fairly stable. However, a major expansion of production over the next 20 years is widely anticipated throughout the industry. Raytheon/Beech just signed a $9 billion, 700-plane contract with the U.S. Department of Defense (DoD) that will run for 20 years. As a result of recent changes in aircraft liability law, Cessna is re-entering the single-engine market. The company is adding 1,000 jobs in Wichita in the near future and 1,000 more at a new assembly plant that will be completed in Independence, Kansas, within the next 12 months. With employment in the aircraft industry stabilizing, wage and salary employment increased approximately 4,200 in the 12 months ending May 1995. As the market improves for commercial aircraft manufacturing, the economic base should continue to expand for the next few years. The strengthening of the economy over the past year has pushed down the unemployment rate to 5.1 percent. Wichita is in the midst of a downtown revitalization that includes an expansion of the convention center, a commitment from a major hotel chain to built a 300-bed convention hotel, efforts to refurbish a vacant 30-year old downtown high-rise hotel, the rehabilitation of a vacant building for State offices, renovation of the historic county courthouse, and infrastructure improvements. Old Town, an area several blocks east of downtown, has undergone renovation of old warehouse and manufacturing buildings for use as restaurants, bars, and shops. Its success has helped to spur the efforts to renovate the downtown area. With declining interest rates and a moderately expanding economic base, production of single-family housing increased steadily from 1,450 units in 1990 to 2,235 in 1994. The 1994 total was the highest for at least the past 16 years. However, permit activity fell 36 percent in the first half of 1995 from the same period of 1994. Home sales rose to 7,999 in 1994, 10 percent above the 1993 total and 74 percent more than in 1990. The median sales price rose 3.2 percent to $73,700. Rising interest rates caused sales to decline by 25 percent in the first 5 months of 1995 from the year-earlier period, while the median sales price dipped to $72,600. Inventories of new houses, particularly those priced over $120,000, are rising and some builders are offering to pay all or part of the closing costs for buyers. Sales and construction activity over the next 2 years are not expected to increase significantly. The rental market started to soften in 1993 because of layoffs in the aircraft industry and continued to soften as low mortgage interest rates attracted tenants to homeownership. The overall rental vacancy rate is currently around 11 percent and the apartment vacancy rate is 9.5 percent, double the rates in 1992. Rent increases have slowed, turnover is high, and concessions are commonplace. In response to the soft market, multifamily construction since 1990 has been negligible except for several tax credit-financed projects. Only 112 multifamily units were permitted in 1994 and there have been only 10 units permitted so far this year. Rocky Mountain Employment growth slowed in the second quarter of 1995, but most States in the region continued to post moderately strong annual gains of 3 to 4 percent. Utah continues to lead the region with a gain of almost 6 percent, while Wyoming's growth rate of under 2 percent persistently lags behind both the region and the United States. Construction job gains slowed in all States but Utah; the good news is that no State saw an actual loss due to the poor Spring weather. Manufacturing employment continues to expand. Continued growth in computer equipment production has made South Dakota's manufacturing sector the fastest growing among Rocky Mountain States. The Summer tourist season got off to a slow start because of the poor weather, but trade and services continue to post impressive job gains. Unemployment rates moved up in April, but most were unchanged in May. The unemployment rate remains under 4 percent in Colorado, Utah, and the Dakotas. The surge of in-migration of the early 1990s has peaked. The labor markets have stayed generally balanced throughout the period of high in-migration. However, spot shortages continue in some construction trades and some difficulties persist in finding entry-level workers. Total building activity in the first 6 months of 1995 was down 7 percent from the first 6 months of 1994. A 20-percent decline in single-family permits, to 23,590 units, has been partially offset by a continued surge in multifamily activity that began last Fall. Permits were issued for 9,846 multifamily units in the first half of 1995, a 55-percent increase over the comparable 1994 period. In the Denver-Boulder area, the number of multifamily units permitted in the first half of 1995 (2,757) was more than double the activity in the first half of 1994. Apartment construction in the region should continue to increase throughout 1995. While single-family building in 1995 will almost certainly be below the 1994 level and about equal to the 1993 level, this will still make 1995 the second or third most active year in the past 10 years. With some notable exceptions like Douglas County (a fast-developing suburban county in the Denver area), most metropolitan areas at the beginning of 1995 were slightly overbuilt. After some concessions and a cutback in production, most of the surplus of unsold new homes has been cleared. Builders have also begun to shift from the higher to the more moderate-price range. Some softness remains in the higher price ranges. The shortages of lots reported during the first half of 1994 had eased by the beginning of 1995. In some areas lot sales picked up by midyear after a lull in the first quarter. Condominium conversions have begun to appear in the Denver and Boulder markets in response to the strong sales markets and high prices in selected submarkets. Only a few new condominium developments are under construction. There has been an increase in townhouse development. Rental markets in the region are balanced to tight. Vacancy rates remain low in the major markets, but conditions have eased because of the recent new construction. The high rents have given tenants an incentive to purchase homes, double up, or commute from less expensive outlying areas. New projects have rented up relatively fast, although concessions are appearing for some of the larger, more expensive rental units. Existing home sales in the first quarter of 1995 were down from 1 year ago in all States. The rate of decline for the region was about 11 percent, a less precipitous decline than the 18-percent drop in the fourth quarter of 1994. First quarter sales in Wyoming picked up considerably from the fourth quarter of 1994; the net result was a decline of less than 1 percent from 1 year ago. Colorado and Utah sales were also up in the first quarter, but the declines from 1 year ago were still in double digits in these States. Price increases have begun to slow with the easing of sales. The median sales price was up 11 percent from 1 year ago in Salt Lake City. Smaller increases were reported in the major markets in Colorado and the Dakotas. Spotlight on Colorado Springs, Colorado The Colorado Springs economy boomed in 1994, growing at its fastest pace in 10 years. The high growth rate is related to the impact of the location of Apple Computer, Inc., and MCI Communications Corporation in Colorado Springs beginning in 1992. Apple, MCI, and related spinoff companies continued to expand in 1994. All employment sectors grew, with the largest gains in the construction, trade, and services sectors, which accounted for nearly 70 percent of the growth. The recent employment gains largely reflect the secondary impact from the surge of high-paying positions that were created in 1992 and 1993. By the end of 1994, the seasonally adjusted unemployment rate had dropped to 3.7 percent, the lowest level in the past 20 years. Employment growth has slowed in the second quarter of 1995. This trend will continue over the next few years as the secondary employment effects taper off and corporate relocations slow because of the diminishing supply of bargain-rate space available since the late 1980s. In addition, troop shifts at Fort Carson will result in the net loss of 2,500 military personnel by the Fall of 1996. None of the area's other military installations were significantly affected by the recent base closure recommendations. The sales market has softened in the past 6 months from the extremely tight conditions of the past few years. High-end speculative sales housing ($300,000 and over) is overbuilt as builders had expected more sales of expensive homes to high-income in-migrants. In addition, potential buyers have been cautious because of the uncertainty of the future of Fort Carson. Builders have cut construction in response; during the first half of 1995 permits were issued for 1,518 units, a 33-percent decline from the first 6 months of 1994. This drop should help bring the supply of single-family homes more in line with demand. Following the favorable news from DoD that there would be no further cuts at the local military installations, both the existing and new sales markets have begun to recover. Sales activity in 1995, however, will remain below the frantic pace of 1993 and the first half of 1994. Despite the more balanced market conditions, the average price of an existing single-family home increased 8 percent in the past 12 months to nearly $125,000. Future demand will be less than the high levels experienced during the past few years and will focus primarily on moderately priced single-family homes, townhouses, and condominiums. The rental market has begun to ease slightly in the past 6 months from the extremely tight conditions of the past few years. The vacancy rate in the first quarter of 1995 was up slightly to 3 percent, and recent rent increases are averaging about 6 percent annually compared with the double-digit increases in prior years. The rental market will continue to move from a tight to balanced condition during the remainder of the year because of the decline in in-migration, the personnel reductions at Fort Carson, and the increased supply of new units entering the market. An increase in vacancies is expected in the submarket near Fort Carson; however, because of the pent-up demand for affordable rentals, the vacancy problems should be of short duration. There are nearly 800 rental units currently under construction, 200 of which are financed with tax credits. Another 600 units are in the pipeline. Most of the new projects will start coming on the market late this year. Pacific The performance of the Pacific States economies thus far in 1995 has been varied. California is continuing its slow recovery as June 1995 nonfarm employment rose above its year-earlier level by 118,000 jobs, or 1 percent. Arizona's growth is slowing a bit. The year-over-year percentage gains in nonfarm employment have fallen steadily during 1995, declining to 4.3 percent in May, still a very hardy growth rate. Nevada's economy, due mainly to Las Vegas, is doing well. Statewide nonfarm employment was up by 5.8 percent from May 1994 to May 1995. Hawaii has the softest economy, as employment dipped slightly below the year-earlier level. Facing sluggish markets, California's residential builders cut back during the first 6 months of 1995. Permits issued for single-family units (32,299) were 23 percent below the year-earlier level. The number of multifamily units authorized (7,307) also declined 22 percent. California home sales through April were weak, with sales of both new and resale units off about one-fourth over last year. The declines were widespread geographically for both categories. Home prices were down from last year in many areas. Resales showed some improvement in May over April levels, attributable to lower interest rates. Lackluster sales have produced an inventory buildup. As of May the listings of existing single-family homes equalled an 11 months' supply at current sales rates compared with an 8 months' supply in May 1994. The supply of condominiums also increased from 10 months to 15 months. Southern California rental markets vary substantially by area, but are in general quite weak. Northern Los Angeles County is probably the weakest, with a 20-percent vacancy rate. Orange County has about a 10-percent vacancy rate. San Diego, however, has a balanced rental market. The rental market in San Francisco also is balanced, with a vacancy rate in the 5- to 6-percent range. East Bay rental markets are softer. In Arizona single-family building permits through June (19,362) were down from the first half of 1994, but home construction is still relatively strong. In Phoenix single-family permits in the first half of 1995 (13,900) were off only about 10 percent from the first half of 1994. Multifamily activity in Arizona continued to increase, with the number of units permitted in the first 6 months of 1995 (6,809) up 89 percent. Phoenix accounted for about three-fourths of the State's multifamily activity for the first half of the year, with the number of units permitted more than double the same period of last year. Total home sales in both Phoenix and Tucson fell sharply during the first 5 months of 1995. The Phoenix slowdown this year was substantially less than that of Tucson. In both areas percentage declines in resales greatly exceeded those for new homes. The first quarter apartment vacancy rate in Phoenix was about 5 percent. During the same period, rents in some of the larger projects rose by 10 percent. The comparable 1995 Tucson vacancy rate was also about 5 percent, but this represented an increase from last year. Vacancies in both areas are expected to rise because of the impact of new construction hitting the market and slower overall absorption. In Nevada single-family permits for the first 6 months of 1995 were off 11 percent from the same period last year, but the market is still relatively strong. In Las Vegas single-family authorizations (9,590 units) fell by 11 percent through June, but multifamily units permitted (4,341 units) were up by 7 percent. The Las Vegas apartment vacancy rate has not changed over the last 6 months, holding at a low 4.5 percent despite greatly increased apartment construction. In Hawaii single-family building permit activity was down 8 percent, but multifamily units were up 25 percent compared with the first 6 months of 1994. In Honolulu resales of both single-family homes and condominiums through May were down about 40 percent compared with sales in the first 5 months of 1994. Spotlight on Fresno, California The Fresno MSA, which includes Fresno and Madera Counties, serves as the agricultural, financial, commercial, and educational center of the San Joaquin Valley in central California. Fresno County is the number one agricultural-producing county in the United States, surpassing second-ranked Tulare County, California, by 23 percent. The 1994 total gross production value was $3.1 billion, the second year the county topped the $3 billion mark. Cotton, grapes, tomatoes, milk, and cattle were the key products in 1994. By May 1995 employment in the Fresno MSA totalled 318,200, virtually unchanged from May 1994. The farm sector constituted 18.5 percent of the jobs and posted a 3-percent decline from May 1994. The nonfarm sector increased slightly from the previous year to reach 259,200. All industries, except business services and government, declined or had only nominal gains. Employment in business services increased by 1,300, a 12-percent increase over May 1994. Government employment increased by 2,000 jobs, 3.2 percent. The sales housing market in the Fresno MSA has been weak. The volume of FHA-insured single-family homes dropped 55 percent, from 12,530 in the first half of 1994 to 5,687 in the comparable 1995 period. MLS data show sales declined 22 percent, from 1,357 in the second quarter of 1994 to 1,063 a year later. The average time on the market for a home increased from 126 days to 135 days during the same period. Developers have confirmed that new home sales have been off by 25 percent from the previous year, continuing a downward trend that began in the last half of 1992. The entry-level market, homes ranging from $89,000 to $120,000, has performed the best. The move-up market, especially those priced above $150,000, has eroded. Builders' responses to diminished demand have included financing incentives, such as buydowns and discounted or free amenities. Some new home prices have been reduced by 10 percent. Permits for single-family units have declined 22 percent from 1,827 to 1,428 from 1994 to 1995. The rental market also has softened this year. A local consultant places the 1995 vacancy rate at 8 percent, which is almost 1 percent higher than in 1994. Households are doubling up, and vacancies among lower rent units have climbed to 10 percent. At the upper end of the rental market, two-bedroom units renting for more than $600, vacancy levels are in the 5-percent range, though tenants are being siphoned off by ownership opportunities or by single-family home rentals. There has been some activity in the seniors housing market. A 148-unit, independent-living facility in Clovis is currently in the second phase of construction. Lease-up experience has been favorable. Administrators of Alzheimers residential care facilities are currently contemplating expansion. Several skilled nursing facilities have recently converted wings dedicated entirely to patients with symptoms of dementia. A multilevel skilled nursing facility is also planned for Clovis. Northwest The strong expansion in the Northwest economy appears to have stalled during the second quarter of 1995. While wage and salary employment increased 3.3 percent in the past 12 months, employment in the second quarter was virtually unchanged from first quarter 1995 levels. Despite the slowdown, the unemployment rate continued to decline to 5.7 percent as of the second quarter of 1995. Oregon is the only State in the region expected to outperform the national economy this year. The development of high-technology manufacturing facilities will continue to boost the State's economy. Intel, Integrated Device Technologies, Komatsu Electronic Metals, Hyundai Electronics America, Wacker Sitronic Corporation, and Fujitsu have all recently announced plans to expand or build new plants in Oregon. These expansions represent approximately 4,700 additional jobs. According to Oregon State economists, total employment is projected to grow by about 2 percent a year (31,000 jobs) annually over the next 10 years. The service industry will account for nearly half of the new jobs, with the high-technology machinery and electronics industries also being major factors. The Portland-Vancouver-Salem and the Eugene-Springfield metropolitan areas are expected to experience a large part of this job growth. The employment outlook in Washington improved during the second quarter when an early retirement program offered by Boeing reduced the need for a previously announced layoff of some 6,500 employees during 1995. Airplane orders have increased, and the downturn at Boeing appears to be nearing the end. However, downsizing at the Hanford Reservation in the Tri-Cities area (Richland-Kennewick-Pasco) is well underway. The area has already lost over half of the 4,700 jobs targeted for elimination this year. The Tri-Cities unemployment rate as of May was 6.6 percent and total employment was down 2.8 percent over the past 12 months to 73,300. Alaska's prospects in 1995 are for little if any growth. Employment is expected to decline in both the oil and timber industries. However, the tourism industry is booming, and the Fairbanks area is experiencing a modern day gold rush at the Fort Knox gold mine. Mining companies have staked more than 80 square miles of claims since October. Population continues to grow faster than the national average in all four States in this region. However, the rate of growth has slowed from the rapid pace of 1988-1993, which was stimulated by in-migrants from California. With the economy improving in California, there has been a decline of in-migrants. During the first half of this year, migration to Oregon was down nearly 33 percent compared to the same period a year ago. Idaho continues to show strong growth but at a much slower pace than in 1994 when the State had the second highest population growth rate in the Nation. Single-family building activity in the region showed some improvement this quarter but remained behind last year's levels. The number of single-family building permits issued (26,292) during the first 6 months of the year was 15 percent below the same period a year ago. The biggest drops were in Idaho (3,624) and Washington (13,963) at 22 and 20 percent, respectively. Single-family activity in Oregon (7,835 units) was down only 5 percent from first half of 1994 levels. Builders are concerned about the supply of developed lots in Oregon, Idaho, and Washington. In Oregon there is a definite shortage of easy-to-develop lots and current land-use regulations are expected to limit the available supply during the next couple of years. The single-family lot inventory is especially tight in the Puget Sound markets and serious shortages are expected as early as next year. Environmental and growth management will continue to keep a tight rein on development in this area. Inadequate financing for infrastructure could become a serious constraint to development in Idaho next year. New and existing home sales throughout the Northwest were still well below the number recorded during the second quarter of 1994. Both new and existing home sales were down in every metropolitan area in the region except Anchorage. The slowdown is primarily the result of higher interest rates and slower in-migration. In Washington sales were down 20 to 30 percent; in Oregon sales dropped 10 percent. Sales in Boise were also down by 20 percent. Sales prices in most areas have increased only modestly or have remained unchanged. Rental market conditions are balanced in most of the market areas in the Northwest. The Seattle rental market continues to improve. The overall rental vacancy rate is around 5 percent. There is still some softness in the south King County submarket where the vacancy rate is around 8 percent. In Portland the vacancy rate is around 5 percent and the market is balanced. Apartment vacancy rates remain extremely low in Eugene (2.5 percent) and Salem (3.5 percent). Market conditions in Boise, Anchorage, and Tacoma are moving from balanced to soft. The rental market in the Tri-Cities exhibited the most dramatic quarterly change as vacancies rose 2 percentage points to 7 percent, reflecting the job declines at the Hanford Reservation. Multifamily permit activity continues to be strong in most of the Northwest. The number of units permitted in the first 6 months of 1995 (12,239) represents a 31-percent increase compared with the same period in 1994. Activity increased 78 percent in Oregon (to 5,000 units) and 25 percent (to 6,047 units) in Washington. The level of activity in Idaho was down 35 percent. As a result of the large number of units in the pipeline for Boise, developers have cut back until the new supply can be absorbed. To date, new units are renting well. Spotlight on Eugene-Springfield, Oregon The mid-1990s have been a very prosperous period for the Eugene-Springfield metropolitan area. As of July 1, 1994, the population was estimated to be 300,000, an increase of 17,100 (6 percent) since the 1990 census. Nonfarm employment increased by 3 percent between the second quarters of 1994 and 1995, as nearly 4,000 jobs were added. At 5 percent the unemployment rate is near a record low. The 1990s have been a period of transition for both the goods- and services-producing sector. The early 1990s were a weak labor market as nonfarm employment contracted from 118,600 jobs in the second quarter of 1990 to 116,800 by the second quarter of 1992. The goods-producing sector experienced a loss of 2,400 jobs, 2,000 of which were concentrated in the lumber and wood sector. Job losses in the lumber and wood products industry were due both to efficiency gains in production and the dwindling supply of logs from federally owned land. Since mid-1992 employment in the Eugene-Springfield area has grown by 12,100 jobs, 8.1 percent. Despite continued contraction in the lumber and wood products industry, the goods-producing sector added 3,000 jobs during this period and the services-producing sector another 9,100 jobs. Goods-producing employment growth over the period was almost evenly split between durable goods and construction. Employment growth in durable goods industries, such as primary and fabricated metals and transportation equipment, is especially significant for the Eugene-Springfield area because it signals the end of a long era of dependence on the lumber and wood products industry. There is concern that, on average, wages paid in these expanding industries will be inferior to those paid in the timber and wood products industry. The goods-producing sector should see significant job growth in the immediate future with the opening of Sony Corporation's compact disc manufacturing facility this year. The Sony facility will employ 340 initially and will increase employment to 1,000 over the next 5 years. Hyundai Electronics of South Korea is currently constructing a $1.3 billion memory chip manufacturing facility in west Eugene. The plant is scheduled to start production in early 1997 and eventually employ up to 1,000 people. Hyundai's arrival is especially significant since it is the first time one of South Korea's three large chip manufacturing companies has built a factory in the United States. The Oregon Employment Department recently forecast employment growth of 22 percent between 1995 and 2005 for the Eugene-Springfield metropolitan area. Leading growth industries are expected to be business and professional services, durable goods, and health services. The area is also the location of the University of Oregon, with an enrollment of close to 17,000 and 3,100 faculty and staff. The university generates approximately $287 million in spending in the Eugene-Springfield area annually. Sales of single-family homes have been robust during the 1990s, with an average of 1,250 homes sold annually from 1990 to 1994. Sales began to slow in the first quarter of 1995 and in the second quarter of 1995 were down by 17.4 percent compared with the same period in 1994. As a result, permits for the construction of new single-family homes fell dramatically from year-earlier levels, as just 483 permits were issued. A growing inventory of new houses at the outset of 1995 and higher mortgage rates combined to rein in the pace of new construction. However, sales picked up substantially in June. Moderately priced homes in the $140,000 to $150,000 range are selling rapidly, but sales remain slow for homes above $200,000 where there is still an overhang in the inventory. Owner-occupied housing affordability is becoming a pressing issue in the Eugene-Springfield area. In 1990 the median price of a home sold was 2.1 times the median family income; by 1995 this figure had risen to 2.8. During the second quarter of 1995, only 18 percent of sales were for homes less than $75,000. Among the most controversial housing issues in the Eugene-Springfield area is the proposed 1 percent tax on electricity use in the city of Eugene, the revenue to be used for the construction of 150 new rental units, 50 rehabilitated rental units, and 20 houses targeted for low-income persons. The rental market is tight, and the vacancy rate at the end of the second quarter of 1995 is estimated to be 2.5 percent, down 1.5 percentage points from the same quarter 1 year ago. The decline in rental vacancies can be attributed to the slow pace of new construction activity; only about 250 units arrived on the market during this period. The rental vacancy rate has, in all likelihood, bottomed out as approximately 600 units are expected to come on the market during the last half of 1995. Over the past 6 months, rents have increased by about 2 percent.