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.