| T he following summaries of housing market conditions and activities
have been prepared by economists in the U.S. Department of Housing and
Urban Developmentís (HUDís) 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, from housing industry sources, and from their ongoing
investigations of housing market conditions carried out in connection
with the review of HUD program applications.
Midwest / Southwest / Great Plains / Rocky Mountain / Pacific / Northwest
Job growth in the New England economy recently has slowed. The 1.2-percent annual rate of growth is the lowest rate recorded in the past 2 years. Total nonagricultural employment in August 2000 for the six New England States was 6.96 million. The slowdown of job growth is due primarily to a shortage of labor at all skill levels. The only State in the region to post at least a 2-percent rate of growth is Maine, with Vermont second at 1.8 percent. These two States have been at the forefront of growth in both goods- and service-producing jobs in the region. New Hampshire posted the lowest rate of job growth during the 12-month period ending in August. Gains in Massachusetts and Connecticut still account for more than 70 percent of the region's employment growth. Unemployment rates in the region range from 2.5 percent in Connecticut to 4.5 percent in Rhode Island, with the region recording a rate of 2.8 percent, down from 3.3 percent in August 1999.
Total residential building activity for the region, as measured by building permits, was down 6 percent for the first 9 months of 2000 from the comparable period in 1999. Multifamily construction has kept pace with last year, but single-family activity is down almost 8 percent. Maine and New Hampshire are the only States to record increases in permit activity in the first 9 months of this year. More than half of the multifamily activity in the region has been in Massachusetts.
The NATIONAL ASSOCIATION OF REALTORS® (NAR) reported that, through the third quarter of 2000, the annual rate of home sales was 223,200 homes, almost unchanged from this time last year. Existing home sales in Massachusetts and Rhode Island were down 4 and 5 percent, respectively, as decreasing inventories and increasing prices continue to slow sales.
Rental housing markets in all areas of New England continue to be very tight. The combination of economic prosperity and limited rental housing production has seriously impacted many markets in the region. Both Portland, Maine, with an unemployment rate of less than 2 percent for most of 2000, and Burlington, Vermont, where employment has grown 3.5 percent in the past 12 months, have seen rent increases of 10 to 15 percent. Additionally, some apartment developments in the Stamford-Norwalk, Connecticut area (adjacent to New York) are reporting double-digit increases in rents when units turn over. The supply of rental units in these areas has not kept up with the demand created by job growth in high-technology industries in these areas.Spotlight on Boston, Massachusetts
The Boston metropolitan area continues to support significant job growth, however, at a somewhat slower rate than during the past 2 years. For the 12 months ending August 2000, employment in the area averaged 2,005,500 jobs, an increase of 1.8 percent over the same period in 1999. Service-producing jobs increased by 34,100, and goods-producing jobs increased by 1,200. Many high-technology companies have moved to the Boston area during the past few years, creating new manufacturing jobs and bolstering the construction and real estate industries. Although there has been considerable consolidation in the healthcare and financial services industries recently, these sectors are expected to experience overall growth. As of August 2000, the unemployment rate in the Boston metropolitan area was 2.1 percent, down from 2.7 percent in August 1999. Only a moderate rate of job growth is expected in the near term, given the shortage of available workers.
The commercial office market is very strong in downtown Boston, with available vacant space extremely limited. Three buildings under construction, totaling approximately 2 million square feet, will be predominantly preleased prior to opening. A number of buildings in the planning stages also have already been preleased, and the tight market is pushing up rents.
Through September, residential building activity in the Boston metropolitan area was at almost the exact pace as 1999, with 6,190 units authorized by building permits. Multifamily permits have increased steadily since 1996, from 1,263 units to almost 2,600 units in 1999. In the first 9 months of 2000, permits were issued for 2,312 multifamily units. Single-family construction was very consistent through much of the 1990s, averaging slightly over 6,000 homes annually. However, single-family activity has declined over the past 20 months. A total of 3,457 homes was issued permits through August 2000, 15 percent below the comparable 1999 figure. Homebuilding in the area is being constrained by shortages of labor, time-consuming local approval processes, and higher interest rates.
The sales housing market in the Boston metropolitan area has been very strong, but activity has been limited by the availability of inventory. In the five-county, greater Boston area, existing home sales in the first 8 months of this year were down 11 percent compared with the same period in 1999. Industry sources report that the decrease in sales is most pronounced in the lower price ranges, especially for first-time buyers. Sales have increased in the higher-priced trade-up and second-home submarkets. According to the Office of Federal Housing Enterprise Oversight, the rate of home price appreciation for the Boston metropolitan area as of the second quarter of 2000 was 15.2 percent, ranking it 11th in the Nation. NAR data for the third quarter of the year report a median sales price of $356,000, an increase of 18 percent compared with the same period in 1999.
The rental housing market in the Boston metropolitan area continues to be very tight. The Bureau of the Census indicated that the rental vacancy rate for the Boston area was 3.1 percent in 1999. It is estimated that the current vacancy rate is somewhat below that level. Because of limited vacancies and strong demand, rents have been increasing significantly. Industry sources claim rents in better locations and in newer units are increasing from high single- to low double-digits. A local survey of vacant available two-bedroom rental units in the city of Boston reported rents of $1,500 a month in many of the city's neighborhoods. A study completed by the Center for Urban and Regional Policy at Northeastern University identified a shortfall of 36,000 housing units needed to bring the residential market in the Boston area into balance: 7,500 units for college students, 13,500 market-rate units for owners and renters, and 15,000 public assistance units.