Employment growth in the Midwest region during the third quarter of 1997 continued the moderate trend of the first 6 months of 1997. For the 12 months ending in August, 256,600 jobs were added in the region. Unemployment rates in all States except Wisconsin were down from 1 year ago.
The healthy economy supported a high volume of new and existing home sales in the region's major housing markets over the past 4 years. As of the third quarter of 1997, the annual rate of existing home sales in the region had reached 876,700, one of the highest volumes of the past 15 years. Michigan's expanding economy helped boost home prices by 7.9 percent in the 12-month period ending in June 1997, the highest rate of price appreciation in the country according to HUD's Office of Federal Housing Enterprise Oversight.
Building permits were issued for 132,730 single-family homes in the first 9 months of 1997 -- down 11 percent from the same period in 1996, although still a strong rate of production. All States reported declines in activity.
The Detroit-Ann Arbor area had 15,675 single-family permits issued in the first 9 months of 1997. Activity was particularly robust in Washtenaw County and in the city of Ann Arbor. The Building Industry Association reported that new home sales in 1997 in the Detroit metropolitan area have kept pace with a very strong 1996. Existing home sales in the Detroit-Ann Arbor area totalled 28,248 through August 1997, only 5 percent below the same period in 1996. As of the second quarter of 1997, the median sales price of existing homes ($119,400) had increased by 6.7 percent.
Ohio's Association of REALTORS® reported that 134,600 existing homes were sold in the State during the first 8 months of 1997, slightly below record home sales of 137,800 for the same period in 1996. Sales activity was steady in the Cincinnati-Hamilton (22,400 homes), Cleveland (28,000 homes), and Columbus (24,000 homes) metropolitan areas. New home sales in Columbus were strong, with contracts for 2,750 new homes signed in the first 6 months of 1997 compared with 2,450 in the first half of 1996 -- a 12-percent increase. In Cincinnati sales of new homes (1,770) in the first 6 months of 1997 were up 5 percent over the comparable period in 1996.
In Chicago developers for the University of Illinois's expansion of its westside campus plan to build new homes selling for from $89,000 to $375,000 only a few blocks from Chicago Housing Authority's 3,700-unit ABLA Public Housing project. HUD allocated $24 million to demolish 3 highrise buildings with 456 units and replace them with 200 new public housing units. In the first 6 months of 1997, the city of Chicago contributed $109 million toward the development |of 2,900 sales and rental units, up 22 percent from 1996's $89 million commitment to affordable housing.
Activity in Chicago's seniors housing market heated up in August 1997, when the Del Webb Corporation bought 1,700 acres of land in suburban Kane County for its first Midwest retirement community.
In the Milwaukee area, new home sales were down from 1996, but builders still expect to have from 3,000 to 4,000 home sales in 1997. The 35,000 prospective buyers who attended the Parade of Homes between August 24 and September 14, 1997, equalled last year's turnout.
Midwest rental housing markets remained strong through the third quarter of 1997, with apartment occupancy in the 93- to 96-percent range in the major markets. Building permits were issued for 43,871 multifamily units through September 1997 -- 4 percent greater than the same period in 1996 and the highest first 9-month total of the 1990s. Except for Wisconsin, where activity was down 21 percent from 1996 for the same period, all States reported increases in the number of multifamily units. Illinois led the region with permits for 10,315 multifamily units in the first 9 months of 1997, a 15-percent gain. In Ohio permits were issued for 9,672 units, an increase of 8 percent. Minnesota recorded 3,703 units in the first 9 months of 1997 -- a 28-percent gain -- as a result of increased demand for rental housing in the tight Minneapolis-St. Paul market.
Occupancy in the Chicago metropolitan area apartment market was a high 95 percent, and recent rent increases were between 4 and 6 percent annually. A July 1997 survey of 109,500 apartments by Grubb and Ellis showed rental vacancies were in the 4- to 5-percent range. Through September 1997 permits were issued for 6,730 multifamily units in the Chicago metropolitan area, an increase of 11 percent over the same period in 1996. The $750 million River East project planned for the city's Streeterville neighborhood will be the largest single development of new apartment units, condominiums, and retail shops in the downtown area. The construction of 470 units, starting early in 1998, will provide the downtown area's first high-rent apartments ($1,000 to $3,000 per month) since the late 1980s. Another apartment tower with 470 studio, one-, and two-bedroom units is planned for 1999.
Minneapolis-St.Paul's apartment vacancy rate fell below 2 percent as of the second quarter of 1997 for the first time. Specialized markets, such as for recent retirees and other senior citizens, continued to attract developers. However, except for tax-credit projects and other forms of public investment, very few affordable apartments for general occupancy were built.
Apartment production in the Cincinnati-Hamilton metropolitan area continued at a fast pace, with multifamily permit activity up 17 percent to 2,625 units in the first 9 months of 1997. Strong demand, particularly in the northeast corridor along I-71, kept the vacancy rates between 3 and 6 percent. In downtown Cleveland, National Terminals Apartments units were absorbed well in their first few months on the market.
Detroit's apartment occupancy rate remained at about 93 percent due to the area's robust economy. New, high-priced apartments in west suburban Novi were leased within a week or two of completion at rents ranging from $900 for one-bedroom units to $1,595 for three-bedroom units. In Grand Rapids, where the apartment vacancy rate is down to 5 percent, one developer reported new rental units were leased as fast as they were completed.
The Indianapolis area continued to see strong gains in apartment construction, with multifamily permit activity (2,275 units) up 43 percent through September 1997 compared with 1996. The rental market held up well as an average of 2,700 units per year have come on the market since the beginning of 1995. As of the third quarter of 1997, the vacancy rate was estimated to be 6 percent.
Spotlight on St. Cloud, Minnesota
St. Cloud is the retail, medical, financial, and banking center for Minnesota's central region. The area has experienced an 8-percent increase in population since 1990. Employment in St. Cloud's diversified economy increased a moderate 1.8 percent, or 1,360 jobs, during the 12 months ending in August 1997. The unemployment rate was a low 3.3 percent as of August. Manufacturing, retail trade, construction and mining, higher education, and medical services are the major employment sectors. The Fingerhut Corporation, a catalog retailer, is the area's largest employer with about 4,000 workers.
St. Cloud's economy has benefitted from a strong partnership between its public and private sectors. The Housing and Redevelopment Authority and local private development community have done an outstanding job of redeveloping the central business district and fostering growth of this area. The new I-94 Business Park will be state of the art, with its infrastructure including fiber optics provided by a local electric utility at no cost to the city. It will embody advanced thinking on matters pertaining to worker recruitment and retention, such as affordable housing and day care.
Homebuilding activity has been fairly steady, averaging 625 single-family permits annually since 1990. Through September 1997 permits were issued for 348 single-family homes. New homes start at just over $92,000, with an average sales price of $145,000. The St. Cloud Area Association of REALTORS® reported that 1,336 existing homes were sold through September 1997 compared with 1,469 homes for the same period in 1996.
Multifamily housing production ranged from 713 units authorized in 1990 down to 86 in 1995 but recovered to 300 units in 1996 and 248 units in the first 9 months of 1997. The vacancy rate in the St. Cloud rental market was around 3 percent. Absorption of new units was fairly rapid, except for luxury apartments. Existing units typically rent for $400 per month for a one-bedroom apartment, $500 for two bedrooms, and $600 or more for three bedrooms. The latest project, with 57 units, has monthly rents ranging from $650 for a one-bedroom unit to $1,000 for three bedrooms. An important factor affecting St. Cloud's rental market is St. Cloud State University, which has dormitory accommodations for only 3,000 of its 14,300 students.
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