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.
Midwest / Southwest / Great Plains / Rocky Mountain / Pacific / Northwest
The economy of the six-State New England region is extending its expansion, providing a solid base for continued manufacturing and retail growth and strong real estate markets. Nonfarm wage and salary employment totalled about 6,590,000 jobs as of August 1997 -- an increase of about 123,600 jobs since August 1996, almost a 2-percent increase. Job creation was reflected in all six States, with Massachusetts providing more than half of the increase -- 67,400 new jobs. Most of the growth occurred in trade and services, although manufacturing is staging a modest comeback, primarily in Massachusetts and New Hampshire.
The New England unemployment rate was 4.3 percent in August 1997, down from 4.6 percent a year ago. New Hampshire and Vermont had the lowest unemployment rates of 2.7 percent and 3.8 percent, respectively, with New Hampshire posting the most dramatic decline from 1 year ago -- from 4.2 percent to 2.7 percent. The highest unemployment rate in the region is in Rhode Island, at 4.9 percent, which is about the national average.
Home construction, as measured by single-family building permits, reached 27,158 units during the first 9 months of 1997, almost equal to the same period last year. Low single-digit percentage increases were posted in Connecticut, Massachusetts, New Hampshire, and Rhode Island. However, significant decreases of 13 percent and 16 percent were recorded in Maine and Vermont, respectively.
The most significant change in the residential building market was the increase in multifamily housing units permitted. With 4,904 multifamily units permitted during the first 9 months of 1997, the region is on track to have its most productive year since 1990. The current year-to-date total is almost twice the amount of the comparable 1996 period. During the 1991-96 period, an average of only 4,150 multifamily units were permitted annually; more than 70 percent of the multifamily units were in Massachusetts and Connecticut. The Boston area accounted for most of the multifamily units in Massachusetts. In Connecticut activity was primarily in Fairfield County (adjacent to New York) and in the other coastal areas, including the Bridgeport, New Haven, and New London metropolitan areas.
Existing home sales in New England were bolstered by the improving economy and favorable mortgage market conditions. Excluding New Hampshire and Vermont, where data were not available, sales on an annualized basis in the four other States increased by 11 percent -- from 159,300 in the third quarter of 1996 to 177,300 in the third quarter of 1997. Home sales in Connecticut increased by 14 percent as of the third quarter of 1997 compared with the third quarter of 1996, while sales increased by 11 percent in Massachusetts to an annual rate of 91,900. The median sales price for existing homes in the Boston area was up 4.7 percent as of the third quarter to $204,400.
The downtown Boston vacancy rate for Class A office space declined to 3.4 percent in the third quarter of 1997, according to one of the area's leading commercial real estate firms. With an overall office vacancy rate of only 5.8 percent in the metropolitan area, the submarkets of downtown Boston, Cambridge, and Mass Pike/Route 128 all had vacancy rates of less than 5 percent. Year to date, about 5.5 million square feet of office space was added to the inventory, and virtually all of it has been absorbed. These very low vacancy rates and rapid absorption rates are a substantial improvement from 5 years ago, when vacancy rates in downtown Boston were approaching 20 percent and lease rates were less than $30 per square foot, compared with the current rate of $40. Market pressure is resulting in the rehabilitation of older inventory, with considerable upgrades.
Rental housing markets throughout New England are typically strong. The best markets are the Boston area (including the suburban ring around Route 128); Fairfield County, Connecticut; and the southern New Hampshire area from Nashua to Portsmouth and into southern Maine. There are close to 2,000 rental units under construction or in planning in eastern Massachusetts. Rental housing vacancy rates have decreased considerably in the past 2 years. Levels of multifamily housing development have been modest in the 1990s in comparison with the 1980s as the overhang of supply was being absorbed. Demand for new apartments is strong and is expected to remain so in these active markets as their economies continue to expand.
Spotlight on Manchester, New Hampshire
Manchester area employment rose by 5,400 to 96,370 jobs, comparing the first 9 months of 1996 with those of 1997. The unemployment rate averaged 2.5 percent for the first 9 months of 1997. Recent developments in the Manchester area include a new 350,000-square-foot medical facility and 120,000 square feet of retail mall expansion. Planned developments include $6 million for renovations to Manchester City Hall and its annex and $2.1 million for downtown building facade repairs and street upgrades. Two hotels also are under construction in the area.
Multifamily building permits peaked at 1,915 units in 1985, then dropped to only 6 units in 1991. Production remained at very low levels through 1995 while the rental housing market slowly absorbed the surplus of apartments. However, in 1996 multifamily permits increased to 285 units, and the total was up to 393 units for the first 9 months of 1997. As an indication that improvement has occurred in the Manchester rental market, a local survey of approximately 700 apartment units showed a vacancy rate of 2.8 percent in September 1997, down from 21 percent 3 years ago. According to a survey conducted by the New Hampshire Housing Finance Agency, rents in the Manchester area have started to increase in recent years. Proposed multifamily rental housing developments include two FHA-insured projects with a total of 340 units.
Home construction, as measured by single-family building permits, has been fairly stable in recent years, averaging 650 homes annually since 1993. The New Hampshire Association of REALTORS® reported that the average sales price in the Manchester area for the first 9 months of 1997 climbed 7 percent to $120,500 compared with the same period in 1996. The number of homes sold was up 9 percent for the same period in 1997. The average number of days that homes are on the market (150 days) is less than half what it was in the third quarter of 1995. Demand for condominium units has increased as well. The number of condominium units sold during the first 9 months of 1997 increased to 195, up from 166 for the first 9 months of 1996, and the median price rose from $56,000 to $64,900. Construction of 84 condominium units is under way in Bedford, with asking prices between $99,900 and $165,000.
Local agencies are working with private lenders to create first-time homeownership opportunities through purchase-rehabilitation loans for older two- to four-family structures. Funding from a variety of sources, such as HUD, the Manchester Neighborhood Housing Services, and the Federal Home Loan Bank Board, is being used for this initiative, which is producing 35 to 40 units a year.