Regional Activity


Employment in the Southeast/Caribbean region increased by 1.7 percent, or 403,500 new jobs, during the 12 months ending August 1998. Forecasts for early 1999 released by North Carolina State University suggest that the State's economy will continue to grow, but at about half the rate of the past 12 months. The slowdown is due to a tight labor market and a reduction in exports to struggling Asian countries. A tight labor market continues to dominate the 41-county Middle Tennessee region, according to the Fall 1998 issue of Midstate Economic Indicators, published by the Business and Economic Research Center of Middle Tennessee State University. Employment has grown to more than 1 million in the region, while the unemployment rate has fallen below 4 percent.

Single-family building permits for 1998 through September for the Southeast totaled 246,697 homes, up 9.7 percent compared with the first 9 months of 1997. The volume increased in each of the eight States, and at this rate the total for 1998 should exceed the total for 1997. Activity in Atlanta for the first 9 months of the year was up 18 percent over 1997 to 34,394 homes.

Existing home sales in the region were strong through the second quarter, but some slowness began to appear in the third quarter. In Greensboro, North Carolina, observers report a dropoff in home sales and single-family building permit activity in the last 2 months of the third quarter. This easing of activity follows record levels of sales in the Greensboro area during the second quarter. In some submarkets of the Nashville metropolitan area, home inventories are increasing as homeowners seek to move up by taking advantage of lower interest rates. This has produced some market softness and price competition. Some rental housing submarkets are also reporting softer conditions as renters, attracted by readily available and affordable mortgage funds, have become homeowners.

Florida home builders have reported that 1998 has been the best year of the 1990s in terms of production, profitability, and sales. The move-up buyers provided the strongest demand, while first-time homebuyers were reported to be priced out of many markets, especially in South Florida. Through September 1998, single-family permit activity was up 9 percent to 74,549 units. There is optimism among builders for the next 6 months, but apprehension beyond that point that the slowdown in the economy and employment growth may offset the positive effects of lower interest rates.

Puerto Rican industry sources predict healthy residential construction activity for the balance of 1998, aided by low mortgage interest rates and the infusion of millions of dollars by FEMA, HUD, and USDA, and the private insurance sector to construct and repair thousands of housing units destroyed or damaged by Hurricane Georges.

The increasing popularity of condominiums is apparent in a number of markets throughout the Southeast. During the first 9 months of 1998, 1,427 condominium units were sold in the Nashville area, an increase of 15.4 percent over the 1,237 units sold during the same period in 1997. The median price of condominium units sold increased from $90,500 to $94,000 (3.9 percent). Sales of townhouses and condominiums in Lexington, Kentucky, were up 28 percent through August compared with the same time last year, while the average median sales price increased by 8 percent to $84,600. In Atlanta, the recent conversions of three highrise apartment buildings to condominiums have increased the supply by about 850 units. Condominium construction in both highrise and lowrise developments has increased significantly. Most of the new developments are luxury units with high price tags.

Multifamily housing permits for the Southeast during the first 9 months of 1998 were up 9 percent over 1997, to 85,307 units. Volume in Mississippi was up 54 percent, stimulated by high occupancy rates in Biloxi, Gulfport, Pascagoula, and Jackson. Volume was also up significantly (23 percent) in Alabama. Birmingham developers are complaining about too few sites on which to build additional apartments. Although the 1998 rental market started somewhat soft, the second half of the year has seen occupancy soar in Birmingham's three major submarkets. The increased occupancy spurred plans for six new projects now in the pipeline, which will add more than 1,400 apartment units to the market by the end of 1999. South Carolina's strong economy has meant good absorption of new multifamily units; increased permit activity; and plans for many additional units in Charleston, Columbia, and Myrtle Beach. In Greenville, however, vacancy rates have risen to just under 10 percent, resulting in a slowdown in development activity.

Spotlight on Miami, Florida

The Miami metropolitan area (Miami-Dade County) has undergone significant demographic changes during the 1990s. As a result of Hurricane Andrew in August 1992, there was a large out-migration of approximately 169,000 persons whose homes had been damaged or destroyed. During the same period, the area saw a significant in-migration of approximately 163,000 persons, primarily from outside the United States.

Employment in Miami-Dade County as of August 1998 was reported to be 994,500, an increase of about 16,000 jobs over the same time a year ago. Unemployment was down from 6.9 percent to 6.3 percent. Employment growth in Miami-Dade County has not kept pace with other major metropolitan markets in Florida. Economic instability in several Central and South American countries, which have strong economic ties with the area through international trade, has slowed the rate of growth. One published estimate indicates that 65 percent of the local economy is dependent on international trade. An estimated one-fourth of all overnight visitors to Dade County are from the Caribbean, Central America, or South America.

Except for the large number of building permits taken out by builders in 1995 in anticipation of changes in impact fees that took effect on January 1, 1996, residential construction has been relatively stable during the past 4 years, averaging 5,400 single-family and 4,900 multifamily units annually. A substantial portion of the multifamily housing activity in this market is condominiums and townhouses for homeownership. Single-family and multifamily building permit activity for the first 9 months of 1998 -- 4,143 homes and 3,598 multifamily units -- were up approximately 5 percent and 13 percent, respectively, over 1997 levels for the comparable period.

New single-family home sales during the first 6 months of 1998 totaled 2,288 homes, down almost 18 percent from 1997 volume for the same period. The median sales price also declined. According to Reinhold P. Wolff Economic Research, Inc., the median sales price during the second quarter was $127,000, down 6.1 percent from the second quarter of 1997. Sales of new condominiums in the first half of 1998 totaled 1,666, a 20-percent drop from the same period in 1997. The median price for a new condominium sold during the second quarter was $102,805, an increase of 5.4 percent over the median price of $97,529 for the second quarter of 1997.

Existing home sales remained strong in Miami-Dade County, with 12,504 sales in the first half of 1998, an increase of 8 percent over the first-half 1997 sales volume. The median price as of the second quarter of 1998 was $108,054, compared with $100,544 for the second quarter of 1997. Sales of existing condominiums totaled 7,253 units during the first 6 months of 1998, up almost 5 percent over the first-half 1997 volume of 6,919 units. The median sales price in the second quarter was $71,074, up 6.6 percent over the median price during the second quarter of 1997.

The rental market in the Miami metropolitan area is generally balanced, with vacancies around 8 percent. A recent survey by Pricewaterhouse-Coopers LLP of large apartment complexes (100 units or more) built after 1970 showed an overall vacancy rate of 5.5 percent as of August, up only slightly from the 5.1 percent reported in August 1997. Rents in the units surveyed have increased by approximately 4 percent.

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