| 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, 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
The economy of New England began the new century with strong job growth. Employment increased by 132,700 jobs (2 percent) in the 12 months ending February 2000. The highest rate of growth was recorded in Maine, where employment increased 2.8 percent; the lowest was in Connecticut, with a 1.4-percent increase. Massachusetts provided the greatest number of jobs at 67,100. Maine had the highest level of goods-producing job growth, both in the number of jobs and the percentage increase: 3,400 and 2.9 percent, respectively. The unemployment rate in New England fell to 2.9 percent in February 2000 from 3.3 percent in February 1999. Unemployment in Connecticut, New Hampshire, and Vermont was below 3 percent. Strong job growth and slow population growth are expected to continue to cause labor shortages.
Job growth in the financial service and technology industries fueled a very tight office space market in the Boston area and eastern Massachusetts. Industry sources report that the downtown Boston office space vacancy rate is in the low single digits. In some areas, such as Cambridge, there is almost no available space to be found. In attractive suburban markets, office rents are approaching $40 per square foot and, in the downtown Boston towers, they are more than $50 per square foot. The strong demand and limited supply is pushing prices of office buildings to record levels.
Total residential building activity for the region, as measured by building permits, was off about 3 percent for the first 3 months of 2000, compared with the same period in 1999. Only Maine and Vermont recorded increases in single-family building permit activity. Multifamily building permit activity showed a modest increase during the period, with Connecticut showing signs of increased multifamily development after 1999 activity was down more than 50 percent from 1998 levels. The rate of activity in Rhode Island continues to increase, and activity in Massachusetts was up 5 percent from the comparable period in 1999, the best year of the decade. Higher interest rates and labor shortages continue to influence the cost of production, slowing the pace of development.
Home sales for 1999, for States where data were available, either were down slightly or showed no change from 1998 levels. After beginning 1999 with increasing sales rates, the second half of the year showed generally stabilizing levels of sales. This was due primarily to modestly increasing interest rates and a limited inventory of houses for sale. The New England region had the highest percentage increase in median prices (9.7 percent) in the last quarter of 1999 compared with the same period in 1998, according to HUD's Office of Federal Housing Enterprise Oversight (OFHEO). Of the first 15 States ranked nationally by rate of increase, four were in New England. Massachusetts was ranked first, with a 12.6-percent increase in the fourth quarter of 1999 from the fourth quarter of 1998.
Rental markets in New England remain strong and are getting tighter. The strongest markets are in the greater-Boston area and adjacent metropolitan areas in southern New Hampshire; Cape Cod; and lower Fairfield County, Connecticut. Recently released Census rental housing vacancy rates for 1999, by State, show that four of the seven States with the lowest rental vacancy rates are in New England. Vermont had the lowest rental vacancy rate in the Nation at 3.6 percent, followed by New Hampshire (4.4 percent) and Massachusetts (4.7 percent). Rhode Island had a rental vacancy rate of 5.1 percent, reflecting significant improvement in job growth in recent years in the Providence metropolitan area. Even Connecticut, with a 1999 rental vacancy rate of 7.3 percent, is down from 9.2 percent in 1998, showing considerable improvement.
Spotlight on Manchester, New Hampshire
The Manchester metropolitan area has experienced significant job and population growth throughout the past decade. During the 12 months ending February 2000, wage and salary employment averaged 103,400 persons, an increase of 3,000 jobs (3 percent) over the comparable period ending February 1999. The area is one of the region's few locations where manufacturing employment has been increasing since the early 1990s. Much of this new manufacturing employment is in high-technology industries, particularly electronic components.
Service industry employment has increased in all areas, with business services recording the greatest recent growth. Commercial and public works construction also are significant contributors to the current economic expansion. Ground has been broken for a new 10,000-seat civic center for entertainment and sporting events, and a large portion of the area's vacant mill space is being leased and rehabilitated by small high-technology and e-commerce firms.
Single-family home building permit activity has increased steadily since the beginning of the decade, from an average of 300 units annually in 1990 and 1991 to 900 units annually in 1998 and 1999. Local sources report that the shortage of skilled workers is an increasing problem and limits construction activity.
Activity in the sales housing market has increased in each of the past 3 years. In 1999 sales for the Manchester area totaled 1,831, up 4 percent from 1998. The median sale price for homes during 1999 was $158,400. Condominium sales have also increased significantly over the past several years; total sales for 1999 were approximately 400 units, up more than 32 percent from the 1998 volume. The median sale price rose 11 percent to $79,000.
The rental housing market in the Manchester area is currently very tight. From 1990 through 1999, building permits have been issued for slightly less than 1,500 multifamily units. Increased job growth and in-migration in recent years, and the limited volume of new construction, have kept vacancy rates very low and put increased pressure on rents. During the past 3 years, the median gross rent for a two-bedroom apartment in the Manchester area has increased slightly more than 20 percent, according to annual surveys conducted by the New Hampshire Housing Finance Authority. Apartment vacancy rates of 2 percent or less are common in newer, well-located properties. In response to the strong demand, several multifamily projects totaling 500 units are now in the planning.