| 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
Job growth in New England's economy increased by approximately 1.8 percent in the 12 months ending February 2001, equal to the average annual rate of growth for the region during the past 10 years. The 124,300 jobs added during this period brought total employment in the region to 7.08 million people. Service-producing industries accounted for 88 percent of the increase; the remainder of the gain was in goods-producing industries, primarily construction. Maine and Massachusetts recorded the highest rates of job growth at 2.4 percent and 2.2 percent, respectively. Together, the two States accounted for 69 percent of the job gains in New England. In the same 12-month period, Connecticut recorded the lowest rate of job growth at 1.0 percent. The unemployment rate in New England continues to decline, reaching 2.5 percent in February 2001down from more than 3 percent a year earlier. Connecticut had the lowest unemployment rate at 1.9 percent.
Despite the generally strong economy and real estate markets in the Boston and eastern Massachusetts areas, the past year has brought some significant changes to local Internet-related companies and to major electronic equipment and networking firms. The demise of many local "dot-com" companies freed some commercial and office space in the Boston suburban markets along the Route 128 and Route 495 highways that encircle Boston. Expansion plans at major companies such as Cisco Systems, Sun Microsystems, and Lucent are being questioned and, in many cases, will be put on hold. Local industry sources indicate that in the short run, this will relieve some pressure on rents and will somewhat increase vacancy rates, but should have no detrimental effect on future, orderly, long-term growth.
For the first 3 months of 2001, residential construction activity in New England as measured by building permits was down 9 percent from the same period in 2000, to 8,286 units. Single-family permit activity was down 14 percent, while multifamily activity increased by 15 percent. Almost all of these new units are planned for the Boston and Stamford-Norwalk metropolitan areas. The Boston rental market continues to be very tight, and the Stamford-Norwalk market continues to generate heavy demand due to the economy in the greater New York City area.
Existing home sales activity throughout the region has been mixed. Overall, as of the fourth quarter, the annual rate of sales for 2000 was down less than 1 percent compared with 1999, to 250,200 homes. Sales prices for existing homes continued to increase dramatically in the New England region, particularly in the greater Boston area, which now extends into southern New Hampshire and northern Rhode Island.
According to the Office of Federal Housing Enterprise Oversight, in the fourth quarter of 2000 Massachusetts, New Hampshire, and Rhode Island were ranked first, third, and fifth, respectively, in the Nation in terms of house price appreciation, compared with the same quarter of 1999. Prices increased by more than 15, 14, and 13 percent, respectively. The six States in New England are all within the top 13 States for price appreciation. According to the NATIONAL ASSOCIATION OF REALTORS®, the median sales price for the Boston metropolitan area in the fourth quarter of 2000 was $329,500, 13.2 percent higher than in the fourth quarter of 1999. Recent reductions in interest rates are expected to continue to spur a high level of sales throughout the region.
With rental housing production averaging approximately 6,800 units during the past 3 years, developers have begun to meet demand levels for new rental units in New England. However, rental markets in New England, with few exceptions, continue to be very tight. Recently published 2000 census data reported rental vacancy rates for Massachusetts, New Hampshire, and Vermont of 3.5, 3.2, and 3.8 percent, respectively. These are the only States in the Nation with rates of less than 4 percent. Connecticut recorded an 8.6-percent rental vacancy rate due in large part to softer market conditions in the urban core areas of its three major metropolitan areas: Bridgeport, Hartford, and New Haven.
Spotlight on Burlington, Vermont
The Burlington metropolitan area, located along the eastern shore of Lake Champlain in the northwest corner of the State, has a diverse, healthy economy with high-technology manufacturing, tourism, education, healthcare, and business services. For the 12 months ending March 2001, nonfarm employment in the Burlington area averaged 108,200 jobs, an increase of 2.6 percent, or 2,700 jobs, over the same period in 2000. This is consistent with Burlington's average annual job growth since 1995. Almost 35 percent of the job growth during the past 12 months was in goods-producing industries, primarily manufacturing. Service-producing industries, primarily business services and government, accounted for 66 percent of the total job growth during the period. As of March 2001, the unemployment rate was 2.1 percent, virtually unchanged from a year ago. The labor market has been very tight. IBM, which has more than 9,000 employees in the area, continues to hire. The University of Vermont and the growing healthcare and business services sectors also attract students and jobseekers to the area.
For the first 3 months of 2001, residential building activity in the Burlington metropolitan area was down 6 percent, on a small base, due to a drop in single-family construction. For most of the 1990s single-family housing production averaged approximately 600 homes, and multifamily housing production, 150 units, annually. Labor shortages and affordability of both sales and rentals have limited recent construction levels.
The sales market in the Burlington area has been strong since the mid-1990s. However, total sales in Chittenden and Grand Isle Counties in the first quarter of 2001 are down 14 percent compared with the first quarter of 2000. During the first quarter of 2001, the median sales price of a single-family residence in Chittenden County was $170,000, up 15 percent from the first quarter of 2000. The median sales price in Grand Isle County was $156,000, up 17 percent from the same period in 2000. Condominiums are experiencing similar gains; prices increased 11 percent to $109,450 in Chittenden County for the first quarter of 2001.
The rental market in the Burlington metropolitan area is extremely tight and has been for some time. Local sources indicate that the rental vacancy rate is in the low single digits. Most of the newer, well-managed properties typically have no vacancies except for turnover. With only limited production of 150 rental units annually during the 1990s, and a strong economy that is adding more than 2,700 jobs each year, the market remains tight. A student population of almost 15,000 at the University of Vermont places additional pressure on the rental market, because most upperclassmen live off-campus.
Although the economy is expected to stay healthy and strong, future growth will be somewhat limited by labor shortages, a small population base, and a relatively distant location from major metropolitan markets in the Nation.