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
Employment in New England grew at a 2-percent annual rate during the 12 months ending in May 2000 to 6,964,200 nonfarm jobs. As in the recent past, the highest rate of growth was in Maine, where jobs increased at a rate of 3.2 percent. Massachusetts and Vermont posted gains of 2.1 and 2.2 percent, respectively, while Connecticut, New Hampshire, and Rhode Island recorded increases of less than 2 percent. The unemployment rate in the New England region as of May 2000 was down to 2.7 percent from 3.4 percent in May 1999. Connecticut's unemployment rate of 2.4 percent was the lowest.
Residential building activity for the New England States, as measured by building permits through June 2000, totaled 21,573 units, down 7 percent from the first half of 1999. The decline is due to the decrease in single-family home permits, which were down in all States except Maine, where there was a small increase. Multifamily units were up 5 percent to 2,998 units, with increases in Massachusetts, New Hampshire, and Rhode Island.
Constraints of available resources, such as land and labor and rising mortgage rates, have moderated the single-family construction market but have not yet significantly impacted the multifamily market. More than half of the multifamily units authorized through June have been in Massachusetts, and 82 percent of these units are in the Boston metropolitan area. The other primary area of multifamily development is the Stamford-Norwalk metropolitan area, which accounted for more than 50 percent of the units issued permits in Connecticut.
Home sales activity through the second quarter of 2000 was slower in New England compared with the volume in the first half of 1999. A major reason for the slowdown in sales was the lack of available inventory and the subsequent large increases in prices. According to HUD's Office of Federal Housing Enterprise Oversight, the New England region had the highest percentage increase in median prices in the Nation, 10.2 percent in the first quarter of 2000. Massachusetts had the highest percentage increase in the region at 13.5 percent.
The rental housing market throughout New England remains very tight, with a significant imbalance between supply and demand. Demand, fueled by job growth and inmigration, is not being met by the current level of construction. The problem was compounded by the loss of rental units through demolition programs in many urban markets. The Eastern Massachusetts and Fairfield County, Connecticut markets have vacancy rates amounting to no more than turnover, and rents are rising substantially. In Hartford, the rental market is tightening to levels not seen in this decade. Occupancy levels are in the high 90s, and rent increases of 5 percent or more are becoming common for developments in the most popular locations. Several major rental projects are planned for in suburban areas and, as part of a major revitalization effort, in downtown Hartford. Three rental developments, one of more than 400 units, are under development in the suburbs of Vernon, West Hartford, and Bloomfield. In the downtown area, two apartment developments totaling 244 units and several smaller residential and commercial rehabilitation developments are under way.
Spotlight on Providence-Fall River-Warwick, Rhode Island-Massachusetts
For the 12 months ending May 2000, employment in the Providence-Fall River-Warwick metropolitan area averaged 519,500 jobs, an increase of less than 1 percent, or 2,700 jobs, over the same period in 1999. Service-producing jobs increased by 4,100 but were offset by the loss of 1,400 goods-producing jobs. The losses in manufacturing, primarily in the jewelry industry, have been offset in recent years by growth in the service industries. Fidelity Investments and other financial service companies have moved to the Providence area in recent years, creating several thousand jobs. Unemployment in the Providence area has been in a downward trend for several years. As of May 2000, the unemployment rate dropped to 3.5 percent, from 3.9 in May 1999.
A considerable amount of the job growth and some population inmigration is due to expansion of companies in the greater Boston area. Southeastern Massachusetts and Rhode Island offered a less costly environment in which to live and do business, and the State was aggressive in courting business through tax incentives and legislation.
During the past several years, the city of Providence has undertaken public-private improvements that have brought commuters, shoppers, and tourists back to the downtown area. These projects, which include developing a new railroad station, rerouting and reopening downtown waterways, and constructing Waterplace Park, changed the landscape of the area. Providence Place Mall opened and will provide 150 specialty shops, along with anchors Nordstroms, Filenes, and Lord & Taylor, a 16-screen movie theater, and several restaurants when completed. The 13-acre mall will generate approximately 2,500 jobs when fully occupied, providing a significant economic boost. Commuter rail service has just begun from downtown Providence to Boston, and the line eventually will extend to Warwick's T.F. Green Airport. This is part of a recent regional approach to air transportation between Massport at Boston's Logan Airport and the regional airports in Manchester, Hartford, and Warwick.
Since 1990, single-family home building permits have experienced two periods of increased activity. From 1990 through 1992, single-family permits averaged 1,450 homes annually; it increased to an average of more than 2,550 homes a year from 1993 through 1998, and to more than 3,000 homes in 1999. During the first 6 months of this year, single-family activity totaled 1,235 homes. Because the Providence metropolitan area comprises approximately 90 percent of the population of Rhode Island, Statewide sales and price data illustrate the market trends. For the first quarter of 2000, single-family sales increased by 2 percent to a total of approximately 1,700; the median sales price was $128,000, an increase of 6.6 percent from the comparable 1999 period. Sales of condominium units for the first quarter were also strong and increased 4 percent compared with the first quarter of 1999.
The rental housing market began a strong recovery in the mid-1990s. As the economic recovery took hold and surplus units were absorbed, the market strengthened. Multifamily activity from 1990 through 1998 was relatively stable, averaging approximately 300 units annually. In 1999, 781 multifamily units were permitted in response to the rental market tightening. During the first half of this year, permits were issued for 223 units. Occupancy rates in prime properties are now above 95 percent, waiting lists are now more common, and pressure is building for rent increases. The rental market is expected to continue to tighten and create upward pressure on rents.