Regional Activity

Rocky Mountain

The annual rate of employment growth in the Rocky Mountain region slipped below 3 percent during the second quarter. Colorado led the region with a 3.2-percent gain. Labor markets remain tight, and the unemployment rates in each of the six States in the region were below the levels they reached 1 year ago. Colorado recorded an unemployment rate of 2.3 percent in June.

North Dakota was hit hard by a series of thunderstorms in June that caused extensive flooding in 11 central and eastern counties. The Federal Emergency Management Agency was authorized to administer Federal disaster aid to help families and communities recover from the damages. State and local sources estimate that damages to public infrastructure, crops, and buildings easily could have surpassed $400 million. Nearly 7,000 homes in Fargo, North Dakota were damaged.

In Sioux Falls, employment growth in the past 12 months slowed to 2.1 percent from the average annual rate of more than 4 percent a year for much of the decade, as layoffs by a large computer component manufacturer offset gains in other sectors. Despite the layoffs, the metropolitan area's unemployment rate of 1.6 percent as of May was one of the Nation's lowest. The slowdown did not dampen the sales and rental housing markets. Homebuilding and sales activity both are expected to surpass last year's record levels. The rental market is usually balanced. A survey by the South Dakota Multi-Housing Association conducted in January recorded an apartment vacancy rate of 3.4 percent.

Grand Forks' economy is holding steady despite its population loss caused by the devastating 1997 flood and last year's deactivation of the missile wing at Grand Forks Air Force Base. May 2000 employment was very close to its level of 1 year ago. The vast majority of the approximately $2 billion reconstruction effort following the 1997 flood was completed. The lack of this ongoing cash infusion from military families may cause a lull in the local economy, but growth should pick up as the availability of newly constructed or renovated building space, infrastructure improvements, and developable land provides opportunities for firms looking to expand.

The ongoing surge of apartment construction in Colorado continued to push the total for multifamily housing in the region ahead of last year's pace. As of June 2000, multifamily permit activity in Colorado was up almost 41 percent from the first 6 months of 1999. With the exception of South Dakota, multifamily permits were down in the rest of the region. Single-family permit activity was down in every State except Montana and South Dakota.

Rental market conditions in the region's major markets were generally balanced to tight. Denver's rental vacancy rate has remained relatively stable in the past 5 years at approximately 5 percent as the market successfully absorbed the increases in new units. However, a large number of units have yet to enter the rental market. The number of units under construction increased to more than 7,000, and conditions are expected to be more competitive during the coming year. This will be particularly evident in suburban Douglas County, where a surge in luxury apartment construction may soften the market in the short run.

The Boulder area became two rental markets. Market conditions near the university area were extremely tight, with a vacancy rate of approximately 1 percent. A swelling freshman class at the University of Colorado has housing officials scrambling to find space for the students. Meanwhile, in the active suburban submarkets where a number of large luxury projects have been completed recently, double-digit vacancy rates became more commonplace.

Strong population growth tightened conditions in the Colorado Springs rental market. The apartment vacancy rate as of the first quarter of 2000 dropped to 4.4 percent, down from 5.7 percent in the first quarter of 1999; rents increased by 6 percent during the same period.

Salt Lake City's vacancy rate in the first quarter of 2000 was an increase of almost 6 percent, from 4.6 percent in the first quarter of 1999, and rents increased only slightly. Recent multifamily permit numbers were enhanced by the construction of housing for the news media, but look for a pre-Olympic pause in apartment construction next year. Apartment owners and developers will be watching anxiously the 2002 Winter Olympics-related construction "bubble" and the release of several hundred media units following the games.

Sales activity in the Rocky Mountain region remained very strong during the first half of the year, up 3 percent. Existing home sales activity in the Denver area was slightly above the pace of last year. Supplies were tight, even though listings were up 14 percent from June 1999, to more than 10,000 homes. Double-digit price increases continued to be the norm. The average sales price for the first half of 2000 was up almost 15 percent from last year at this time. The average sales price in Boulder for a single-family home during the first half of 2000 was just under $300,000, up 16 percent from 1 year ago. In Colorado Springs, sales through June were 6 percent ahead of last year's record level. Active listings as of June were down 3 percent from a year earlier, and the average sales price in the first half of this year was up 10 percent, compared with the same period last year. The Salt Lake City sales market continued on a more moderate pace than its Colorado counterparts. Sales activity in the first half of 2000 changed little from the first half of 1999, and the average sales price was up a modest 4 percent.

Spotlight on Provo-Orem, Utah

Provo-Orem is home to Brigham Young University (BYU) and Utah Valley State College. Together, these two schools account for more than 50,000 students and 20,000 faculty and staff. The presence of research facilities at BYU and the availability of a highly educated workforce contributed to the strong growth of the area's high-technology sector. The Utah County Economic Development Association reports 440 high-technology manufacturing and services businesses in the metropolitan area, employing nearly 17,000 workers. Some of the largest companies are Novell, FlowServe, Ameritech Library Services, and Micron. The population increased by more than 3 percent a year from 1990 to 1999, to approximately 353,000 persons.

The economy of the Provo-Orem area continued to experience a strong rate of growth, but it slowed recently from the rapid pace of the second half of the 1990s. In the 12 months ending in June, non-agricultural wage and salary employment grew by 3 percent. The unemployment rate as of June 2000 was at a low 2.3 percent.

Because of natural physical barriers throughout the county, developable land in and near Provo is scarce. The city is in the process of reclaiming a former steel plant site. Following the cleanup of the 300-acre brownfield site, the city intends to use Environmental Protection Agency and HUD funding to help redevelop the site. Plans are under way to build office and industrial space on the site, and construction is scheduled to start within the next 12 months. In another effort, the city of Provo is working with BYU to create a high-density, mixed-use commercial and residential area just south of campus. The city's master plan calls for a student village that includes highrise apartment buildings and small-business spaces for retail services such as copy shops, grocery stores, restaurants, and apparel stores. The development will include between 1,000 and 1,500 housing units. Construction is expected to begin within the next 2 years and be phased in over several years.

Homebuilding in the Provo-Orem area was particularly strong in the latter half of the decade. From 1995 through 1997, single-family building permits averaged 2,750 annually. Activity increased substantially in the past 2 years, with an average of 3,225 homes permitted annually. The number of single-family permits issued in the Provo-Orem area in the first 6 months of the year totaled 1,352 homes, down only 2 percent from this time last year. However, local sources anticipate that home construction will continue to slow because of a lot shortage and development restrictions imposed by local jurisdictions. Almost all of the recent homebuilding activity in the metropolitan area has been in the smaller towns in the suburbs. In 1990, Provo and Orem accounted for more than 55 percent of the area's single-family permits activity. By 1999, the cities' share fell to less than 16 percent. According to the Utah Valley Homebuilders Association, there was serious pressure for some cities to delay or deny subdivision development because of neighborhood opposition.

Higher interest rates did not dampen existing home sales. The Utah County Association of REALTORS reported that sales through June totaled 1,278 homes, up 16 percent compared with the same period a year earlier; at the same time, the average sales price increased by 6 percent to $172,900. Activity is at a pace to surpass last year's record-setting volume of 2,449 homes. The market for townhouses and condominiums, which was flat from 1996 through 1998, has picked up in the past year. Through June, sales activity was up, and the average sales price for an existing unit was up 9 percent to $120,900.

Multifamily permits totaled 263 units during the 6 months ending in June, well below the level of construction of the previous 5 years, when an average of nearly 1,100 units a year was permitted. The decline in activity was due in part to the lack of available buildable sites, the increased time for zoning approval, and opposition in some parts of the metropolitan area to multifamily construction. The rental market in Provo-Orem is tight. Market-rate developments built in the past 3 years have all leased up quickly, with rents for a two-bedroom unit typically ranging from $750 to $850. The current vacancy rate in the traditional (nonstudent) apartment market is less than 3 percent. The rental market tightened in the first half of 2000 and is expected to become even tighter during the next 12 months because there is little in the construction pipeline to come on the market.

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