Regional Activity

Rocky Mountain

Employment gains were widespread in the 12 months ending in June 2001. Employment growth in the Rocky Mountain region as a whole increased 2 percent. Modest increases in Colorado and Wyoming kept the annual growth rates in these States above 2 percent. In contrast, the rate in Utah was a stable 1.7 percent. The rate of growth in Utah has declined unabated since early 1995. Montana posted an annual gain of 1.8 percent while rates in North and South Dakota remain under 2 percent. The region’s growth remains well above the rate for the Nation as a whole.

Layoff announcements are making headlines, but labor markets have stayed firm. The unemployment rate has been below 3 percent for 2 years in Colorado and South Dakota. In North Dakota, the rate has been below 3 percent for a year. South Dakota’s 2.5-percent rate in June 2001 tied that State with Connecticut for the lowest rate in the United States. Rates in Utah and Wyoming remain in the 3- to 4-percent range, and the drop to 4.3 percent in Montana brought the rate below the national average for the first time in years.

Total building permit activity in the region for the first 6 months of 2001 is ahead of last year’s pace. A modest gain in single-family permits (6.5 percent), accompanied by a surge in multifamily permits (31.3 percent), pushed the total past 12 percent. The boom in multifamily activity has been widespread. Colorado Springs builders began the year aggressively, with more than 800 units permitted in the first 2 months of 2001. Activity has since slowed, but the total for the first 6 months of the year is almost three times the number issued in the first 6 months of 2000. Denver’s multifamily sector limped along through April, but builders took out permits for almost 3,400 multifamily units in May and June, keeping the total for the first 6 months of the year just ahead of 2000’s record pace.

The rental vacancy rate in the Denver area hit a 10-year high of 5.7 percent in the second quarter of 2001 as the initial wave of last year’s building permit activity entered the market. The recent increase in building activity is expected to keep the market balanced but competitive well into the middle of 2002. Salt Lake City metropolitan area apartment construction picked up early in 2001 and has stayed active. In the first 6 months of 2000 permits are at more than twice the level of 2000.

Home sales activity is up slightly in the Denver area, but listings have skyrocketed. The average sales price is more than 10 percent greater than last year. Anecdotal evidence suggests that sales price increases may slow in the second half of the year as the increased inventory begins to force sellers to drop prices. In nearby Boulder, sales prices continue to escalate despite a number of significant layoffs in the high-technology industry. The average sales price for a single-family home in the first 5 months of 2001 was $343,000, up 16 percent from 2000. In the unincorporated portion of Boulder County the average price of a single-family home is more than $500,000 while the average in the city of Boulder stands at $472,000.

Employment growth in the Salt Lake City area has slowed as projects related to the 2002 Winter Olympics and the Interstate 15 reconstruction are being completed. By May 2001, construction employment had declined by 1,000 jobs, slowing wage and salary employment growth for the year to 1.8 percent. The 3.7-percent unemployment rate recorded in May 2001 increased by seven-tenths of a percentage point from a year ago. This slower growth did not put a damper on residential building. Multifamily building was given a boost by the start of 500 units that initially will be used for Olympics media and security workers before being released to the market. Single-family activity has held its own and is up 5 percent from this time in 2000. Lower interest rates have helped the existing single-family home sales market, but prices remain modest. The Wasatch Front Multiple Listing Service reported an average existing home sales price of $168,800 during the first half of 2001, a 1.3-percent increase from the same period in 2000. The rental market continues to be firm; Hendricks & Partners’ first-quarter 2001 survey showed a vacancy rate of 3.9 percent, well below the 5.8 percent recorded in 2000. The market should remain firm in the second half of 2001 because most of the multifamily units now under construction will not be available to local renters until after the Winter Olympics.

Colorado Springs’ strong employment growth slipped under 3 percent in May 2001. Layoffs in the high-technology sector, especially in semiconductors, dampened otherwise steady growth in construction, trade, and services. Residential construction surged during the first half of 2001. According to the Pikes Peak Regional Building Department, the number of single-family permits issued was up by 18 percent over 2000’s record level. In response to an extremely tight rental market, multifamily building increased dramatically during the first half of 2001. The nearly 1,600 units under construction should help the market be more balanced by the second half of the year.

Spotlight on Sioux Falls, South Dakota

Sioux Falls is the commercial, industrial, and financial center of South Dakota and the regional trade and service center for much of the southeastern part of the State. It has been one of the fastest-growing areas in the Rocky Mountain region since 1990.

According to the 2000 census, the population of the two-county area increased by an annual average of 2 percent to 172,412 persons. Nearly 60 percent of the population growth in the area was due to inmigration. This significant increase in households has had a substantial impact on the local housing market.

During the past 10 years, wage and salary employment grew at a rapid rate (averaging 4 percent annually), and the unemployment rate remained low at well under 3 percent. The city’s proximity to the two State universities, coupled with a continued inflow of workers from rural areas, has helped supply the labor force to accommodate recent job growth.

This strong, steady growth pattern retreated in 2001 because of layoffs (more than 500) at two of the area’s largest employers, Hutchinson and Gateway (both computer manufacturing companies). Average employment growth during the 12-month period ending in May 2001 was slightly greater than 1.5 percent more than that of the same period in 2000. Despite the slowdown, the unemployment rate in May 2001 remained at a very low 1.8 percent.

The outlook for the second half of 2001 is better. Planned expansions by existing manufacturing firms and the trade and services sector, and stabilized employment in the local high-technology sector, are expected to push employment growth into the 2- to 3-percent range.

The strong economy has stimulated residential building. Record-setting production continued in 2000; the total for the year surpassed the previous high (recorded in 1999) by nearly 15 percent. Building slightly slowed in 2001 because of an unusually cold winter and slower employment growth. New homes make up approximately 30 percent of the single-family sales market. According to Prudential Chell REALTORS® , 60 percent of the new homes sold through June of this year are priced below $150,000, close to the South Dakota Housing Authority (SDHA) price limit for first-time home-buyers of $141,012. The move-up range of $150,000 to $200,000 was the next most popular, accounting for 30 percent of new home sales, while high-end homes priced above $200,000 made up the balance.

Multifamily building also set a record for the decade but varied considerably from year to year. A total of 5,000 units were built, with more than 60 percent constructed in the mid-1990s. During the cutback period of the late 1990s, construction shifted from tax credit financed projects to market rate units. As the rental market improved, another construction spike occurred in 2000 when 750 multifamily units were started. Multifamily permit activity in the first half of 2001 decreased nearly 70 percent from the same period in 2000. Because of a slower economy, builders are waiting to see how the market absorbs these units before starting additional developments. This lower level of production is expected to continue through the second half of 2001.

The rental market in Sioux Falls is balanced. According to the South Dakota Multihousing Association, the first-quarter 2001 vacancy rate for all apartments increased to 4.8 percent, compared with 3.4 percent recorded a year earlier. New apartment projects have been leasing up well. A typical two-bedroom/two-bathroom apartment rents for $750 to $850. Many of the newer projects include underground heated parking, washers and dryers in each unit, a swimming pool, and exercise and computer rooms.

The sales market for existing homes in the Sioux Falls area continues to be strong but stable. The average sales price for a single-family home during the first half of 2001 was $129,200, up 5 percent compared with the same period in 2000. Sales activity so far in 2001 is down slightly, while the inventory of available homes has increased. Homes priced under SDHA’s existing purchase price limit of $111,412 are in short supply, while supplies of new and existing units in the $115,000 to $140,000 range are more plentiful.

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