Regional Activity


The Midwest region's economy continued to perform well in the second quarter of 1998. As of June, all States in the region reported the highest job totals and lowest unemployment rates in more than 20 years. Indiana and Minnesota reported some of the lowest unemployment rates in the Nation, at 2.8 and 2.6 percent, respectively. Nonagricultural employment increased by 449,600 in the 12 months ending in June, a 1.9-percent gain over the previous 12-month period. Chicago's robust economy generated significant employment gains during the past 12 months. Detroit and Minneapolis-St. Paul are not far behind.

Home construction in the Midwest in the first half of 1998 was strong. Building permits were issued for 94,122 single-family homes, a 12-percent increase over the comparable 1997 period and the second highest level in the past 15 years. All States and the largest metropolitan areas in the region had gains in single-family activity. Existing home sales in the region also have been strong in 1998. First-quarter sales were at a record-high annual rate of 959,000 homes, 14 percent above first-quarter 1997. Preliminary information suggests that healthy local economies have sustained the high sales volume during the second quarter.

Illinois is seeing its best sales housing market of the decade. Sales during the second quarter of 1998 were 16 percent ahead of the same quarter in 1997, and May sales activity was the highest monthly total since August 1995. In the city of Chicago, a 20-percent increase in condominium sales during the first 3 months of 1998 pushed total home sales for the first quarter to a record 3,460 units, according to the Chicago Association of REALTORS®. Activity continued to be strong in April and May, with sales up 15 and 8 percent, respectively, over the volume during the same months in 1997. Reflecting the increased demand for sales housing, many inner-city neighborhoods are experiencing significant revitalization. In the Kenwood-Oakland neighborhood on the near southside, new single-family homes are selling for $200,000 to $400,000, where existing homes rarely sold for more than $40,000 only 10 years ago.

Michigan builders and real estate agents are very optimistic about 1998 because of strong activity in the first 5 months of the year. New and existing home sales in the Detroit-Ann Arbor area totaled 18,570, an 18-percent increase over the first 5 months of 1997. Single-family building permits increased by 11 percent to 11,225 units. Pulte Corporation is planning its second major development in the city in less than 2 years. The Grainmark development of 400 moderately priced new homes ($130,000 to $170,000) is expected to match the strong market response to Shorepointe Village's 57 luxury homes, which are selling for $330,000 to $550,000. The Grand Rapids Association of REALTORS® reported that existing home sales for 1998 through May increased by 8 percent to 4,345 homes, and the average sales price was up 6 percent to $116,700.

Minnesota's strong economy and increased demand pushed single-family building permits up 18 percent to 10,937 units in the first half of 1998. In the Minneapolis-St. Paul area, building permits were issued for 7,773 new homes in the first 6 months of 1998 compared with 6,561 homes in the first 6 months of 1997, an 18-percent increase. The Builders Association of the Twin Cities reported that sales activity has been brisk in all price ranges.

The Ohio Association of REALTORS® reported that 60,500 new and existing homes were sold in the State during the first 4 months of 1998, compared with 56,400 for the same period in 1997, a 7-percent gain. Strong sales markets in Cincinnati, Cleveland, and Columbus helped boost the homeownership rate in the State to a record 70.9 percent in the first quarter of 1998.

Midwest rental housing markets remain generally sound, with apartment occupancy in the 92- to 98-percent range. The slowdown in apartment construction, which began in the fall of 1997, has continued into the second quarter. Regionwide through June, the number of multifamily housing units permitted was down 8 percent to 25,167 units from strong 1997 levels.

Strong demand for housing in downtown Cleveland continues to attract developers. The most recent apartment project in the warehouse district is the conversion of the vacant Otis Terminal building to apartments and retail space. The 249 units in this project are expected to rent for $525 to $2,400 a month. Madison, Wisconsin's low rental vacancy rate of 3.9 percent in the first quarter of 1998 is encouraging local apartment developers, particularly in the northeast section of the metropolitan area, where American Family Insurance Corporation's $87 million headquarters expansion will double the existing workforce of 1,500.

Chicago's continued economic growth and strong demand for housing is attracting large amounts of investment capital to the rental market. Draper and Kramer Incorporated reported that sales of existing apartment projects doubled in 1997 compared with 1996. In the first half of 1998, 24 complexes with a total of 8,000 units sold for about $500 million. Real estate investment trusts have concentrated on the downtown market, where apartment occupancy was almost 97 percent in April and where rents are increasing 5 to 6 percent annually. However, multifamily housing permit activity for the Chicago metropolitan area was down 22 percent during the first 6 months of 1998. Cutbacks in apartment production are particularly evident in the western suburbs, where there is currently an oversupply of high-rent units in the Aurora-Naperville area.

The number of multifamily housing building permits issued in the Detroit-Ann Arbor area increased by 34 percent to 2,700 units in the first half of 1998. Apartment occupancy has remained at approximately 95 percent as of May, according to a survey of 33,700 units by the Metropolitan Apartment Guide.

Apartment construction in Minneapolis-St. Paul's tight rental market continued to improve in the second quarter. Multifamily housing permit activity in the first half of 1998 was up 22 percent to 1,460 units.

Spotlight on Columbus, Ohio

The Columbus area economy has generated about 60,000 new jobs in the past 3 years. During the 12 months ending in May 1998, nonagricultural employment increased by 21,600 jobs, a 2.6-percent increase over the previous 12-month period. Major growth sectors are business and educational services, finance and insurance, durable goods manufacturing, and trade. The labor market is very tight, with a low 2.3-percent unemployment rate. The six-county metropolitan area is Ohio's fastest growing urban area, with a population of approximately 1.5 million, up 8.5 percent since the 1990 census. One-third of the growth was due to in-migration in response to greater job opportunities. The city of Columbus has been effective in attracting new industry, diversifying its economy, and expanding the tax base through controlled growth and annexation. The city's land area has more than doubled during the past 25 years to 211 square miles.

Construction is providing an additional boost to the local economy. The 95-acre Nationwide Arena District is the downtown's largest mixed-use development, with a new sports facility for Columbus' first major league club, the Blue Jackets hockey team. More than 1.3 million square feet of office and retail space, 350 luxury apartments, and entertainment facilities will be included in this development. A $200 million shopping mall is under construction on the city's north side.

Columbus' strong economy has stimulated housing construction. Single-family home permits increased from an average of 5,800 units annually in 1990 and 1991 to 7,600 units in 1996. Activity dropped by 14 percent in 1997 but has increased by 17 percent in the first 6 months of 1998 compared with the same period a year ago. The Columbus Board of REALTORS® reported that a record 18,130 existing homes were sold in 1997 at an average price of $128,800. FHA mortgage insurance activity in the metropolitan area was down slightly last year, with 7,018 endorsed loans for a total mortgage amount of $620.4 million, compared with 7,534 loans and a $624.5 million mortgage amount in 1996.

A first-quarter 1998 survey of 106,300 apartment units in the Columbus metropolitan area by the Danter Company showed a 4.7-percent vacancy rate compared with 3.8 percent in the first quarter of 1997. More than 4,000 new units entered the market during the past 2 years, and another 3,645 apartments were under construction in early 1998. Developers remain optimistic, however, and multifamily housing building permits were issued for 1,592 units in the first half of 1998, equal to 1997's production for the same period. The city's east side, with its concentration of older projects, has the highest vacancy rate, at about 7.5 percent.

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