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, 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
Nonagricultural employment in New England rose 2.4 percent (158,200 jobs) to 6,727,900 for the 12 months ending in June 1998. All States posted gains, with Massachusetts reporting an annual growth rate of more than 3 percent. During this period the region's unemployment rate fell to 3.7 percent. Rhode Island experienced the greatest unemployment rate decline, from 5.5 percent in June 1997 to 4.1 percent in June 1998. Massachusetts had the lowest rate at 3.4 percent.
Residential building permits in New England totaled 22,595 units in the first half of 1998, a 15-percent increase over 1997 volume for the comparable period. Single-family activity for the period was up 16 percent to 19,399 units. Vermont, New Hampshire, and Connecticut experienced the largest rates of growth in single-family activity of 24, 23, and 19 percent, respectively.
According to the NATIONAL ASSOCIATION OF REALTORS® and the New Hampshire Association of REALTORS®, which provided data on activity in that State, the annual rate of existing sales in the New England region (excluding Vermont) as of the first quarter of 1998 reached 196,700 homes, a 20-percent increase over the same period in 1997. Sales housing demand is at or near the peak levels of the late 1980s.
Rental housing markets are tightening through-out New England, a condition that has stimulated apartment construction. Multifamily permit act-ivity for the first half of 1998, 3,196 units, was 7 percent above the volume for the comparable period in 1997. Recent surveys in the Boston area estimate the area's rental vacancy rate at slightly less than 4 percent, the lowest rate since 1989.
As of June 1998, the vacancy rate for office space in the Boston metropolitan area had fallen into the single digits. High land costs and limited availability of developable parcels are pushing rents and property values upward and creating demand beyond downtown Boston areas. Downtown area rents for Class A space are moving into the range of $50 to $60 per square foot, up from below $30 per square foot in 1992. Purchases of existing office buildings in downtown Boston and Cambridge have recently gone as high as $315 per square foot. Local real estate professionals are optimistic that the strong performance of the office market will continue into 1999.
Spotlight on Stamford-Norwalk, Connecticut
The Stamford-Norwalk metropolitan area has prospered as a result of corporate migrations from New York City as well as the general economic recovery of the 1990s. Stamford has benefited from increased job levels at Swiss Bank, Zurich Reinsurance, NatWest Bank, and the University of Connecticut's recently completed expansion. Since 1992 unemployment has decreased dramatically, reaching a rate of 2.4 percent in May 1998, the lowest of Connecticut's labor market areas. Employment in the area has recently surpassed the prerecession job levels of the late 1980s. Nonagricultural wage and salary employment, as of May 1998, was 208,300, an increase of 6,100 jobs over May 1997. Growth has been largely in service industries. Manufacturing jobs have remained relatively constant since 1994 after having fallen by 12,000 jobs from 1989 through 1994.
Single-family building permit activity has averaged 445 homes annually since 1992. Multifamily housing development has been at very low levels in recent years (210 units annually in 1996 and 1997) because of zoning limitations and the very high cost of development. However, industry sources indicate that as many as 1,000 multifamily units in planning stages can be expected to enter the market within the next 2 years.
The sales housing market in the Stamford-Norwalk area has been strong during the past several years. During the first 5 months of 1998, home sales totaled 2,653, about 3 percent higher than the same period in 1997. Reflecting the high median family income of about $90,000 in 1998, the median sales price of single-family homes in the first quarter of 1998 was $349,500 for the metropolitan area. Suburban area home prices are much higher, with the current median at $450,000. The median prices of condominiums increased from $170,300 in the first quarter of 1997 to $183,800 in the first quarter of 1998.
The area's rental housing market is tight. The substantial improvement in the local economy and low levels of construction have resulted in vacancy rates well below 5 percent in many developments. Rents for properties in desirable locations are typically $1,000 to $1,200 for a one-bedroom unit and $1,300 to $1,500 for a two-bedroom unit.
The office market in the area continues to exhibit positive net absorption and decreasing vacancy rates. As of the first quarter of 1998, the office vacancy rate was 8.8 percent, down from 13.1 percent during the comparable period in 1997. Vacancy rates are even lower in Stamford's central business district and in Greenwich. With the tighter market conditions, commercial office rents have increased about 13 percent from a year ago. About 750,000 square feet of new space are currently in the pipeline, with approximately half under construction.