Growth in nonagricultural employment in the Southeast/Caribbean region has remained strong, with 690,000 jobs added during the 12 months ending in June 1998 (a 3-percent increase). South Carolina had the biggest percentage gain, 5 percent, followed by Florida at 4 percent and Georgia at 3.7 percent. The lowest rates of unemployment were in North Carolina (3 percent) and South Carolina (3.2 percent).
Among the most significant employment developments by individual employers in the region, the Beau Rivage Casino development in the Biloxi-Gulfport-Pascagoula area expects to hire 3,400 workers before the facility opens in February 1999. In the Louisville area, United Parcel Service expansions are expected to create up to 6,000 new jobs by 2005, and the Ford Kentucky Truck Plant recently added 1,600 workers.
The number of single-family building permits issued in the region during the first half of 1998 was up 7 percent over the same period in 1997, from 150,643 units to 161,190 units. The largest percentage increases were reported in Kentucky and Mississippi (13 percent) and Georgia (11 percent). The 22,484 units permitted during the first half of the year for the Atlanta metropolitan area were an 18-percent increase over 1997 volume for the same period. Other high-volume metropolitan areas reporting substantial increases in activity during the first half of 1998 include Raleigh-Durham-Chapel Hill, with 7,111 units for a 20-percent increase, and Nashville, with 5,351 units, or an 11-percent increase.
Atlanta's strong sales market showed no sign of abating. New home sales set first-quarter records in many of the northern suburbs, including Cherokee, Cobb, De Kalb, Gwinnett, and northern Fulton Counties. Worsening traffic congestion, however, has led to increased interest in in-town living, which has strengthened the sales market in some neighborhoods of the city. Rising home prices are responsible for the Atlanta metropolitan area's slippage in a recent national survey of housing affordability by Ernst &Young's Leventhal Real Estate Group. Although Atlanta still compares favorably with large cities nationally, home prices have risen compared with other southeastern cities.
Multifamily housing activity in the Southeast has also continued to be very strong through the second quarter of 1998. In the first 6 months of 1998, permits were issued for 52,055 units, a 3-percent increase over 1997's record-year volume during the comparable period. During the first half of 1998, more multifamily units (4,988) were permitted in the Orlando metropolitan area than in any other area in the region. Rental occupancy remains strong in Orlando, at 95 percent. With more than 10,000 multifamily units under construction, the area is facing a large increase in inventory, raising concern about overbuilding. Miami metropolitan area permit activity averaged about 9,900 units annually from 1995 through 1997. The weaker local economy and lower rate of population growth, however, have resulted in an increase in the rental vacancy rate. In the West Palm Beach-Boca Raton metropolitan area, the apartment vacancy rate in the area dropped from 3.8 percent in 1997 to 3.2 percent in 1998, according to a survey conducted by Reinhold P. Wolff Economic Research.
Atlanta-area rental housing occupancy appears to be holding steady in most submarkets, even with the high levels of production. Competition has increased in areas where construction is concentrated, and some new developments are offering up to 2 months free rent to achieve rent-up. The current rate of multifamily construction shows little sign of diminishing. Permits through the first 5 months of 1998 (4,429 units) are 6.7 percent ahead of figures from the year earlier, with large increases reported in the city of Atlanta and Gwinnett County. Several large parcels in the city of Atlanta have been acquired recently by major developers, who have plans for high-density rental development. The increasing popularity of condominiums has encouraged the first substantial wave of apartment-to-condominium conversion in the city since the 1980s, with more than 700 units recently announced for conversion.
In its latest report for the Greensboro/Winston-Salem/High Point (Triad) area, Carolinas Real Data reported an increase in the apartment vacancy rate from 5 percent in September 1997 to 6.3 percent as of March 1998. The apartment vacancy rate in Greensboro rose from 5.7 percent to 6.5 percent and in Winston-Salem from 4.2 percent to 6 percent. It is expected that rental housing production in the Triad area will continue to outpace capacity, resulting in a further increase in vacancy rates, probably to 8 or 8.5 percent within the next 12 months.
Spotlight on Caguas, Puerto Rico
The Caguas metropolitan area is the third largest in Puerto Rico, with an estimated population of 317,800. The area has strong economic ties with the neighboring urban centers of Bayamon and San Juan.
Residential building permit activity totaled 9,079 units from 1990 through June 1998. Single-family home activity accounted for 72 percent of the building, with the balance being multifamily condominiums. In general, the homebuilding industry in the area has experienced healthy growth in recent years, mostly as a result of consistent economic growth and low interest rates of about 7 percent. New and existing home sales have surged in recent years. Single-family detached housing continues to be more popular than townhouses and condominiums and accounts for approximately 75 percent of all sales. Demand is strongest for units priced between $55,000 and $102,000. Units sold under Puerto Rico's Affordable Housing Program sell in the $55,000 to $64,000 range and are mostly modest single-family detached dwellings. This program offers tax exemptions to affordable housing developers and provides downpayment and interest subsidy assistance to moderate-income families.
The demand for rental housing is at a level that is considered too low to provide incentives for new rental multifamily housing development. High costs of both construction and improved land, as well as low incomes, are cited as the main barriers to rental construction. Much of the current demand for market-rate rentals is being met by the conversion of single-family and multifamily condominium units to rentals and by the construction of second-story units above existing single-family dwellings. Some government-assisted rental housing is planned with the help of the HOME and LIHTC programs. The rental market in the metropolitan area has tightened since 1990, and the rental vacancy rate is estimated to be between 5 and 6 percent.
The city of Caguas is planning a Neighborhood Revitalization Strategic Area Plan for 6 communities with a combined population of 3,652 persons and 1,461 housing units. The project is a contiguous cluster of small housing units comprising about 160 acres of land in urban Caguas, west of its central business district. The proposal involves the development of 250 new, mixed-income sales housing units and 50 new, multifamily rental-assisted units; the creation of a neighborhood housing services organization; and the provision of home rehabilitation loans and property titles to owner-occupants who do not have legal title. In addition, the project plans to generate 200 full-time jobs, promote at least 10 new resident-owned businesses, and market the Economic Development Bank's services to new and existing area businesses. The project will also include a number of facilities for social services and community support activities that will be provided by community-based organizations.
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