U.S. HOUSING MARKET CONDITIONS



4th Quarter 1996

February 1997

-------------------------------



SUMMARY



Despite downturns in the fourth quarter in housing production and

marketing, 1996 was an excellent year for the housing industry.

Building permits slipped 2 percent in the fourth quarter, but the

1,430,900 units permitted in 1996 made it the best year since 1988.

Single-family permits at 1,073,100 were at the fourth-highest

number since the series started in 1959, exceeded only in 1977,

1978, and 1986. Housing starts declined 5 percent in the fourth

quarter, but at 1,473,700 units, 1996 also was the best year since

1988 for housing starts. Single-family housing starts had their

second-best year since 1986, exceeded only in 1994.



In housing marketing, new home sales decreased approximately 6

percent in the fourth quarter of 1996, but the 756,000 sales made

1996 the third-best year since the series began in 1963; only the

hyperactive years of 1977 and 1978 had higher new home sales.

Existing home sales slipped 4 percent in the fourth quarter, but

1996 had the highest sales total ever with 4,086,000 units sold.

This was 100,000 sales and 2 1/2 percent above the previous high

year, 1978. The total for new and existing sales, 4,842,000 units,

also set a new record, surpassing the 4,803,000 units sold in 1978.



Because new homes are now larger and have more amenities than new

homes in earlier years, the aggregate value of new homes sold in

1996 exceeded the value of homes in any prior year except 1994. The

1996 home typically was a trade-up home, while the typical 1978

home was a starter home. The average new home in 1978 had 1,755

square feet of floor area; the average new home in 1995 had about

2,100 square feet of floor area, which was a 20-percent increase.

Based on constant 1996 dollars, the 1996 output totalled more than

$135 billion, compared with $127 billion in 1995, $140 billion in

1994, and $134 billion in 1978.



Another record was set by manufactured (mobile) home shipments in

1996. Shipments from manufacturers to dealers were expected to

total 365,000 units in 1996, exceeding the previous record of

340,000 units shipped in 1995. This data series goes back to 1974,

when the third-highest number, 329,000 units, was shipped.



Another area that showed strength and vibrancy during 1996 was

homeownership. The growing demand for owning a home, due to growing

consumer confidence and made possible by affordable mortgage

interest rates, accounted for the excellent year in new and

existing home sales and manufactured (mobile) home shipments. The

Nation's homeownership rate rose 0.7 percentage points in 1996,

following an identical rise in 1995. The homeownership rate at the

end of 1996 was 65.4 percent, almost back to where it was in 1980

(65.6 percent) before the decade-long decline in homeownership set

in.



The fourth-quarter downturn may presage the return to more normal

levels of activity than many housing analysts have been

anticipating. Except for housing completions, which naturally

experience a timelag and so should continue to rise in 1997, most

production and marketing measures can be expected to show some

small declines into 1997 and perhaps 1998 as well. Any slowdown

should be modest in the important single-family sector because the

inventory of unsold homes is low and, therefore, any decrease in

demand should not be magnified by an inventory correction. While

the annual rental vacancy rate is at an all-time high and the

regional reports indicate some soft markets are developing,

multifamily housing construction is at a modest level by historical

standards. Continued good economic conditions and a healthy demand

for homeownership should continue to buoy the Nation's housing

production and marketing.





REGIONAL PERSPECTIVE



Confirming the national data, field economists at the U.S.

Department of Housing and Urban Development reported that 1996 was

one of the best years in the past 7 years for housing sales at the

local level. Homebuilding continued at a brisk pace in most of the

major markets, while sales of both new and existing homes sustained

high levels and set records in some areas.



Sales of existing homes were especially strong in the Boston area.

In the Mid-Atlantic region, the Washington, D.C., area ended the

year with the fourth-largest volume of single-family permits

nationally. Atlanta remained the hot market in the Southeast with

more than 37,500 single-family houses authorized by building

permits in 1996.



The Midwest region had its highest level of home construction since

1978. California's sales housing market continued to improve,

racking up the best performance since 1989; single-family permits

were up in 17 of 25 of the State's metropolitan markets. Sales

markets in the Northwest, particularly in the Puget Sound area,

also continued to show strength.



In much of the country, rental housing markets held firm. Tighter

market conditions in Boston made rental housing construction

feasible for the first time in many years. Midwest apartment

building was at the highest level in the past 7 years. Texas also

experienced high volumes of apartment construction.



But there are warning signs that previously hot rental housing

markets are starting to cool off. Large multifamily housing

production volumes are causing concern in some markets in the

Southeast, Southwest, and Rocky Mountain regions. There have been

significant reductions in construction activity in the Orlando,

Miami-Fort Lauderdale, Atlanta, and Raleigh-Durham areas. The

Austin and Albuquerque rental markets, in particular, have softened

due to an oversupply of new high-rent apartments. New apartment

projects in the Denver area are continuing to fill, but rent

concessions are widespread.







THE PROVIDERS OF AFFORDABLE HOUSING 



Nearly 35 million households rent their housing units. Because of

the importance of housing, the Federal Government provides

assistance to slightly more than 4 million low-income households.

Even with this level of support, another 12 million families who

are eligible for assistance receive none and must rely on

private-sector property owners for affordable housing. Thus it is

important to know how this segment of the market operates. Whether

and how providers of unassisted, affordable rental units serving

these low-income families differ from owners providing more

expensive rental units to families with higher incomes and more

extensive choices is an important policy issue. This paper looks at

information collected in the Property Owners and Managers Survey

(POMS) conducted for the U.S. Department of Housing and Urban

Development (HUD) by the U.S. Bureau of the Census.[1]





IDENTIFYING AFFORDABLE RENTAL UNITS



This work examines whether property owners and managers who provide

affordable rental housing behave differently from property owners

and managers of more expensive rental units. Affordable rental

housing refers to units that do not cost so much as to be

burdensome to lower income families. To identify affordable units,

an approach is used based on HUD's income eligibility rules and

affordability-burden guidelines. Affordable rental units are

identified as those that a family with 50 percent of the

HUD-adjusted area median income[2] (an income-eligible family)

could afford without spending more than 30 percent of their income

on rent, which is the standard of reasonable rent burden implicit

in most of HUD's assisted-housing programs.[3] HUD-adjusted median

family incomes are available for every county or county equivalent

(nearly 3,200 areas). Ideally, these cutoffs would be adjusted for

differences in the number of bedrooms; however, this added

precision must await the merging of POMS, which does not contain

number of bedrooms, with the 1995 American Housing Survey.[4] Using

this definition about one-half of private-sector rental units would

be considered affordable. This is somewhat higher than other

studies have found.[5] For now this approach is sufficient to

provide useful results on the providers of affordable housing,

although the intention is to use the more refined definition in

future work.





WHO ARE THE OWNERS?



Single-family privately owned rental units are predominately owned

by individual investors whether the unit is affordable to lower

income families or only to higher income families. The other forms

of ownership infrequently occur for single-family properties and

are distributed nearly the same for affordable units as for the

more expensive units. Units in multifamily properties are also

frequently owned by individual investors; however, individual

investors more often own affordable units (59 percent) than more

expensive units (44 percent).[6] This shortfall for more expensive

units is made up by the higher presence of limited partnerships (14

percent for affordable units compared with 17 percent for more

expensive units) and general partnerships (7 percent for affordable

units compared with 11 percent for more expensive units). These

last two differences are not statistically significant.



Affordable rental units owned by noninstitutional owners, such as

individual investors (including joint ownership by two or more

individuals), estate trustees, and limited and general

partnerships, are more likely to have a lower number of owners than

the more expensive properties. For example 52 percent of affordable

single-family rental units have one owner, while only 45 percent of

the more expensive single-family rental units have one owner.

Affordable multifamily rental properties owned by noninstitutional

owners[7] exhibit the same pattern, with 31 percent of affordable

units owned by a single owner compared with 23 percent for more

expensive units. The difference for single-family rental units just

misses being statistically significant. Other characteristics of

noninstitutional owners reveal that affordable single-family rental

units are more likely to be owned by older individuals, with 63

percent of the units having owners over 55 years old compared with

only 44 percent for more expensive single-family units. No such

clear pattern holds for noninstitutional owners of multifamily

rental properties. 



Owners of affordable rental properties are more often reported to

be female, with 32 percent for single-family affordable units

compared with 27 percent for more expensive units. The difference

for multifamily units is not as great, with 20 percent for

affordable units compared with 17 percent for more expensive units.

(Neither difference is statistically significant.) Overall, most

rental units are owned by owners who are white. However, there are

some interesting differences between affordable and more expensive

rental units. Respondents for noninstitutionally owned affordable

rental properties are more likely to have reported that the owners

are African American (11 percent for single-family and 6 percent

for multifamily) than is the case for more expensive rental units

(2 percent for single-family and 3 percent for multifamily). Only

the difference for single-family rental units is statistically

significant. Owners of single-family rental units who are Asian or

Pacific Islanders are more often owners of more expensive rental

units, but again the difference is not large enough to be

statistically meaningful. The differences in ownership by persons

of Hispanic origin are small and insignificant.

 

In terms of the number of total rental units owned, there is a

statistically slight tendency for single-family rental units to be

owned by persons who have no other properties. Owners of affordable

multifamily rental units are more likely to own fewer total units

than owners of more expensive rental units; 56 percent of the more

expensive units have owners who own 50 or more units, while only 32

percent of affordable multifamily units have owners who own 50

units or more. This shift toward smaller scale for owners of

affordable units in multifamily properties is also evident in the

number of owners with two to four units (29 percent compared with

4 percent for owners of more expensive units).



Compared with more expensive rental units, affordable rental units

seem to be owned by individuals who are older, more frequently

women, more frequently African Americans, and who own fewer other

units.





HOW WAS THE PROPERTY ACQUIRED?



The predominant method of acquiring rental properties is reported

to be purchasing for all types of property -- affordable and more

expensive, single-family and multifamily. However, affordable

single-family rental properties were acquired more often by

inheritance or gift (13 percent) than was the case for more

expensive single-family rental units (5 percent). This tendency,

though smaller, is also present for rental units in multifamily

properties, but it is not statistically significant (4 percent for

affordable units versus 1 percent for more expensive units). 



Reasons for acquiring rental properties were somewhat different for

single-family properties and less so for units in multifamily

properties, though they are not statistically significant for

either type of property. "Providing affordable housing" (4 percent

for affordable units, 1 percent for more expensive units) and

"income" (31 percent for affordable units, 25 percent for more

expensive units) were more prevalent reasons for acquiring

affordable single-family rental properties, while "as a residence

for self or family" was the more prevalent reason for acquiring

more expensive single-family rental units (32 percent versus 28

percent). For owners of units in multifamily rental properties,

"retirement security" (9 percent for affordable units, 5 percent

for more expensive units) and "family security" (4 percent versus

2 percent) played more important roles for affordable units than

for more expensive units. "Long-term capital gains" was given as a

reason more often by owners of more expensive multifamily rental

units (19 percent) than by owners of affordable multifamily rental

units (15 percent). 



Owners of affordable rental units, both single-family and

multifamily, acquired their properties earlier than owners of more

expensive rental units. Affordable rental units were more likely to

be acquired before 1980 (39 percent for single-family and 38

percent for multifamily) than were more expensive rental units (24

percent for single-family and 31 percent for multifamily).



Methods of financing acquisitions of properties showed a very sharp

distinction for affordable single-family rental units, with 29

percent of owners reporting that they paid all cash while about 12

percent of the owners of more expensive single-family rental units

reported paying all cash. Owners of multifamily rental units paid

all cash less frequently, and the distinction between affordable

and more expensive rental units is not statistically significant (9

percent for affordable units and 7 percent for more expensive

units). 



In summary affordable single-family rental units were more often

acquired as inheritances or gifts, purchased for all cash, and

acquired earlier than more expensive units. Multifamily rental unit

acquisition methods, reasons, and financing differ less between

owners of affordable and more expensive units, with the exception

of when they acquired the units. 





ATTITUDES TOWARD THE PROPERTY



Regardless of unit type or affordability, the majority of owners

plan to hold their properties for more than 5 years. Owners of

affordable single-family rental units are more attached to their

units than owners of more expensive single-family rental units, in

contrast to multifamily rental properties where the opposite is

true. Owners of affordable single-family rental properties more

often responded that they would hold their properties for more than

5 years (71 percent compared with 62 percent for owners of more

expensive units). For multifamily rental properties the pattern is

reversed, although it is less pronounced and not quite

statistically significant (81 percent for more expensive units

versus 76 percent for affordable units). 



When asked whether they would buy their properties again, owners of

affordable single-family rental units were more likely to answer in

the affirmative (58 percent) than owners of more expensive

single-family rental units (49 percent). Owners of multifamily

rental properties were even more positive about doing it over

again, but in this case the owners of more expensive units were

more positive than owners of affordable units (75 percent versus 65

percent). 



More than 60 percent of all owners reported earning a profit or

breaking even. For single-family rental units, owners of more

expensive units more often reported earning a profit (52 percent

compared with 49 percent for owners of affordable units) or having

a loss (32 percent versus 31 percent for owners of affordable

units). Owners of affordable rental units were more likely to

report breaking even (20 percent compared with 15 percent for

owners of more expensive rental units). These distinctions,

however, do not have statistical significance. Owners of the more

expensive units in multifamily rental properties were more

positive, with more reporting profits (67 percent versus 58 percent

for owners of affordable units) and fewer reporting losses (22

percent versus 27 percent for owners of affordable units). This is

a statistically insignificant difference. 



When asked about the profitability of their properties compared

with similar properties, most owners (60 to 68 percent) reported

that their units were about the same as other similar units. Owners

of affordable units were more likely to respond that their

properties were less profitable than owners of more expensive units

(36 percent versus 25 percent for single-family units and 20

percent versus 12 percent for multifamily units). 



In addition to profitability, owners were queried about changes in

the value of their properties compared with other similar

properties. The most common response (44 to 55 percent) was that

the value remained the same. Owners of the more expensive

single-family rental units were ambivalent: more indicated an

increase in value (34 percent compared with 31 percent, although

the difference is not statistically significant) and more indicated

a decrease in value (23 percent compared with 13 percent of owners

of affordable units). Owners of the more expensive units in

multifamily rental properties were more positive about value, with

37 percent indicating an increase in value compared with 29 percent

for owners of affordable units in multifamily rental properties.



Owners of affordable rental units feel that they are competing with

rental properties that are either assisted or that accept

tenant-based assistance. Owners of affordable rental units, when

asked if they compete with private properties that accept Section

8 tenants, more often respond affirmatively (45 percent versus 35

percent for single-family units and 51 percent versus 37 percent

for multifamily properties). These owners of affordable rental

units also see themselves competing more often with rental

properties receiving non-Section 8 assistance and with public

housing. 



Owners are generally positive about their properties -- they plan

to hold on to them for long periods of time; they would most often

purchase the properties again; they most likely made a profit or

broke even; and they rated their units "better" or "about the same"

compared with similar properties in terms of profits and value

appreciation. Nevertheless important differences among these

characteristics exist between affordable and more expensive single-

family rental units. Owners of affordable single-family rental

units gave more positive answers for length of future ownership,

buying property again, and property value appreciation, and gave

less positive answers for current profits and profitability

compared with similar properties, than the owners of more expensive

single-family rental units. Owners of units in more expensive

multifamily rental properties were more unequivocal: They gave more

positive responses to all these questions. Finally, owners of

affordable rental units more often saw themselves competing with

assisted housing for new tenants than owners of more expensive

rental units.





DEALING WITH SECTION 8



Knowledge of HUD's Section 8 program is not as widespread as one

might expect. Only about one in six owners of single-family rental

units is very familiar with the program; this is true for owners of

both affordable and more expensive rental units. Furthermore, the

percent of single-family homeowners not familiar with the program

is higher among the owners of affordable units than among owners of

more expensive units (59 versus 54 percent, a difference that is

not statistically significant). Owners of multifamily rental

properties are much more aware of the program, with one out of

three owners very familiar and more than one out of three owners

somewhat familiar. Multifamily owners' awareness of the program is

about the same for those with affordable units as for those with

more expensive units. 



About six out of seven owners of single-family rental units

reported that they had not received any inquiries from prospective

Section 8 tenants. There were no statistically significant

differences in the number of inquiries received by owners of

affordable units and owners of more expensive units.[8] Owners of

multifamily rental units more often received some inquiries, with

only 4 out of 10 reporting that they received no inquiries in the

past 6 months. There is very little difference in the number of

inquiries received by owners of affordable units and by owners of

more expensive units in multifamily rental properties.[9]



Similarly, owners of affordable rental units were more likely to

have reported that they would accept Section 8 tenants (57 percent

versus 47 percent for single-family units and 57 percent versus 44

percent for multifamily properties). Owners of both affordable and

more expensive rental units who reported that they would not accept

Section 8 tenants most often cited three reasons: potential

problems with tenants, too many regulations, and too much

paperwork. Owners of more expensive units cited these problems more

often than owners of affordable units. Owners of more expensive

units often said that their rents were too high compared with the

Fair Market Rents used by the Section 8 program (31 percent versus

5 percent for single-family units and 45 percent versus 13 percent

for multifamily properties). 



Owners of affordable single-family rental units had a slight

tendency to be not as familiar with Section 8 and to receive fewer

inquiries than owners of more expensive units, but they were more

likely to accept Section 8 tenants than owners of more expensive

single-family rental units. Owners of affordable units in

multifamily rental properties were at least as familiar with the

Section 8 program and were more willing to accept Section 8 tenants

than owners of the more expensive multifamily rental properties.





MAINTENANCE AND UPKEEP



Affordable rental units are generally older than more expensive

rental units. Seventy-two percent of affordable single-family

rental units were built before 1970, while only 49 percent of more

expensive rental units are as old. Multifamily rental units are

newer than single-family rental units (55 percent built before 1970

compared with 37 percent built before 1970), but once again the

affordable stock is older than the more expensive stock. 



A higher percentage of the owners of affordable single-family

rental units (9 percent) reported spending no money on maintenance

compared with owners of more expensive single-family rental units

(4 percent), though the difference is not large enough to be

statistically significant. In spite of the fact that many owners

spent no money on maintenance, the median percentage of rental

income spent on maintenance by owners of affordable single-family

rental units is slightly above 10 percent, whereas owners of more

expensive rental units spent slightly less than 10 percent. Owners

of units in multifamily rental properties rarely spent nothing on

maintenance, with their median amount spent on maintenance being

about 16 percent of rental income for affordable units and a

slightly higher median for more expensive units. 



This maintenance spending may reflect the maintenance policies that

owners currently pursue. Only 75 percent of the owners of

affordable single-family rental units reported handling all

problems immediately and practicing preventive maintenance, while

87 percent of the owners of more expensive rental units followed

such a policy. The percentage reporting that they postponed

handling most problems and handled only major problems as soon as

possible was nearly twice as high for affordable single-family

rental units than for more expensive rental units (10 percent

versus 5 percent). Though owners of units in multifamily rental

properties more often followed better maintenance policies, the

level of preventive maintenance was lower for affordable units than

for more expensive units (86 percent versus 91 percent), and the

frequency of postponing most problems was lower for more expensive

units (2 percent versus 4 percent) than for affordable units,

though not statistically so. When asked about their plans for

future maintenance, owners gave almost identical responses as they

gave for their current maintenance plans.



Another indicator of maintenance and unit quality can be gleaned

from owners' answers to questions about unit inspections in the

past 2 years. Between 21 and 23 percent of single-family rental

units and between 36 and 41 percent of units in multifamily rental

properties were reported to have been inspected in the past 2

years. The most frequent outcome was that the units passed

inspection (80 to 93 percent). Though the differences are not

statistically significant, affordable units fared slightly worse

than the more expensive units, with only 80 percent of

single-family units and 89 percent of multifamily properties

passing initial inspections, while the rates for the more expensive

units were 85 percent and 92 percent, respectively. 



Overall, owners of affordable rental units faced more maintenance

challenges from their older stock, but at the same time many of

them spent no money on maintenance and, compared with more

expensive rental units, did not follow as frequently a preventive

approach with immediate attention to problems. 





CONCLUDING COMMENTS



This paper has delved in a cursory way into the issue of whether

owners of affordable rental housing units are different from owners

of more expensive rental housing units. The analysis is based on

tables with a simple and inexact two-way characterization of

affordability. Further analysis is warranted, yet this preliminary

treatment clearly reveals important differences that should be

recognized in developing national housing policies.



Affordable rental properties are older and are less aggressively

maintained. They tend to be less profitable, and the providers of

affordable multifamily rental properties are less optimistic about

the future. Affordable rental housing providers more often perceive

themselves to be in competition with federally assisted housing.

Still the majority of providers of affordable rental housing expect

to retain ownership for 5 or more years and would acquire the

property again.





ENDNOTES



[1] The survey was conducted in the later part of 1995 and early

1996 from a nationally representative, scientifically selected

sample of privately owned rental units. About 8,000 owners or

property managers answered questions on property acquisition,

financing, maintenance and capital spending, expenses, income,

strategies, tenant selection, and tenant relationships. Additional

information can be found in the November 1996 issue of U.S. Housing

Market Conditions Report or on the World Wide Web at

http://www.census.gov/hhes/www/poms.html. 



[2] HUD-adjusted median incomes, along with a description of the

methodology used to calculate them for metropolitan areas and

nonmetropolitan counties, are published each year as a HUD Notice.

For example, the 1997 estimates were published in U.S. Department

of Housing and Urban Development Notice: PDR-96-01 -- Estimated

Median Family Income for Fiscal Year 1997, issued December 27,

1996. This is also available on the World Wide Web at

http://www.huduser.org/fmrdata97/medians.html.



[3] About 5 percent of the responses did not have a reported rent.



[4] As a result of not adjusting for bedroom size, some rental

units will be misclassified. For example it is possible that

affordable three-bedroom units will be classified as more

expensive, while expensive efficiency units will be classified as

affordable.



[5] See Rental Housing Assistance at a Crossroads: A Report to

Congress on Worst Case Housing Need, Office of Policy Development

and Research, U.S. Department of Housing and Urban Development,

March 1996. Forty-three percent of rental units were affordable to

families with up to 50 percent of area median family incomes.



[6] Differences noted in the text are statistically significant at

the 90-percent confidence level unless otherwise noted.



[7] Personal characteristics for noninstitutional owners refer to

the single owner, the operating general or lead partner in general

partnerships, or any one of the owners if the property is owned by

two or more individuals.



[8] The upper response category for single-family units is "5 or

more," and it is "100 or more" for units in multifamily properties.



[9] The apparent anomaly of more expensive units receiving more

inquiries may be an artifact. More expensive units may be located

in larger properties (where owners indicated that they owned more

total units) and thus would be expected to have more inquiries

because of their size.



-------------------------------



U.S. Housing Market Conditions is published quarterly by the U.S.

Department of Housing and Urban Development, Office of Policy

Development and Research.



Andrew M. Cuomo

 Secretary



Michael A. Stegman

 Assistant Secretary, Office of Policy Development and Research



Frederick J. Eggers

 Deputy Assistant Secretary, Economic Affairs



Paul A. Leonard

 Deputy Assistant Secretary, Policy Development



Duane T. McGough

 Director, Housing and Demographic Analysis Division



David E. Shenk

 Director, Economic Market Analysis Division



Katherine L. O'Leary

 Director, Research Utilization Division



Ronald J. Sepanik

 Deputy Director, Housing and Demographic Analysis Division



Bruce D. Atkinson

 Economist



Sue George Neal

 Economist



Randall M. Scheessele

 Economist



Edward J. Szymanoski

 Economist



Vanessa Void-Taylor

 Research Utilization Specialist



Robert R. Callis

 Bureau of the Census





HUD Field Office Economists who contributed to this issue are:



New England: John R. Riley 

 Boston



Boston, MA: John R. Riley

 Boston



New York/New Jersey: David S. Burns

 New York



Albany-Schenectady-Troy, NY: William Coyner

 Buffalo



Mid-Atlantic: Frances A. Kenney

 Richmond



Washington, DC-MD-VA-WV: Rafiq A. Munir

 Washington, DC



Southeast: Bette L. Almand

 Atlanta



Louisville, KY-IN: Charles P. Hugghins

 Atlanta



Midwest: Joseph P. McDonnell

 Chicago



Ann Arbor, MI: Thomas W. Miesse

 Detroit



Southwest: Linda L. Hanratty

 Ft. Worth



Las Cruces, NM: Linda L. Hanratty

 Ft. Worth



Great Plains: Donald J. Gebauer

 Kansas City



Des Moines, IA: James P. Laakso

 Omaha



Rocky Mountain: James A. Coil

 Denver



Colorado Springs, CO: George H. Antoine

 Denver



Pacific: Robert E. Jolda

 San Francisco



Phoenix, AZ: Robert E. Jolda

 San Francisco



Northwest: Pamela R. Sharpe

 Seattle



Spokane, WA: Sarah E. Bland

 Seattle 



-------------------------------



NATIONAL DATA





HOUSING PRODUCTION



PERMITS



Permits for construction of new housing units decreased 2 percent

in the fourth quarter of 1996 to a seasonally adjusted annual rate

of 1,397,000 units and were 3 percent below the fourth quarter of

1995. One-unit permits, at 1,017,000 units, were 4 percent below

the level of the previous quarter and down 6 percent from a year

earlier. Multifamily permits (5 or more units in structure), at

313,000 units, were 6 percent above the third quarter and 6 percent

above the fourth quarter of 1995.





STARTS



Construction starts of new housing units in the fourth quarter of

1996 totalled 1,409,000 units at a seasonally adjusted annual rate,

5 percent below the third quarter of 1996, but even with the fourth

quarter of 1995. Single-family starts, at 1,091,000 units, were 7

percent lower than the previous quarter and 3 percent below the

1995 rate. Multifamily starts totalled 266,000 units, a

statistically insignificant 2 percent below the previous quarter

and a statistically insignificant 6 percent above the same quarter

in 1995.





UNDER CONSTRUCTION



Housing units under construction at the end of the fourth quarter

of 1996 were at a seasonally adjusted annual rate of 820,000 units,

1 percent lower than the previous quarter but 3 percent above the

fourth quarter of 1995. Single-family units under construction at

the end of the fourth quarter of 1996 stood at 577,000 units, a

statistically insignificant 3 percent below the previous quarter

but a statistically insignificant 1 percent above the fourth

quarter of 1995. Multifamily units were at 215,000 units, up a

statistically insignificant 3 percent from both the previous

quarter and the fourth quarter of 1995. 





COMPLETIONS



Housing units completed in the fourth quarter of 1996 at a

seasonally adjusted annual rate of 1,416,000 units were down a

statistically insignificant 1 percent but up 9 percent above the

same quarter of 1995. Single-family completions at 1,135,000 units

were unchanged from the previous quarter and 9 percent above the

rate of a year earlier. Multifamily completions at 241,000 units

were a statistically insignificant 3 percent below the previous

quarter but a statistically insignificant 5 percent above the same

quarter of 1995. 





MANUFACTURED (MOBILE) HOME SHIPMENTS



Shipments of new manufactured (mobile) homes to dealers were at a

seasonally adjusted annual rate of 371,000 units in the third

quarter of 1996, which is the same as the previous quarter and 8

percent above the rate of a year earlier.







HOUSING MARKETING



HOME SALES



Sales of new single-family homes totalled 749,000 units at a

seasonally adjusted annual rate (SAAR) in the fourth quarter of

1996, a statistically insignificant 6 percent below the previous

quarter but a statistically insignificant 10 percent above the

fourth quarter of 1995. The number of new homes for sale at the end

of December 1996 numbered 327,000 units, down a statistically

insignificant 5 percent from the last quarter and down 12 percent

from the fourth quarter of 1995. At the end of December,

inventories represented a 5.2-months supply at the current sales

rates, down a statistically insignificant 2 percent from the

previous quarter and down 21 percent from the fourth quarter of

1995. 



Sales of existing single-family homes reported by the NATIONAL

ASSOCIATION OF REALTORS (registered trademark), for the fourth

quarter of 1996 totalled 3,950,000 (SAAR), down 4 percent from the

third quarter's level and down 1 percent from the fourth quarter of

1995. The number of units for sale at the end of the fourth quarter

was 1,650,000, which is 23 percent below the previous quarter but

12 percent above the fourth quarter of 1995. At the end of the

fourth quarter, there was a 5.1-months supply of units, 20 percent

below the previous quarter but 11 percent above the fourth quarter

of 1995.





HOME PRICES 



The median price of new homes during the fourth quarter of 1996 was

$144,700, up a statistically insignificant 3 percent from the

previous quarter's level and up a statistically insignificant 5

percent from the fourth quarter of 1995. The average price of new

homes sold during the fourth quarter of 1996 was $171,100, up 4

percent from the third quarter of 1996 and up 6 percent from the

same quarter a year ago. The price adjusted to represent a

constant-quality house was $164,900, a statistically insignificant

1 percent below the third quarter of 1996 but up a statistically

insignificant 1 percent from the fourth quarter of 1995. The values

for the set of physical characteristics used for the constant-

quality house are based on 1992 sales. 



The median price of existing single-family homes in the fourth

quarter of 1996 was $117,600, which is 2 percent below last quarter

but 3 percent above the fourth quarter of 1995, according to the

NATIONAL ASSOCIATION OF REALTORS (registered trademark). The

average price of $145,000 was 2 percent below the previous quarter

but 4 percent above the fourth quarter of 1995. 





HOUSING AFFORDABILITY



Housing affordability is the ratio of median family income to the

income needed to purchase the median-priced home based on current

interest rates and underwriting standards, expressed as an index.

The NATIONAL ASSOCIATION OF REALTORS (registered trademark)

composite index value for the fourth quarter of 1996 shows that

families earning the median income have 126.7 percent of the income

needed to purchase the median-priced existing home. This figure is

6 percent above the third quarter of 1996 but 2 percent below the

fourth quarter of 1995. This increase is the result of a 2-percent

fall in the median home price and a 25-basis-point decrease in the

interest rate that failed to be offset by a 5-percent drop in

median family income during the last quarter. The fixed-rate index

increased by 6 percent from the third quarter of 1996 but fell by

3 percent from the fourth quarter of 1995. The adjustable-rate

index increased by 6 percent from the previous quarter but

decreased by 1 percent from the same quarter a year earlier. 





APARTMENT ABSORPTIONS



There were 53,300 new, unsubsidized, unfurnished, multifamily (5 or

more units in structure) rental apartments completed in the third

quarter of 1996, up a statistically insignificant 5 percent from

the previous quarter and up a statistically insignificant 11

percent from the third quarter of 1995. Of the apartments

completed in the third quarter of 1996, 72 percent were rented

within 3 months. This absorption rate is up a statistically

insignificant 1 percent from the previous quarter and equal to the

same quarter the previous year. The median asking rent for

apartments completed in the third quarter was $682, which is a

statistically insignificant 1 percent below the previous quarter

but a statistically insignificant 3 percent higher than a year

earlier. 





MANUFACTURED (MOBILE) HOME PLACEMENTS



Manufactured homes placed on site ready for occupancy in the third

quarter of 1996 totalled 300,000 at a seasonally adjusted annual

rate, nearly equal to the level of the previous quarter and a

statistically insignificant 3 percent below the third quarter of

1995. The number of homes for sale on dealers' lots at the end of

the third quarter totalled 117,000 units, 14 percent above the

previous quarter and 39 percent above the same quarter of 1995. The

average sales price of the units sold in the third quarter was

$39,000, up a statistically insignificant 1 percent from the

previous quarter and 6 percent higher than the 1995 price.





BUILDERS' VIEWS OF HOUSING MARKET ACTIVITY



The National Association of Home Builders (NAHB) conducts a monthly

survey focusing on builders' views of the level of sales activity

and their expectations for the near future. NAHB uses these survey

responses to construct indices of housing market activity. (The

index values range from 0 to 100.) The fourth-quarter value for the

index of current market activity for single-family detached houses

stood at 57, down 5 points from the third-quarter level of 62 but

up 1 point from 1995's fourth quarter. The index for future sales

expectations, 61, was down 3 points from the third-quarter value

and down 1 point from 1995's level. Prospective buyer traffic had

an index value of 41, which is 5 points below the third-quarter

value and 1 point below 1995's fourth quarter level. NAHB combines

these separate indices into a single housing market index that

mirrors the three components quite closely. In the fourth quarter,

this index stood at 53, which is 5 points below the third-quarter

level and equal to the value from 1995. 





HOUSING FINANCE



MORTGAGE INTEREST RATES



Mortgage interest rates for all categories of loans declined from

the previous quarter. The contract mortgage interest rate for 30-

year, fixed-rate, conventional mortgages reported by Freddie Mac

was 7.69 percent in the fourth quarter, 47 basis points lower than

the previous quarter but 35 basis points higher than the same

quarter of 1995. Adjustable-rate mortgages in the fourth quarter

were going for 5.56 percent, 33 basis points below the previous

quarter and 9 basis points below the same quarter of 1995. Fixed-

rate, 15-year mortgages, at 7.20 percent, were down 48 basis points

from last quarter but up 33 basis points from the same quarter of

the previous year. The FHA rate fell 33 basis points during the

quarter and was 50 basis points above the same quarter in 1995. 





FHA 1-4 FAMILY MORTGAGE INSURANCE



Applications for FHA mortgage insurance on 1-4 family homes were

received for 238,700 (not seasonally adjusted) properties in the

fourth quarter of 1996, down 4 percent from the previous quarter

but up 11 percent from the fourth quarter of 1995. Endorsements or

insurance policies issued totalled 209,500, down 5 percent from the

third quarter of 1996 but up 39 percent from the fourth quarter of

1995. Endorsements for refinancing were 18,100, down 24 percent

from the third quarter of 1996 and 3 percent from a year earlier. 





PMI AND VA ACTIVITY



Private mortgage insurers issued 240,500 policies or certificates

of insurance on conventional mortgage loans during the fourth

quarter of 1996, down 16 percent from the third quarter and down 10

percent from the fourth quarter of 1995; these numbers are not

seasonally adjusted. The U.S. Department of Veterans Affairs

reported the issuance of mortgage loan guaranties for 68,700

single-family properties in the fourth quarter of 1996, down 13

percent from the previous quarter but up 9 percent from the fourth

quarter of 1995. 





MORTGAGE ORIGINATIONS BY LOAN TYPE, 1-4 FAMILY UNITS



The total value of mortgage originations for 1-4 family homes was

$218 billion in the third quarter of 1996, unchanged from the

second quarter of 1996. Uninsured mortgage volume grew 1 percent;

FHA-insured mortgages increased 1 percent; privately insured

mortgages decreased 3 percent; and VA-guarantied mortgages

decreased by 19 percent. The overall increase from the third

quarter of 1995 was 15 percent. FHA mortgage volume increased 34

percent, VA-guarantied mortgages increased 12 percent, and

privately insured mortgages rose 3 percent while the volume for

uninsured mortgages increased 16 percent. Market shares changed

very little during the third quarter of 1996 or from the third

quarter of 1995. 





RESIDENTIAL MORTGAGE ORIGINATIONS BY BUILDING TYPE



Residential mortgage originations totalled $230.7 billion in the

third quarter of 1996, down 1 percent from the second quarter of

1996 but up 16 percent from the third quarter of 1995, and nearly

identical to the single-family mortgage pattern. The financing

volume for multifamily (5+) units totalled $12.7 billion in the

third quarter, down 1 percent from the previous quarter but up 28

percent from the third quarter of 1995. 





MORTGAGE ORIGINATIONS BY LENDER TYPE, 1-4 FAMILY UNITS



During the third quarter of 1996, commercial banks with a volume of

$60.2 billion and a market share of 27.6 percent and mutual savings

banks with a volume of $9.6 billion and a market share of 4.4

percent show increases from the second quarter of 1996 and the

third quarter of 1995. However, the second and third quarter data

are based on a newly introduced sample design that calls into

question any comparisons of current data with earlier data. More

data from the newly introduced sample design needs to be collected

before the series can be used with confidence for time-to-time

comparisons. Volume data for other lender types are unaffected;

however, comparisons of their market share data across time are

affected by this question of comparability. Mortgage companies

decreased their volumes during the third quarter of 1996 to $116.7

billion, a 9-percent decrease from the second quarter of 1996 but

an 11-percent gain over the third quarter of 1995. Their market

share is now estimated to be 53.5 percent, and they continue to

dominate the market. Savings and loans originated $30.4 billion in

mortgages, a 13-percent decrease from the second quarter of 1996

but an 11-percent increase from the third quarter of 1995. Their

market share in the third quarter is now estimated to be 13.9

percent. Volumes and market shares for "other lenders" continue to

be quite small.





DELINQUENCIES AND FORECLOSURES



Total delinquencies were at 4.16 percent at the end of the third

quarter of 1996, 4 percent below the second quarter and 6 percent

below the third quarter of 1995. Ninety-day delinquencies were at

0.59 percent, down 6 percent from the second quarter of 1996 and

down 23 percent from the third quarter of 1995. During the third

quarter of 1996, 0.33 percent of loans entered foreclosure, down 3

percent from both the previous quarter and the third quarter of

1995. 





HOUSING INVESTMENT



RESIDENTIAL FIXED INVESTMENT AND GROSS DOMESTIC PRODUCT



Residential Fixed Investment (RFI) for the fourth quarter of 1996

was $312.2 billion, equal to the value from the third quarter of

1996 but up 5 percent from the fourth quarter of 1995. As a

percentage of the Gross Domestic Product, RFI was 4 percent, down

0.1 percentage point from the previous quarter but equal to the

value from a year ago. 





HOUSING INVENTORY



HOUSING STOCK



As of the fourth quarter of 1996, the estimate of the total housing

stock, 114,555,000 units, was equal to the level of the third

quarter of 1996 and 1.4 percent above 1995's level. The number of

occupied units was up a statistically insignificant 0.1 percent

from last quarter but was 0.9 percent above the same quarter in

1995. Owner-occupied homes were equal to the level of the third

quarter of 1996 and 1.4 percent above the fourth quarter of 1995.

Rentals declined a statistically insignificant 0.4 percent from

last quarter and declined a statistically insignificant 0.1 percent

from 1995. Vacant units fell a statistically insignificant 0.9

percent from last quarter but rose 5.3 percent from 1995.





VACANCY RATES



The 1996 fourth-quarter national rental vacancy rate, at 7.7

percent, was down a statistically insignificant 0.3 percentage

point from last quarter and equal to the level of 1995. The

homeowner vacancy rate, at 1.7 percent, was unchanged from last

quarter but up a statistically insignificant 0.1 percentage point

from 1995.





HOMEOWNERSHIP RATES



The national homeownership rate was 65.4 percent in the fourth

quarter of 1996, down a statistically insignificant 0.2

percentage point from the third quarter but up 0.3 percentage point

from the fourth quarter of 1995. The homeownership rate for

minority households decreased a statistically insignificant 0.5

percentage point from the third quarter but increased 0.7

percentage point from 1995. The rate for young households of 58-

percent homeownership was up a statistically insignificant 0.2

percentage point from last quarter's rate and a statistically

insignificant 0.1 percentage point from 1995's fourth quarter.  



-------------------------------



REGIONAL ACTIVITY



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.





NEW ENGLAND



New England added 73,000 jobs in the 12 months ending November

1996, a 2.1-percent increase over the same period a year ago.

Service-producing industries led the way, creating 80,900 jobs, but

this gain was partially offset by the decline of 7,900 jobs in

goods-producing industries. Massachusetts had the largest share of

the increase, 39,000 new jobs. Connecticut ranked second with more

than 20,000 new jobs, despite cutbacks in the defense and insurance

industries. Maine, New Hampshire, Rhode Island, and Vermont also

reported net increases in employment over the past 12 months. 



Since the employment downturn bottomed out in late 1992,

Connecticut has regained 65,000 of the 160,000 jobs previously

lost. Hartford saw its unemployment rate decline from 5.4 percent

to 4.8 percent. In the New London area, job losses in manufacturing

have been offset by gains in the casino business. The Mohegan Sun

Casino, which recently opened in Montville near New London, has

5,000 employees. 



The unemployment rates for all of the New England States are below

the national average. Massachusetts and New Hampshire had the

lowest rates, both 3.9 percent, in November 1996. Maine's rate of

4.2 percent was not far behind. Connecticut's rate was 5.1 percent,

down from 5.6 percent in November 1995. 



Photonics, the practical use of light, such as with laser surgery

and laser machinery, is the emerging industry in New England.

Massachusetts, New Hampshire, and Connecticut are the top three

States in the Nation in this area. Connecticut has 11,000 persons

employed in photonics firms, most of which have fewer than 50

employees. 



Home construction in the region, as measured by single-family

building permits, showed continued strength through the fourth

quarter of 1996. For the year, permits were issued for 35,575

units, a 3.7-percent increase over the same period in 1995. Maine

had the greatest gain, 8.4 percent. Portland, the largest

metropolitan area in Maine, registered a 12-percent increase in

single-family permits. Connecticut, Massachusetts, and Vermont also

reported modest increases in single-family permits from 1 year ago.

New Hampshire showed a small decline. 



Existing home sales held steady in the region. Connecticut sales

declined slightly during 1996 compared with 1995. The sales housing

market in Massachusetts is doing significantly better, with the

annual sales volume at 83,100 as of the third quarter compared with

68,100 in the third quarter of the previous year.



New England rental housing markets are tightening as the economy

expands. The hottest markets are in eastern Massachusetts,

southern New Hampshire, and southeastern Maine. Absorption of new

rental housing in the Greater Boston area has continued at a strong

pace. Apartment vacancy rates in communities along Route 128 are

still 2 percent or less. Steady economic growth coupled with modest

apartment construction have kept pressure on the existing rental

stock. 



The number of multifamily housing units permitted in New England in

1996 increased 25 percent. In Massachusetts multifamily permit

activity was up almost 19 percent from 1,911 to 2,269 units; New

Hampshire experienced a jump from 376 to 1,023 units. Only

Connecticut and Maine recorded declines. Boston, Hartford,

Manchester, and Providence all reported increases in multifamily

permit activity compared with 1995 levels. 



Leggat McCall Retirement Properties announced plans to develop

about 1,700 units of housing for seniors in New England during the

next 2 years. The majority of the units will be in Massachusetts.

The target market will be seniors with incomes between $15,000 and

$30,000. 



SPOTLIGHT ON

BOSTON, MASSACHUSETTS



The economy of the Boston metropolitan area continues its slow

improvement. Employment during the 12 months ending in October 1996

increased almost 1 percent, reaching a level of 1,852,800 jobs.

Local economic forecasts expect this modest rate of growth to

continue in 1997. The latest unemployment figures support the

positive change in the Boston area's economic climate. The area's

unemployment rate declined substantially to 3.2 percent as of

October 1996. 



The largest job gains have been in the services and financial

sectors. The financial sector has benefitted from a State law that

provided a $40 million tax break for mutual fund companies. Local

financial corporations have made major commitments on commercial

properties in downtown Boston and plan to expand. Employment gains

are also expected in the biomedical research and computer software

industries. However, downsizing continues by a number of major

defense-related employers such as Raytheon. Manufacturing comprises

only about 12 percent of employment, down from 20 percent in the

early 1980s.



The Boston metropolitan area housing market has steadily improved

since 1992. Existing home sales have been extremely strong

throughout the metropolitan area, with many people trading up to

take advantage of low interest rates. Buoyed by an improving

economy, the median sales price of an existing home increased from

$171,100 in 1992 to $179,000 in 1995. 



Home construction continued to improve in 1996. Single-family

building permits in the Boston area increased by 7.4 percent to

5,943 units. The number of speculatively built homes has

increased for the first time since the late 1980s. However, custom

construction for predetermined buyers remains the norm, with most

new homes priced from $275,000 to $325,000. As a result of

increased demand inside Route 128, prices of improved lots have

increased 50 percent during the past 2 years. A standard improved

lot in this submarket now sells for $100,000 to $250,000. Outside

Route 128, lot prices are $75,000 to $100,000. 



Construction has begun on a new commuter line from the South

Station section of Boston to communities in southeastern

Massachusetts. The line, which is expected to begin operation in

1998, has stimulated considerable interest in commercial and

residential development near the planned stations. 



The Boston rental housing market has tightened due to increased

demand over the past 2 years and little significant development

over the past 7 years. Low apartment vacancy rates (typically less

than 3 percent) throughout the area have begun to spur the planning

and development of new units. Permits were issued for 1,342

multifamily units in 1996, a 42.3-percent increase over 1995.



With the end of rent control in Boston, Cambridge, and Brookline,

rents have increased significantly. Many apartment complexes in

Cambridge are reporting almost 100-percent occupancy, with rents

ranging from $1,000 to $2,000 for two-bedroom units. The rise in

rents in the metropolitan area has made development of new rental

housing financially attractive. Downtown rental housing is

becoming increasingly attractive to developers. Students at

Boston's colleges and universities have doubled up to pay higher

rents, putting pressure on the downtown rental market. Developers

are expressing interest in meeting this demand by converting older

manufacturing buildings to rentals. 





NEW YORK/NEW JERSEY



Nonagricultural employment in New York State increased by 58,200

jobs, or 0.7 percent, between November 1995 and November 1996, led

by the construction and services sectors. New Jersey employment

increased by 34,500 jobs, or 1.0 percent, during the same period.

New York State's unemployment rate was 6.0 percent in November

1996, down from 6.3 percent a year earlier. New Jersey's

unemployment rate was 6.2 percent in November 1996, also down by

0.3 percentage points from November 1995.



Employment increased by 29,500 jobs in New York City, or 0.9

percent, between November 1995 and November 1996. The unemployment

rate for the city was 8.8 percent in November 1996, up from 8.2

percent in November 1995. 



New York City's estimated 1995 population was 7,312,000, a slight

increase of about 15,000 persons since 1990. The population would

have declined were it not for a substantial increase in

immigration. A recent report by New York City's Department of

Planning indicated that 563,000 immigrants arrived between 1990 and

1994. Almost two-thirds of these new residents have located in

Brooklyn and Queens, making an already tight market tighter.



The rental housing market is strong throughout the New York City

metropolitan area. Hoboken and Jersey City, particularly the

waterfront areas, have recently experienced substantial increases

in rental housing construction. The demand for housing in these

communities has been stimulated by ongoing neighborhood

revitalization, much lower rents, and easy accessibility to

Manhattan.



According to a recent report of the Real Estate Board of New York,

residential condominium sales in Manhattan were 32 percent higher

during the third quarter of 1996 than the third quarter of 1995.

Several brokerage firms reported that third-quarter 1996

cooperative housing sales were the highest ever in Manhattan. The

market for lower priced cooperatives ($25,000 for a studio

apartment to $75,000 for a three-bedroom unit) is beginning to

experience increased activity in such areas as Flatbush and

Sheepshead Bay in Brooklyn.



The recovery continues in New York City's commercial real estate

market. The sales price of Class A office buildings in Manhattan is

averaging about $200 per square foot. Rents have increased modestly

to an average of $40 per square foot, and landlords are offering

fewer concessions than previously. The vacancy rate fell to 8.9

percent in November 1996 from 10.4 percent in November 1995. Office

space in Brooklyn and Queens is in short supply, and, in many

instances, is commanding higher rents than in Lower Manhattan.



The hotel industry in Manhattan is particularly robust, with

occupancy in 1996 at 82 percent, up from 79 percent in 1995. Room

rates increased to an average of $170.50 a night, up from $155.50

in 1995. At least three new hotels are scheduled to begin

construction in Manhattan in 1997.



In New York State, single-family building permits totalled 20,225

units in 1996, a slight 1-percent decline from 1995 levels.

However, home sales on Long Island increased 11.6 percent during

the first 9 months of 1996, and single-family building permits for

1996 were also up 11.6 percent over 1995. The improvement is

attributable to a stronger than anticipated local economy.



New York State multifamily housing construction activity in 1996

doubled from the previous year. Permits were issued for 15,763

units, the highest level in the past 7 years. The New York City

metropolitan area accounted for 55 percent of multifamily units due

in large part to the strong rental market in Manhattan. In New

Jersey single-family permit activity (21,107 units) was up 14.9

percent in 1996, and multifamily housing (3,457 units) was up close

to 9 percent.



SPOTLIGHT ON

ALBANY-SCHENECTADY-TROY, NEW YORK



The six-county Albany-Schenectady-Troy metropolitan area

experienced a slight 1.4-percent growth in population between 1990

and 1995, compared with a 0.8-percent increase for New York State.

During this period total population in the metropolitan area

increased from 861,400 to 873,400 persons, primarily due to growth

in Saratoga County.



In the 12 months ending November 1996, nonagricultural employment

in the metropolitan area declined by approximately 3,000 jobs,

largely the result of reductions in State government, although

employment losses also occurred in manufacturing. There were modest

increases in construction employment, transportation and public

utilities, and wholesale and retail trade.



The Albany area has a well-educated and highly skilled workforce,

due to the presence of the State government. Approximately one in

four jobs in the metropolitan area is in government. Manufacturing

currently comprises less than 10 percent of the employment base

within the metropolitan area. As of November 1996, the unemployment

rate for the area had declined to 3.7 percent, primarily reflecting

losses in the workforce. 



Between 1990 and 1994, single-family building permits in the Albany

area held fairly steady at about 2,350 homes a year. The majority

of new housing is custom-built homes priced above $175,000. In

response to declining demand for new units, due to regional

economic conditions and recent job losses in the public sector,

single-family permits have dropped more than 30 percent to 1,600

homes annually in the past 24 months. Housing development is most

prevalent in suburban townships of Albany, Rensselaer, and Saratoga

counties. 



Existing home sales in the Albany area have declined since 1993,

according to New York State Association of Realtors (registered

trademark) data. From the third quarter of 1995 to the third

quarter of 1996, the median sales price of an existing

single-family home fell by 2.2 percent to $106,100. 



Multifamily building activity in the Albany area has held fairly

steady since 1990, averaging 600 units annually. Recent

construction has been largely in Albany, Rensselaer, and Saratoga

counties. The rental market is balanced. Recent rent increases for

newer rental properties in suburban submarkets have been in the 2-

to 3-percent range; these projects generally have high occupancy

levels. Some of the older rental properties have vacancy rates in

excess of 10 percent. 





MID-ATLANTIC



Mid-Atlantic employment in the first 11 months of 1996 increased by

less than 1 percent. In Virginia the 48,000 jobs added in the first

11 months, a 1.6-percent gain, were due to rapid expansion of high-

technology business services in Northern Virginia. The four major

metropolitan areas of Philadelphia, Pittsburgh, Baltimore, and

Washington, D.C., had employment gains of less than 1 percent

through the first 11 months. Delaware employment grew by 2.5

percent, helped by the retention of automobile-production jobs at

both Chrysler and General Motors. 



November 1996 unemployment rates hit a 6-year low in both

Maryland (4.4 percent) and Virginia (3.8 percent). Pennsylvania's

unemployment rate of 4.5 percent represents a significant decline

from the November 1995 rate of 5.8 percent. West Virginia's rate of

6.8 percent also represents a continuing steady decline.



In Center City, Philadelphia, two leading companies, SmithKline

Beecham and Independence Blue Cross, announced downtown expansions

that will add 700 jobs. Planning is under way in Baltimore for

development of an 800-room luxury hotel and retail complex in the

Inner Harbor. This will be the city's biggest and first major hotel

development since 1988. 



New home production in the Mid-Atlantic has held steady. Single-

family building permits totalled 96,432 units in 1996. None of the

States or major markets showed much change from 1995 permit levels.

Existing home sales increased 11 percent in the Baltimore area

through November, led by Carroll County (16 percent), Baltimore

City (13 percent), and Baltimore County (11 percent). Sales in

Virginia for 1996 are expected to be about the same as 1995. In the

Pittsburgh area, the 6-percent increase in sales in 1996 included

a gain in Allegheny County. 



Rental housing markets continue to tighten and production has

increased from the low levels in the early part of the decade.

Apartment production, as measured by building permits, increased

14.5 percent to 20,234 units from 1995 to 1996. Pennsylvania's

multifamily permit activity was up 42 percent from very low 1995

levels, including a 63-percent increase to 2,162 units in the

Philadelphia area. Demand for downtown residential rentals in

Philadelphia is strong. The Philadelphia HUD Office is processing

3 multifamily housing applications, with a total of 451 units, for

FHA mortgage insurance, and 3 other projects are in the planning

stages. The Pittsburgh rental market continues to improve, with

suburban projects averaging vacancy rates of less than 3 percent.

In Virginia the number of multifamily permits increased 19 percent

to 10,746 in 1996. The Baltimore area rental market has been

relatively soft since 1990, and the recovery has been stymied by a

sluggish economy. Reduced vacancies and fewer rent concessions have

been noted. 



SPOTLIGHT ON

WASHINGTON, D.C.



Cutbacks in Federal spending reduced employment growth from more

than 5 percent a year in the late 1980s to less than 1 percent in

1990 and 1991. Employment gains from 1992 to 1995 ranged from 1.4

to 1.9 percent annually. Based on data for the first 11 months of

1996, employment growth slowed again to less than 1 percent as

government employment declined by 15,600 jobs. The District of

Columbia has been particularly hard hit by both government and

private-sector job losses in recent years, while suburban job gains

have accrued primarily in the Virginia suburbs. 



Northern Virginia's healthy job growth of 2.3 percent (22,000 jobs)

in 1996 contrasts with the static picture in suburban Maryland.

Northern Virginia's aggressive economic development strategy and a

competitive edge in lower taxes have paid off with significant job

gains in high-technology business services. 



Participation in telecommunications by companies like MCI and LCI

has spurred expansion in the utility sector. Job gains in Manassas

(Prince William County) have been spurred by the new computer chip

plant, Dominion Semiconductor. The plant, scheduled to open in late

1997, is already generating secondary development by equipment and

service providers. Reston (Fairfax County) is projected to add

3,000 jobs in 8 years to Oracle's new headquarters; BDM

International will move 1,000 employees to new offices in Reston.

The two headquarters will generate more than 1 million square feet

in office space expansion in 1997. 



By early December 1996, office vacancy rates in the Washington

metropolitan area had dropped to less than 8 percent. There was a

9-percent vacancy rate in the District, an 11-percent rate in

Maryland, and a less than 5-percent rate in Northern Virginia. The

current construction level of 3.4 million square feet represents

less than 1 year's absorption and is nearly evenly divided between

the District (1.8 million) and Northern Virginia (1.3 million).

Average rates in the District for new space, at nearly $36 per

square foot, were one-third higher than suburban rents.



Job gains in outlying suburban areas have stimulated development

and growth of edge cities beyond the beltway, pushing residential

development into third-ring suburban counties. Both the Frederick

and Hagerstown, Maryland, areas are benefitting from the movement

of jobs to peripheral locations, while Northern Virginia's growth

follows both major highway and airport corridors.



The sales housing market continued to show gradual improvement in

1996. New and existing home sales were up 3 and 4 percent,

respectively, over 1995 totals. However, existing home sales slowed

in the second half of 1996, and 1997 forecasts are cautious

regarding continued market improvement. On the Maryland side, new

home sales were up 3 percent and existing home sales increased 5

percent. Montgomery and Prince George's counties, which account for

more than half of all activity, showed only slight gains. Outlying

Frederick County reported a slight drop in existing home sales, but

a 12-percent gain in new activity. On the Virginia side, new home

sales remained steady, while existing home sales increased 3

percent. The high-volume Arlington-Alexandria-Fairfax submarket

remained steady, while Loudoun County reported a 14-percent

increase in sales. Prince William County held steady in new home

sales, while existing home sales were up 6 percent.



The Washington area's new home production, as measured by

building permits, is the fourth-largest market nationally, with

23,184 units permitted in 1996. While single-family permit

activity in 1996 was about equal to 1995 levels, production was up

7 percent in Northern Virginia due largely to increased volume in

the outlying counties. New homebuyers have a wide inventory from

which to choose and are still able to obtain builder concessions in

the form of more amenities or lower closing costs. The southern

Maryland area (Charles and Calvert counties) is experiencing

greater growth due to the transfer of 6,800 military and civilian

personnel to the Patuxent River Naval Air Station. Both Charles and

Prince George's counties are evaluating measures to halt or slow

townhouse development.



The Washington area rental market is generally balanced. New

apartments in Tysons Corner, Reston, Alexandria, Gaithersburg, and

Rockville are being quickly absorbed at a typical pace of 30 units

per project a month. The number of multifamily units permitted in

1996 (7,892 units) was up almost 28 percent. Suburban rental

vacancy rates range from 5 percent in Northern Virginia to 6.5

percent in Prince George's County.





SOUTHEAST/CARIBBEAN



Nonagricultural employment growth in the Southeast kept pace with

the national growth rate of 2.1 percent between November 1995 and

November 1996. Georgia, Florida, and South Carolina exceeded this

figure, but in Alabama and Mississippi, the rate of growth was less

than 1 percent. Florida's tourism industry had an excellent year;

a record 42 million persons visited the State in 1996, 2 percent

more than the previous year. The decline of the textile and apparel

industries continues to be a drag on the economy of North Carolina.



The Southeast's November unemployment rate of 4.9 percent declined

from the November 1995 level in every State except South Carolina.

The labor supply is tight in many areas of the Southeast. Disney is

holding job fairs in Orlando and reports difficulty filling

positions. Jacksonville's building contractors face a shortage of

skilled workers, resulting in delays, and some companies find it

necessary to turn down work because of the labor shortage. The

unemployment rate for Puerto Rico has declined, but still remains

high, at 12.2 percent.



Single-family construction in the Southeast, as measured by

building permits, was up 8.2 percent (295,896 units) in 1996

compared with 1995's volume. The biggest percentage increase was in

South Carolina, where the number of permits increased by almost 17

percent to 22,133 units, led by the Greenville-Spartanburg and

Columbia areas. Alabama also had a big percentage increase (13.3),

with 14,466 units permitted in 1996. The smallest increase in

single-family permit activity was in Tennessee (2.7 percent), where

a 13-percent decline in Memphis was offset by a substantial 17-

percent gain to 10,039 units in the Nashville area. The Atlanta

area remains the national leader among metropolitan areas, with

37,523 single-family units permitted in 1996, up 7.4 percent from

a year ago. 



Birmingham home sales for 1996 reached a record level of 9,238,

surpassing the previous high of 8,527 homes sold in 1993 when

mortgage rates hit a 25-year low. The rise in home sales in 1996

occurred despite a steady rise in 30-year fixed-rate conventional

mortgages from 7 percent in February to 7.8 percent in December. In

the Caribbean, sales volume, as measured by the number of FHA loan

applications in the first 11 months of 1996, increased 11.3 percent

to 22,501 units.



Multifamily permit activity in the Southeast in 1996 was slightly

below the 1995 level, but the total volume of 96,383 units led all

the other regions of the Nation. South Carolina and Tennessee

experienced the biggest percentage increases, 40 and 60 percent,

respectively. The increase in South Carolina was largely the result

of activity in Greenville and Myrtle Beach. In Tennessee in 1996

the number of units permitted in Memphis (3,563 units) was up 86

percent, and in Nashville activity more than doubled to 5,557

units.



Florida had close to a 14-percent decline in multifamily activity

in 1996, but still recorded the highest volume (33,551 units) in

the Southeast. No rental markets in Florida are considered soft at

this time. However, recent production levels are a cause for

concern in the Jacksonville area, where more than 3,000 rental

units will have been completed from mid-1996 to mid-1997. In the

Fort Lauderdale area, rents were flat between February and August

1996, which, combined with the increases in multifamily production

over the past several years, may be an indication of a weakening

rental market. 



In Georgia multifamily housing activity in 1996 declined 11 percent

to 15,447 units. In Atlanta multifamily activity in 1996 fell by 18

percent to 10,739 units from the year-earlier total due to an

excessive pace of construction in 1995 in many of the area's

submarkets. Apartment occupancy remained below 90 percent in the

Augusta area, which is still suffering from cutbacks at the

Savannah River Plant. An additional 875 jobs are to be eliminated

in January at this facility. Occupancy has also declined in the

Macon area. 



A recent survey of apartment units along the Mississippi Gulf Coast

indicates an increase in the vacancy rate to about 10 percent. 



The rental housing market in North Carolina continues to show

strength. Multifamily permit activity in 1996 totalled 14,527

units, the best year over the past 7 years. In August 1996 there

were 7,500 units under construction or proposed for the Research

Triangle area. However, in response to the large pipeline,

building permits declined by 20 percent in 1996. Apartment

construction in Raleigh and Durham exceeds current requirements,

but because of the rapid growth in the area, the surplus is not

expected to last long. In the Charlotte-Gastonia area, multifamily

activity in 1996 (5,943 units) was up almost 60 percent over 1995.

As a result the apartment vacancy rate in this area is expected to

exceed 8 percent in the near future.



SPOTLIGHT ON

LOUISVILLE, KENTUCKY



Since 1990 the Louisville area's nonagricultural wage and salary

employment has increased by an average of 2.1 percent annually. For

the 12 months ending in November 1996, nonagricultural employment

averaged 536,850 jobs, or 1.9 percent above the preceding 12-month

period. Of the gain of 11,400 jobs, 7,000 were in the services

sector and 3,200 were in trade. Manufacturing jobs declined by 400

over the period. 



The largest private employers in the Louisville area are United

Parcel Service (UPS)(14,400 jobs), General Electric Appliances

(9,750 jobs), and Ford Motor Company (8,600 jobs). Capitalizing on

the fast delivery service provided by the UPS national air service

hub, the area has become a popular location for computer repair

facilities. Local estimates anticipate there will be 2,000 to 2,500

computer repair jobs in the area by the end of 1997.



A locally prepared index of payroll growth in metropolitan areas

ranked Louisville 37th among the largest 75 metropolitan areas in

1996. Since 1993 the area has slipped from 15th place on this

index, as other areas that were harder hit by the recession have

rebounded more vigorously. In contrast, the Louisville economy has

had a more moderate rate of growth.



The population of the Louisville metropolitan area is approaching

1 million; the last estimate by the U.S. Bureau of the Census

placed the area's population at 987,102 as of July 1, 1995.

Jefferson County, with 672,918 residents, has just over two-thirds

of the area's population. Most of the growth, however, has occurred

in the other six counties of the metropolitan area. The largest

increase, more than 8,000 persons, has been in Bullitt County. 



Multifamily housing authorized by building permits in the

Louisville metropolitan area averaged 1,853 units a year from 1983

through 1989 and 1,018 units annually from 1990 through 1996. The

1996 total of 1,426 units was the highest since 1987.



A recent survey of Jefferson County's large apartment projects by

the appraisal firm of Chapman and Bell found occupancy above 95

percent. Building permit data indicate that growth in the county's

multifamily housing stock has been at a modest rate during the

1990s, averaging 663 units per year. 



The number of single-family homes authorized by building permits

for the metropolitan area averaged 2,375 units during the 1980s and

4,542 units during the 1990s. In 1996 permits were issued for 5,024

single-family units, a near record level. Realty Research

Corporation, which monitors homebuilding, reports that demand is

keeping up with production, thereby creating a balanced market.

Increasing land costs are prompting the development of patio homes

and zero-lot-line developments.



Statistics provided by the Louisville Board of Realtors

(registered trademark) show that the average sales price of the

7,684 houses sold during the first 11 months of 1996 was $121,000.

This figure was slightly more than 4 percent above the average for

1995.





MIDWEST



The Midwest economy continued to perform well in 1996. All States

in the region reported employment gains through November and

unemployment rates below the national average. Durable-goods

manufacturing remains strong, but construction, retail trade, and

business and health services have provided the largest number of

new jobs. Home construction was up in all States. Based on the

House Price Index from the Office of Federal Housing Enterprise

Oversight, housing prices for the 12 months ending September 1996

appreciated the fastest in the Nation.



Private surveys of business conditions showed local economies

expanding throughout the year in the Chicago, Detroit, Cleveland,

Cincinnati, Milwaukee, Grand Rapids, and Rockford metropolitan

areas. Hiring plans for the first quarter of 1997 are stronger in

the Midwest than a year earlier, particularly in finance, trade,

and services.



Illinois and Michigan led the region in employment growth, each

adding about 90,000 jobs in the 12 months ending November 1996. A

$722 million expansion of Chicago's Midway Airport is expected to

double employment near the airport and increase personal income by

$1.6 billion over the next 10 years. Detroit's economy will receive

a boost from construction of three casinos approved by Michigan

voters in November, which are expected to add about 9,000 jobs. In

northwest Indiana three casino openings since June contributed to

a strong 10-percent gain in services employment and helped reduce

the unemployment rate in the Gary area to 3.8 percent in November.

All major industry sectors gained employment in Minnesota and

Wisconsin, where the unemployment rate has stayed below 4 percent

in both States for the past 2 years.



Existing home sales in the region continued strong in 1996. Third-

quarter sales were at an 871,000-unit annual rate, 3 percent above

the third quarter of 1995 and close to the Midwest sales record of

884,000 homes annually as of second quarter 1994. Michigan's

booming economy helped boost home prices 9.4 percent in the 12-

month period ending September 1996, the second-highest price

appreciation in the country. Indiana and Wisconsin had the next

largest price appreciation in the region, each up 5.7 percent. 



Healthy local economies and favorable mortgage rates boosted

single-family home construction in the region to its highest level

since 1978. In 1996 single-family permits were issued for 187,992

units, an increase of 9.6 percent compared with a year earlier.

Activity was up in all States of the region, led by Indiana's 11-

percent increase to 30,662 units. Michigan and Ohio reported the

largest number of single-family permits, 41,937 and 36,031 units,

respectively. Southeast Michigan (Detroit, Flint, and Ann Arbor

metropolitan areas) saw a record year for homebuilding, according

to the local builders' association; in 1996 permits were issued for

21,671 single-family units, 11 percent above 1995. 



Chicago's sales housing market is strong. Almost 25,000 single-

family units were permitted in the metropolitan area in 1996.

Existing home sales in the city were up 12 percent to 49,460 units

through November 1996, while home sales in suburban Cook County

increased by 7 percent over last year. Chicago's robust market is

spurring construction of new homes in the downtown area. In the

South Loop, Draper and Kramer Incorporated are developing a 330-

unit town-home development adjacent to 2,000 rental units, which

they rehabilitated with a $41 million FHA-insured loan. The

townhomes are planned to sell for $178,000 compared with an average

price of around $200,000 for similar housing in other parts of

downtown. Chicago's HUD Office led the Nation for the second

consecutive fiscal year, approving 36,984 FHA-insured homes in

1996. 



Continuing to benefit from a strong economy, Minneapolis-St. Paul

area builders reported that home construction in 1996 was up 8

percent over last year. One builder reported steady growth in sales

of new homes in 1996, and expects sales to double in 1997. Existing

home sales in the metropolitan area in 1996 were up 11 percent over

1995, and the median sales price increased 7 percent to $109,500. 



Based on data from the Ohio Association of Realtors (registered

trademark), 173,800 existing homes were sold in the State during

the 10 months ending in October 1996, 10 percent above the 1995

volume for the comparable period, and the highest level in the past

6 years. In Columbus Affordable Housing Associates reported that

375 new homes priced between $85,000 and $126,000 sold well.

Another 400 homes are under construction in the city, and the

developer plans to build 600 more during the next 3 years. The

Cincinnati Homebuilders Association reported that new home sales

exceeded expectations at the first annual CITIRAMA home show in

October. All but 1 of the 13 detached, single-family homes were

sold at prices ranging between $120,000 and $169,000. The city

donated the land and will abate homeowner property taxes for the

next 15 years. The strong market response to downtown sales housing

has encouraged Cincinnati to offer more city-owned lots for single-

family development at next summer's home showcase. 



New home sales in the Madison, Wisconsin, area were down from last

year, but activity varied widely by price range. One builder

reported that sales of new homes priced between $125,000 and

$180,000 sold particularly well in 1996, while sales of higher

priced homes ($230,000 to $270,000) were way down. To stimulate

sales a builder of luxury homes reduced prices by 5 percent, and

another builder of condominiums will shift to less expensive

$130,000 to $150,000 units. 



Midwest rental markets remain generally sound, with apartment

occupancy in the 93- to 97-percent range in the fourth quarter of

1996. Multifamily housing production, which slowed in the first

half of 1996, strengthened in the fall to finish the year well

ahead of last year's strong performance. Permits were issued for

62,105 units in the Midwest region in 1996, almost 10 percent above

last year's total. Ohio (13,192 units), Michigan (9,586 units), and

Illinois (13,702 units) all recorded substantial increases in the

number of multifamily units permitted in 1996.



Indianapolis' rental market is holding up well in the face of

increased construction activity. Fourth-quarter occupancy was 94

percent, unchanged from the previous quarter. About 1,900 apartment

units entered the market in 1996 and another 2,900 units will be

completed in 1997, well above the 540-unit annual average between

1992 and 1994. Builders have begun to cut back, and the number of

multifamily housing units permitted in 1996 is down 17 percent from

1995.



In Madison, Wisconsin, absorption of several thousand new units

remains strong, but rent increases in existing projects have slowed

and concessions are now more common. The local apartment

association reported that more existing projects are offering 1

month's free rent or a reduced security deposit. Apartment

occupancy in the metropolitan area is 93 percent currently,

slightly below 94 percent in 1995.



Cleveland's downtown apartment market has continued to improve. The

city's recent survey of 1,500 market-rate rental units showed a

7.7-percent vacancy rate. There is increased developer interest in

converting older office buildings to apartments in the Playhouse

Square District. Columbus' third-quarter apartment vacancy rate was

3.8 percent, according to a survey of 105,164 rental units by the

Danter Company. This vacancy rate was down from 4.7 percent in

1995.



Minneapolis-St. Paul's healthy economy and low level of apartment

construction have kept the rental vacancy rate in the metropolitan

area close to 3 percent for the past several years. Multifamily

housing production in the Twin Cities area in 1996 was down 22

percent compared with 1995's volume. 



Chicago's rental market is strong overall. In 1996 the number of

multifamily units permitted in the metropolitan area increased 21

percent to 9,332. Apartment occupancy is currently between 95 and

97 percent. However, in west Du Page County rent concessions in

luxury apartments are becoming more widespread. About 1,000 units

are in initial rentup in the Aurora area, with another 2,500 units

expected on the market in 1997.



SPOTLIGHT ON

ANN ARBOR, MICHIGAN



Ann Arbor's strong economy is due in great part to the University

of Michigan and the automobile supply companies servicing nearby

Detroit. With more than 31,000 employees, the university and its

hospitals comprise 11 percent of nonagricultural employment in the

metropolitan area. Research activities have resulted in the startup

of about 160 companies during the past 10 years, adding

approximately 7,000 employees. The university spent $400 million on

research in the 1994-95 academic year, up from $160 million in

1985. This amount was the second-largest research expenditure among

U.S. universities. More than $1.5 billion in capital improvements

also was completed by the university during the past 10 years.

General Motors and Ford Motor Company, with combined workforces of

nearly 15,000, are the next largest employers in the Ann Arbor

area.



Ann Arbor's unemployment rate has historically been lower than any

other metropolitan area in Michigan. As of November 1996, the

unemployment rate was 2.6 percent compared with 2.9 percent a year

earlier. Ann Arbor added 4,900 jobs over the past 12 months,

boosting total nonagricultural employment in the metropolitan area

to 261,500 jobs in November. State and local government,

transportation equipment, trade, and business and health services

provided most of the new jobs. The population in the metropolitan

area, estimated to be around 500,000 in 1995, has increased more

than 7 percent since the 1990 census.



Ann Arbor's strong economy has boosted the sales housing market.

From 1990 through 1992, an average of 900 single-family building

permits were authorized annually in the metropolitan area. However,

with the recovery of the automobile industry and other sectors of

the area's economy in 1993, activity increased dramatically to an

average of 3,373 units annually from 1993 to 1995. In 1996 single-

family activity continued to surge, with 4,310 units. Especially

active areas include Ann Arbor, Ypsilanti, and Pittsfield Township

in Washtenaw County, and Brighton and Green Oaks Townships in

Livingston County. The most popular price range for new homes is

from $150,000 to $180,000.



In Washtenaw County the median price of existing homes sold in the

first 11 months of 1996 was $140,000, an 11-percent increase over

the same period in 1995. Sales activity for the period was down

slightly from last year. According to Ann Arbor's Board of Realtors

(registered trademark), the average sale price of existing homes

has been increasing by about 10 percent during the past 3 years.

FHA mortgage insurance activity in the metropolitan area jumped 34

percent to 778 endorsed loans in the 12 months ending September

1996.



The Ann Arbor area's rental market is currently balanced, but is

getting tighter as a result of limited apartment construction. The

rental housing vacancy rate is 5 to 6 percent in the metropolitan

area, down from 8 percent in the late 1980s. Multifamily housing

permits averaged only 365 units annually from 1991 to 1993, as the

excess supply from the late 1980s was absorbed. In 1996 permits

were issued for 614 multifamily units. The tight rental market

within the city is dominated by the University of Michigan's more

than 36,000 students. Several developers are planning apartment

projects near the city. 



There are few affordable rental or homeownership opportunities for

lower income households in Ann Arbor. To expand its stock of

affordable housing, the city allocated HUD funds in 1996 for the

development of 50 rental units. Rehabilitation of the Ann Arbor Inn

with tax credits will add another 114 units of affordable housing

for the elderly.





SOUTHWEST



For the 12-month period ending in November 1996, regionwide job

growth averaged 2.8 percent. Job growth in Texas remained strong,

with a 3.1-percent increase of 244,100 new jobs.



Single-family construction and sales in 1996 were up throughout the

Southwest, with an overall increase in single-family permits of

14.4 percent to 119,721 units. Texas, with 81,452 single-family

units, had the largest increase, 17.4 percent. All major markets in

Texas reported substantial increases in activity over strong 1995

levels. In the Austin-San Marcos metropolitan area, single-family

permits were issued for 8,083 homes, a 43-percent increase over

1995. Activity was up by 15 percent in the Dallas-Fort Worth area

to 25,508 units, by 22 percent in the Houston-Galveston area to

19,366 units, and by 11 percent in the San Antonio area to 6,484

units. Oklahoma City and Tulsa continue to show improvement, with

single-family permits up 12 percent in each area.



Multifamily building-permit activity in 1996 rose slightly less

than 2 percent regionwide to 45,581 units. Only Texas and Louisiana

reported increases. In Texas 35,089 units were permitted in 1996,

8 percent greater than 1995 and the highest volume in the past 7

years. Activity in the Houston area fell 16 percent in 1996. In the

Dallas-Fort Worth area, the number of multifamily units was up only

1 percent to 13,512 units. Austin-San Marcos recorded a modest 5.6-

percent gain to 6,325 units in 1996.



Apartment construction is beginning to be cut back in the region's

major markets in response to increasingly competitive market

conditions, the large number of units still in the pipeline, and

the large supply of affordable sales housing. Apartment occupancy

is currently in the 90- to 94-percent range in most of the major

markets. The Austin and Albuquerque rental markets have softened

due to an oversupply of new luxury units and moderating employment

growth. In Austin rental occupancy is likely to drop to 90 percent

or less in 1997 as some 7,800 apartment units enter the market.

Occupancy rates in Albuquerque should stabilize in the low 90s.



In northwest Houston some new projects have been forced to lower

rents to reach 90-percent occupancy. The San Antonio rental market

continues to be in a slump, with overall apartment occupancy at 91

percent, unchanged from 12 months ago. Rent concessions have become

widespread in both new and existing projects. In the New Orleans

area, apartment occupancy has dropped about 1 percentage point to

92 percent during the past 12 months, and occupancy in the city of

New Orleans has dropped below 90 percent.



In Dallas, despite an estimated 11,000 new apartment units,

apartment occupancy remained in the 94-percent range as people

continued arriving in response to the new jobs. In El Paso the

apartment occupancy rate has declined to around 90 percent as a

result of reductions in military personnel at Fort Bliss and the

slowdown in the local economy.



SPOTLIGHT ON

LAS CRUCES, NEW MEXICO



The Las Cruces metropolitan area is located in south-central New

Mexico bordering Texas and Mexico. The population of the

metropolitan area has increased 3 percent annually since 1990 to

more than 160,000 persons. During the same period, the city of Las

Cruces has grown by 8,900 persons to become the largest city in

southern New Mexico, with an estimated population of 71,000. 



For the 12 months ending in November 1996, employment in the Las

Cruces area increased by 5.1 percent to 51,300 jobs over the

previous 12-month period. This followed 1995, when employment

increased by a healthy 4.3 percent. Nearly all job categories have

contributed to the growth. Between 1990 and 1994, nonagricultural

wage and salary job growth in the Las Cruces area averaged only 600

jobs per year, restrained by job losses at the White Sands Missile

Range. Employment at the missile range peaked in 1990 at 9,033

jobs, but totalled only 6,981 by September 30, 1996. No additional

layoffs are planned in 1997, but attrition should continue to

reduce employment at this facility.



Las Cruces is home to New Mexico State University, which had a

full-time enrollment of 11,671 students in the Fall of 1996. The

university has a major economic impact on the area. In addition the

area has been attracting retirees due to its desert climate and

scenery and relatively low cost of living. El Paso, Texas' airport

and military installations are 40 miles to the south. Other major

growth areas in the metropolitan area are Santa Teresa and Sunland

Park. Santa Teresa is a 25-year-old planned development west of El

Paso, which has a new border crossing with Mexico as well as golf

courses and an airport industrial park. Sunland Park is a fast-

growing community of more than 9,000 persons that is bounded by El

Paso, Mexico, and Santa Teresa. 



There were 1,185 homes sold through the Las Cruces Multiple Listing

Service in 1995 and another 1,173 in 1996. The average cost of

existing homes in 1995 was $94,368. Because of its affordability,

manufactured housing comprises a significant part of the housing

stock in the area (25 percent in 1990). More than 1,000 new

manufactured home permits have been approved each year since 1990.

This compares with an average of 725 single-family homes and 150

multifamily housing units permitted annually during the same

period.



A large number of rental housing units in Las Cruces are in two- to

four-unit buildings that are occupied by college students. Rental

occupancy typically drops 10 to 15 percent in the summer months.

There are a few existing luxury-type apartment complexes that cater

to single professionals and retirees. The recent strong job growth

should increase rental housing demand slightly during the next 2

years.





GREAT PLAINS



Nonagricultural wage and salary employment in the Great Plains

increased by 127,500 jobs, or 2.1 percent, from November 1995 to

November 1996 compared with 1.7 percent for the same 1994 to 1995

period. The region's labor market remains tight. As of November

1996, the unemployment rates in the region ranged from 2.4

percent in Nebraska to 4.0 percent in Missouri. Kansas City's

unemployment rate was 3.5 percent, while in suburban Johnson

County, it was 2.6 percent. 



Kansas reported the largest annual rate of employment growth in the

region, 3.2 percent. A total of 38,800 jobs were added, nearly

three-fourths of which were in construction, manufacturing, retail

trade, and government. Wichita's booming aviation business provided

all of the manufacturing employment growth in Kansas.



Nebraska's 2.5-percent employment growth in the 12 months ending

November 1996 added 20,400 new jobs. Job growth in manufacturing

and services provided more than 60 percent of the increase. More

than two-thirds of the State's job gains have been outside the

Lincoln and Omaha metropolitan areas. 



Iowa's 1.8-percent employment growth continued to lag that of the

national economy. A total of 24,700 jobs were created from November

1995 to November 1996, the major share in construction, retail

trade, and services. Shortages of workers in the State are

constraining job growth, particularly in the meatpacking industry.

There are also shortages of skilled construction and metals

workers. 



Missouri added the most jobs (43,600) from November 1995 to

November 1996, but had the lowest growth rate (1.7 percent) of the

four States. Manufacturing employment dropped by 7,200 jobs.

Declines were widespread in both durable- and nondurable-goods

manufacturing. The large decline of 2,200 jobs (8.6 percent) in

aircraft and parts manufacturing reflects the winding down of

several defense contracts in the St. Louis area. Kansas City is

still facing shortages of telemarketing and customer service

employees and skilled computer personnel.



Homebuilding activity in the region continues at a strong pace,

with single-family building permits for 1996 (43,350 homes) up 11

percent over 1995. All four States reported increases. Kansas

(9,800 units) and Missouri (19,405 units) had the second best year

in the past 7 years. Third-quarter sales of existing homes in the

region remain strong, up 1.2 percent from the year-earlier period.

Iowa and Nebraska registered gains of 6.6 and 4.6

percent, respectively.



The Kansas City sales market has been strong, with single-family

building permits (9,728 homes) exceeding 1995 totals by 17 percent.

Sales of new homes in 1996 were up 14 percent over 1995, while

sales of existing homes were up 8 percent during the year. The

median price of existing home sales increased 8.7 percent from the

second quarter of 1995 to the second quarter of 1996. 



Multifamily activity in 1996 reached the highest level (18,929

units) of the past 9 years. Strong gains were recorded in Kansas

(51.7 percent), Missouri (27.1 percent), and Nebraska (47 percent).

Nebraska, with 4,496 units, had its best year since 1972, and the

Omaha metropolitan area saw its largest volume of multifamily

construction since 1986. During the past year, the vacancy rate in

larger garden apartments in this tight market has increased

slightly from 2.7 to 3.5 percent.



In the St. Louis area, an era is ending with the relocation of the

last tenants from LaClede Town, a 1,240-unit HUD housing project.

Once a model housing development, the complex has deteriorated over

time, resulting in HUD's decision to raze all of the units. The

city of St. Louis, which will obtain the cleared 53-acre site,

plans to sell parcels of the land to Harris-Stowe State College,

St. Louis University, Sigma-Aldrich Corporation, and A.G. Edwards

and Sons. Proceeds from the sale will go to the Gateway Village

project, a proposed residential community planned for an area of

north St. Louis. Harris-Stowe State College is to obtain 17.5

acres, which will enable it to expand its campus by constructing 6

new buildings. St. Louis University will receive 14 acres for new

student recreational facilities and a parking garage. Sigma-Aldrich

Corporation will build a new headquarters on the 14 acres it will

purchase, while A.G. Edwards and Sons investment firm plans to

acquire 7 acres to expand its company's headquarters.



SPOTLIGHT ON 

DES MOINES, IOWA



Des Moines continues to expand as an insurance industry center.

More than 60 home offices of insurance companies and 100 State,

district, and regional offices for other insurance companies are

located in the area. The Principal Financial Group has completed

construction of an eight-story office building on its downtown

corporate campus. The new 525,000-square-foot building, which will

house an additional 2,500 employees, brings Principal's home-office

space to more than 1.7 million square feet.



In the Spring EMC Insurance Companies will complete their new 20-

story office tower in downtown Des Moines. Known as "700 Walnut,"

the $50 million, 425,000-square-foot building is a major addition

to its corporate headquarters. This building will house 1,250

employees. Equitable of Iowa recently announced that it will

construct a six-story building in downtown Des Moines.



Des Moines has started a major revitalization program known as the

Gateway Project. The Gateway Commons Project, located six blocks

west of downtown, involves a joint city/private-sector effort to

revitalize the area known as Auto Row. Efforts will include

preserving nine buildings that were of significance to the Des

Moines automotive production and merchandising industry in the

early years of the 20th century. Two new office buildings will also

be part of this project. East of downtown, the Capitol Gateway East

Project will revitalize the area bordering the Des Moines River and

State capitol. Part of the plan is to improve the seven blocks of

Locust Street leading from the river to the State capitol to make

it an attractive boulevard and encourage pedestrian use.



Since 1990 nonagricultural wage and salary employment in the Des

Moines metropolitan area has increased a healthy 2.4 percent each

year. The unemployment rate through November 1996 was a very low

3.3 percent.



Multifamily housing building permits have averaged more than 1,050

units a year during the past 5 years. This level of production,

however, has exceeded demand, resulting in an increase in rental

vacancies. At the end of 1996, the apartment vacancy rate was

estimated to be about 8 percent and is expected to continue

increasing in 1997. Competition from the increased supply of

condominium units has been a factor in the rise in rental

vacancies. 



For the past 5 years, single-family building permits have averaged

more than 2,250 units a year. According to the Des Moines Area

Association of Realtors (registered trademark), 7,882 homes were

sold during 1996, a 3-percent increase from the previous year.

Sales prices also were up about 3 percent from 1995, averaging

$104,700. Two large housing developments were recently announced in

West Des Moines. When completed in approximately 5 years, one will

have 600 houses and 900 apartments and townhomes, and the other

will include 500 houses and 500 apartments and townhomes. 





ROCKY MOUNTAIN



Fourth-quarter employment levels were up in most States. Annual

growth rates continue in the 2- to 3-percent range in the Dakotas

and Montana. Utah leads the region with a 5.1-percent rate, while

Wyoming's annual growth rate remains less than 1 percent.

Colorado's growth rate dropped below 2 percent in this quarter;

some economists are now wondering if the anticipated slowdown in

the State's economy will be more abrupt than expected.



While residential construction in the region began to slow in the

second half of 1996, non-residential construction continues to

expand. Hiring at South Dakota's food-processing industries helped

spur manufacturing growth in the second half of the year.

Financial-service firms continue to expand. Utah's manufacturing

sector is also strong, as evidenced by widespread gains in most

durable-goods sectors. Montana's construction industry has lagged

many of the other States, but this sector should get a boost from

the start of construction on an 800-mile pipeline from Canada and

a major plant in Butte. Colorado's advanced-technology sector will

add a major employer when Sun Microsystems locates one of its three

largest campuses in an industrial park between Denver and Boulder.

The Colorado campus will eventually employ up to 3,500 workers.



North Dakota's 2.7-percent unemployment rate in November tied

Nebraska's figure for the lowest rate in the United States. South

Dakota (2.9 percent) and Utah (3.0 percent) were not far behind.

Business concerns about labor shortages continue to make news. A

recent issue of a local business journal included an article

entitled "Finding Employees in a Tight Labor Market." A local

chamber of commerce is sponsoring a seminar with the same title. A

recent survey done for the University of Colorado Economic Outlook

Forum revealed that, for the second consecutive year, manufacturers

indicated that the limited availability of trained labor was their

primary concern for the coming year.



In contrast to the manufacturing and services sectors, labor and

material shortages in the residential construction industry that

were reported a few years ago are no longer a major factor. While

labor and material costs continue to increase, the rate of increase

is manageable. Real estate brokers have noted that the quality of

construction has improved because quality labor and building

materials are more readily available.



Regionwide building permit activity in 1996 was up a modest 6

percent for both single-family homes (54,310 units) and multifamily

housing (22,708 units). The Denver, Colorado Springs, and Salt Lake

City areas all recorded strong increases in single-family permits

over 1995 levels. 



Rental vacancy rates remain at moderate levels in major rental

markets in the Rocky Mountain region. Major softening is not likely

in 1997, but most markets have become more competitive. There are

a large number of apartment units under construction, and

absorption of these will slow as the result of reduced employment

growth and in-migration in 1997. Salt Lake City's and Colorado

Springs' rental vacancy rates have increased to more than 4 percent

for the first time since the early 1990s. Denver's rate hovered

around 5 percent for most of 1996. Rent increases have fallen from

double-digit levels recorded a few years ago to the 3-to 5-percent

range. New apartment projects are renting up, but incentives are

widespread. The large number of luxury units have made this segment

of the market very competitive. In response, multifamily permit

activity in the Denver area in 1996 declined 11 percent. The

underlying strength of major metropolitan economies throughout the

Rocky Mountain region will continue to support apartment

construction, but markets must first absorb the large supply of

units started in 1996.



Rental markets in the smaller areas have also eased. Fargo, Sioux

Falls, and Billings are absorbing new units coming on line, but

vacancies have increased and rent increases are limited. Military

cutbacks have adversely affected the Cheyenne and Great Falls

rental markets.



The strong rates of home sales and construction diminished during

the second half of 1996. By the end of the year, the number of new

and active listings had increased and sellers had begun to lower

their asking prices. This trend should continue into 1997 as the

market absorbs the increased supply of new and existing houses for

sale. Home prices are expected to continue increasing, although the

days of double-digit annual gains are over. Still, homebuilding

activity in 1996 surpassed 1995's performance based on the strength

of the first half of the year. 



SPOTLIGHT ON 

COLORADO SPRINGS, COLORADO



Colorado Springs' economy continues to grow at robust levels

despite military reductions at Fort Carson and some corporate

layoffs. Wage and salary employment has grown by 6 to 8 percent per

year during the past 3 years. The unemployment rate had declined to

3.8 percent by November 1996, one of the lowest rates in decades.

The area's population has increased by 3 percent a year since 1990

to an estimated 480,000 persons. 



Construction, trade, and services-sector employment have accounted

for about 75 percent of the new jobs during the past year. Also

helping the local economy expand has been the growth in

telecommunications, credit card and insurance processing, and

semiconductor manufacturing. The $140 million expansion of the

Colorado Springs Municipal Airport in 1994 and the entry of Western

Pacific, a discount air carrier, added hundreds of employees in the

transportation sector. Low fares and shorter commuting distances

attracted many travellers who would otherwise have used the Denver

International Airport. These activities more than offset the loss

of 2,500 military personnel at Fort Carson, and downsizing at

Digital Equipment, Apple Computer, and Quantum.



The outlook during the next few years is for continued, if slower,

economic growth. The expected slowdown in the semiconductor

industry has delayed the opening of Rockwell Semiconductor Systems'

$500 million plant. This slowdown will affect other area

semiconductor manufacturers, including Atmel, Symbios Logic, and

Vitesse Semiconductor. The rapid growth in trade employment

recorded during the past few years also will subside because of an

expected slowdown in retail expansions. 



Construction, however, will remain strong, including semiconductor-

related and hotel expansions. While the bargains for commercial

buildings and residential housing have passed, the area still

competes well with many other areas of the country. Its amenities

will continue to appeal to workers, retirees, and businesses

relocating to the area. 



The sales market had eased by the end of 1996, but the year as a

whole was a good one. Total sales increased slightly, and the

average sales price was up 8 percent to nearly $140,000. Most new

homes are priced between $150,000 and $200,000. Demand is strong

for homes priced less than $120,000, but the supply is limited. In

1996 permits were issued for more than 4,000 single-family units,

an 18-percent increase over strong 1995 activity.



The rental housing market has moved from tight to balanced, but the

slowing of apartment construction in the second half of 1996 should

keep it from softening. The vacancy rate has increased slightly to

about 4 percent, and the average annual rent increase has slowed to

about 3 percent. Since the beginning of 1995, 12 large multifamily

projects totalling nearly 2,500 units have broken ground. The

phased completion of these projects has allowed them to reach

sustaining occupancy.



The largest U.S. Department of Defense housing project under the

Military Family Housing Privatization Initiative is underway at

Fort Carson. The Army has issued an invitation to build and manage

840 new units and renovate the post's existing family housing stock

of 1,824 units. Construction could begin by the end of 1997 and

will take 4 to 5 years to complete. Completion of this project will

free up moderately priced housing units in strong demand by the

civilian population.





PACIFIC



The Pacific economy has improved significantly in the past year,

adding 459,500 new jobs in the 12 months ending November 1996. With

its best economy since the late 1980s, California's 326,400-job

increase (2.6 percent) was fueled by services, electronics

manufacturing, and exports. The State is expected to have a 2.5- to

3-percent employment growth rate in 1997. California's unemployment

rate fell sharply in 1996 to 6.9 percent as of November. San Jose's

high-technology products recently made it the State's leading

export zone and fastest-growing area. Six Southern California

counties produced half of the State's new jobs. 



Arizona's economy finished the year robustly, with 85,800 new jobs

added during the 12 months ending in November, a record 4.7-percent

increase. Construction has been a major factor in the fast-growing

economy, with current employment more than 10,000 jobs above the

1986 peak. However, the completion of Intel's Chandler

semiconductor plant and a slowdown of both residential and

commercial construction should slow employment growth in 1997.



The continued growth of Nevada's hotel/casino business in 1996

supported a 7.4-percent increase in employment of about 58,000 new

jobs. Construction and expansion of hotels and casinos in 1997 are

expected to fuel employment gains that may be even larger. 



Hawaii's economic performance was mixed in 1996. After several

years of job losses, modest growth of tourism and the tapering of

government downsizing should lead to stabilization or slight

increases in employment in 1997. 



The U.S. Bureau of the Census recently predicted that Nevada and

Arizona will be the first- and third-ranked States, respectively,

for percentage population growth from 1995 to 2000, 22.2 and 13.1

percent, respectively. California is expected to add 932,000

persons, the third-largest absolute gain.



Single-family production in 1996, as measured by building permits,

increased 7 percent in California to 73,610 homes. While an

improvement over 1995, levels remain well below those of the late

1980s. Permit activity was up in 17 of 25 metropolitan areas, with

activity in San Diego up more than 20 percent. In San Jose single-

family activity in 1996 (4,035 homes) was almost double that of

1995. In Arizona single-family permits were up 5 percent to 41,666

units, the second best year of the past 7 years. Nevada also

experienced its best year of the past 7 years, with permits up 6

percent to 23,875 units. New home construction in Hawaii retreated

during the year, reflecting the sluggish economy.



Existing home sales were very strong in 1996, increasing 20 percent

in California through November for the best performance since 1989.

The Phoenix and Las Vegas areas each gained 14

percent. 



Multifamily building permit activity for the Pacific region was up

7.9 percent in 1996 compared with 1995 levels. Nevada led the

region with a 30-percent increase (13,412 units), reflecting the

strong Las Vegas rental market. In Arizona multifamily activity was

down a slight 3 percent but remains very strong at 12,311 units.

Apartment production was up nearly 14 percent in California to

18,299 units, though still far below the levels of the 1980s. 



With the improved economy and relatively low levels of production,

tighter conditions are evident in a number of rental markets. The

San Jose and San Francisco rental markets are extremely tight, with

vacancy rates of less than 3 percent in professionally managed

properties. The number of multifamily units permitted in San Jose

in 1996 (3,538) was almost triple 1995 levels, and activity in the

entire Bay Area was up 71 percent over 1995 to 7,158 units. The

Sacramento area rental market is balanced, with the vacancy rate in

the 4- to 5-percent range.



Southern California rental markets improved gradually in 1996.

Southern Orange County is reported to be tight, with an overall

vacancy rate estimated to be in the 3- to 4-percent range, while

northern Orange County submarkets are showing 5- to 6-percent

vacancy rates. Multifamily permit activity in Orange County was up

41 percent in 1996 to 3,174 units. 



Property managers report double-digit vacancy rates in most

Riverside-San Bernardino submarkets. There was minor improvement in

the predominantly soft Los Angeles market, but the apartment

vacancy rate remains around 9 percent. San Diego County is balanced

overall, with a 5- to 6-percent rental vacancy rate, and northern-

tier communities are reporting tighter conditions. 



SPOTLIGHT ON

PHOENIX, ARIZONA



Since 1990 the Phoenix metropolitan area has been the most rapidly

growing of the 39 major job markets in the Nation. The area added

63,000 jobs, a 5.2-percent increase, in the 12 months ending

November 1996, but is expected to grow more moderately in 1997.

Reflecting the tight labor market, the unemployment rate as of

November was a low 3.4 percent. Services and trade have each

contributed about one-third of 1996's employment growth. One of the

largest employers in the area is Arizona State University (ASU),

with 47,000 students and 7,700 faculty and staff. High-technology

manufacturing has been a major source of the growth. Motorola is

the largest private-sector employer (19,350 jobs), followed by

AlliedSignal, Intel, Honeywell, and McDonnell-Douglas. Intel is

completing a semiconductor chip plant in Chandler, while Sumitomo

Sitix is building one in north Phoenix.



In-migrants attracted by employment opportunities or retirement

amenities have accounted for more than two-thirds of the population

growth since 1990. The ASU Center for Business Research estimated

the population of Maricopa County at 2,634,000 as of the third

quarter of 1996, reflecting a 3.1-percent annual increase since

1990. The population growth for the remainder of the decade is

forecast to slow to around 2.6 percent annually.



The area's substantial growth has supported an extremely strong

housing market. Single-family permit activity in 1996 set a record

with 29,505 units. With new home prices now more than $140,000, up

more than $10,000 during the year, affordability is a growing

concern. The higher prices reflect increased costs of finished

lots, labor shortages, and development fees. Local observers expect

home production to drop 10 to 15 percent in 1997, still a very

healthy level by past standards.



Existing sales also hit a record in 1996, with sales up nearly 14

percent during the year. The median sales price for a three-bedroom

home started the year at about $94,000 and increased to $100,000 in

December.



Phoenix permitted 9,849 multifamily units in 1996, a 12.1-percent

increase over 1995. Despite the high levels of production, the

overall rental market remains balanced. The Arizona Real Estate

Center estimated an apartment vacancy rate of 4.5 percent in the

third quarter, up from 4.2 percent a year earlier. Concessions have

been necessary, however, in submarkets where too many

similar projects came on line simultaneously.





NORTHWEST



Northwest employment as of the fourth quarter of 1996 was up 3.2

percent, or 143,800 jobs, over the fourth quarter of 1995. This

figure compares with a 1.6-percent growth rate from 1994 to 1995.

All States reported job gains, the smallest being in Alaska.

Employment was up 4.9 percent in Idaho, 4.2 percent in Oregon, 2.4

percent in Washington, and 1 percent in Alaska. The region's

unemployment rate as of the fourth quarter was 5.8 percent compared

with 5.9 percent during the same period in 1995. The metropolitan

areas with the lowest unemployment rates were Boise (3.4 percent)

and Portland (4.2 percent). 



The outlook for the Northwest economy is optimistic. The boom in

the aerospace industry will coincide with the continued expansion

in the high-technology, banking, construction, utilities, and

services sectors, especially in Washington and Oregon. Mining

industry prospects also appear favorable in Alaska and Idaho. 



Net migration will continue strong through the end of the decade,

particularly into metropolitan areas where unemployment rates are

low and the pressure on wages is significant. Washington's

population is expected to increase by 400,000 during the next 4

years. According to the State's projection, the population in the

1990s will grow at the fastest rate since the World War II boom.

Winter storms came early to the region with devastating effect.

Engineers and contractors are busy in the aftermath of the storms.

In Washington insured losses are estimated to be in the $125

million to $150 million range. The State is also requesting $42

million in Federal disaster assistance.



The growing strength of the economy kept residential construction

rising in 1996. Single-family building permit activity jumped in

every State. Activity was up 10.6 percent in Washington to 30,013

homes and 9.2 percent in Oregon to 16,913 homes. 



Sales of existing homes in most metropolitan areas in Oregon

exceeded levels attained in 1995. Price appreciation continued to

motivate most trade-up activity. The Salem and Portland-Vancouver

areas remained very strong in 1996, with single-family permits up

21 and 12 percent, respectively, over strong 1995 volumes.



Nearly 50 percent of Idaho's single-family permit activity occurred

in Boise, where sales of newly constructed homes have been strong,

especially in the $100,000 to $150,000 range. The Idaho Association

of Realtors (registered trademark) reported that total 1996 sales

equalled 12,443, just 1.3 percent below the strong level of 1995.

House price appreciation advanced 1 percent in 1996 compared with

5 percent in 1995. 



The number of homes sold in the Puget Sound area (Seattle, Tacoma,

and Bremerton metropolitan areas) was up by 10 percent in 1996. The

median price of a home sold in the Seattle metropolitan area as of

the third quarter of 1996 was $168,800. Single-family permits in

the Puget Sound area for 1996 were up a modest 3.5 percent to

16,026 units. 



Alaska and Washington reported impressive increases in multifamily

housing production, while activity in Idaho decreased. In

Washington multifamily units were up 9.4 percent to 12,370 units

due to the 29-percent jump in activity in the Puget Sound area

(8,296 units). Idaho production declined as builders responded to

the soft rental market conditions in the Boise area. Apartment

permits issued in Boise in 1996 totalled 297 units, less than one-

third of the 1995 level, and far below the 2,300 units permitted in

1994.



The rental vacancy rate in Oregon's metropolitan areas increased

from 3.5 percent in the fourth quarter of 1995 to 4.8 percent in

the fourth quarter of 1996. Multifamily housing activity in the

Portland metropolitan area in 1996 remained fairly strong with

7,170 units permitted. Activity in Salem increased more than 27

percent in 1996 to 1,419 units in response to continued tight

market conditions. The apartment vacancy rate in the Seattle area

is 3.5 percent, a 6-year low. 



SPOTLIGHT ON

SPOKANE, WASHINGTON



From 1991 through 1994, employment in the Spokane area grew at an

average annual rate of 2.3 percent, hitting a peak of 3.5 percent

in 1994. Layoffs by existing employers and a reduction in the

number of new enterprises caused nonagricultural wage and salary

employment growth to decline by 1.4 percent in 1995. The economy

showed modest improvement in 1996, with employment up 1.9 percent

to 182,440 jobs. The unemployment rate as of the fourth quarter of

1996 was 4.8 percent, down from 5.4 percent during the fourth

quarter of 1995.



The Spokane area's population growth also has slowed during the

past 2 years. The population increased by a modest 1.3 percent in

1996 to just more than 406,000 persons. This figure compares with

an annual average increase of around 3 percent from 1991 to 1994.

The unincorporated area east of the city of Spokane known as the

Valley has been the center of much of the area's recent commercial

and residential development. 



The sales market has cooled. Home sales for the first 11 months of

1996 were down by 5 percent to 4,294 homes. The average sales price

rose by 2.5 percent to $113,250. New home construction has averaged

about 1,475 units annually during the past 2 years, which is 25

percent below 1991 through 1994 activity.



The Spokane rental market has begun to show signs of softness.

Concessions are becoming more evident. For the third consecutive

quarter, the area has an estimated rental vacancy rate of 7

percent, up from 5.5 percent in 1995. Multifamily housing

construction, however, has showed no signs of slowing down. There

were more multifamily units permitted during 1996 (1,816 units)

than in any year since 1979. The outlook is that the supply of new

rental units will continue to outpace the demand for the near

future.



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