The end of 2001 brought discouraging news on employment changes in the region. Colorado, South Dakota, and Utah recorded losses for the year while job totals in the remaining three States stayed virtually unchanged. Nonagricultural employment in Colorado as of December 2001 was approximately 1 percent below that of a year earlier. This situation was repeated in Utah and South Dakota as losses in high technology industries in all three States reversed a recent history of strong growth.

The construction industry, another important part of the previous boom, is headed for a contraction because most commercial real estate markets face varying degrees of overbuilding. Montana and Wyoming were the only Rocky Mountain States to finish 2001 with an employment level greater than that of December 2000. Declines in employment have softened labor markets throughout the region. Colorado, North Dakota, South Dakota, and Utah saw sharp increases in unemployment rates in Dec-ember, to more than 5 percent. However, North Dakota and South Dakota still posted the two lowest unemployment rates in the Nation.

Although the economy and the rate of job growth has slowed in the Denver metropolitan area, apartment construction continues to expand. Multifamily building permits in 2000 totaled 11,415 units, an increase of more than 65 percent over the average for the 3 prior years and the most active year since the early 1970s. During 2001, permits were issued for approximately 12,400 units, an 11-percent increase over 2000 levels. Based on recent absorption, this level of construction is well above expected annual demand. As these apartments reached the market, vacancies increased accordingly. The metropolitan area apartment vacancy rate rose to 5.7 percent in the second quarter of 2001 and increased again in the third quarter, to 6.8 percent. Rent concessions have become more widespread in the overall market. At this point, the market appears headed into a softening period that will last into 2003 and possibly beyond if apartment construction is not cut back significantly in 2002. The renter vacancy rate should increase throughout 2002.

A total of 47,832 existing homes were sold in the Denver metropolitan area in 2001, slightly less than the previous year's record level of 48,608 units. Condominium sales set a new record of 11,944 units, ahead of last year's total of 11,600 units. The overall average price of $233,160 for 2001 represents a 7.3-percent increase from the 2000 average of $217,245. This gain was the lowest in 4 years and fell below the average of the past 10 years. The latest price increase is a departure from the double-digit gains of 1998 though 2000. The drop was the result of both slower growth in demand and an increase in inventory.

Growth in wage and salary employment in the Salt Lake City area continued to slow in 2001 through the fourth quarter, reaching its lowest rate since the 1980s. The economic impact of the 2002 Winter Olympics will give the area a large, but temporary, boost in the first quarter of 2002. The slower growth in the metropolitan area did not put a damper on housing demand or residential building. Single-family permit activity for the year totaled more than 7,100 homes, a 9-percent increase over 2000 volume. Multifamily building permit activity in 2001 increased 69 percent to 2,442 units. However, this volume is considerably below the boom levels of 1995 through 1998. The Wasatch Front Multiple Listing Service reported a 5.6-percent increase in existing home sales for 2001. The rental market conditions have eased somewhat from the tight conditions of a year ago. A survey by Hendricks & Partners showed a 2001 third-quarter vacancy rate of 4.2 percent, compared with 3.9 percent a year earlier. Meanwhile, the average rent increased by just over 2 percent. The rental market should become more balanced after the completion of the Olympics as Olympics-related workers leave the area and rental units are released to the market.

Colorado Springs' economy continues to slow as a result of high technology layoffs that began earlier in the year. A slower economy, a strong sales market, and a wave of new multifamily units coming online have made market conditions more competitive and more balanced than previously. The fourth-quarter vacancy rate of 7.5 percent in an apartment survey by Doug Carter, LLC, is the highest recorded since 1991. The report also noted that the market is considerably weaker for newer Class A products in the north submarket, where the current vacancy rate is over 15 percent. The level of new multifamily construction in 2001 stands at approximately 1,900 units, which is 58 percent above last year and the highest level since 1990. A quick return to tighter market conditions in the next 12 months is unlikely.

Spotlight on Bismarck, North Dakota

Bismarck, the capital of North Dakota, also is the retail and business center of western North Dakota. It is the second largest city in the State, and the two-county metropolitan area grew at a steady rate from 1990 to 2000. The population of the area in 2000 was 94,719 persons, an average annual gain of 1.3 percent. Nonagricultural employment also grew at a healthy rate, increasing by nearly 3 percent a year during the same time period. The rate of population and employment growth in the Bismarck area slowed in 2001 but did not decline. Through the 12 months ending in November 2001, employment grew at an annual rate of 1 percent. The area's unemployment rate remained very low, standing at 2.1 percent as of November 2001.

Bismarck's economic stability is anchored by the activities of the State government, a large trade and service area, and continued diversification of its private-sector employment base. State and local government employment account for 20 percent of total nonagricultural wage and salary employment. The area's government employment base has helped the local economy weather past recessions. The city also provides service support for coal mining and electric power industries west of Bismarck. Within 60 miles of the city are 12 coal-fired plants exporting electric power to areas of North Dakota, Minnesota, and Wisconsin. The Bismarck area also has a number of customer service and data processing centers for companies such as Sykes Enterprises and Aetna/U.S. Healthcare. Other large private-sector employers are Bobcat/Ingersoll Rand and Basin Electric Power Cooperative.

Existing home sales in the Bismarck area were active in 2001. The Bismarck-Mandan Board of REALTORS® reported that sales in the area increased by 10 percent compared with 2000, while the average sales price increased by 1.4 percent to $110,900. There were 664 single-family sales in 2001, compared with 602 in 2000. Homes affordable to area first-time buyers, priced at $80,000 to $100,000, moved quickly, while homes priced in the upper levels, at $200,000 or more, moved more slowly owing to competition from new construction. With the current inventory of listings increasing, price increases are expected to remain modest.

Despite the slower economy, homebuilding activity increased in 2001. In the 12 months ending in December, permits were issued for 479 homes, 24 percent ahead of last year. More than 60 percent of the new homes in the area were built in or adjacent to the city of Bismarck. Another 15 percent were built across the Missouri river in Mandan. According to the Bismarck-Mandan Homebuilder Association, the average price of a new home in the metropolitan area is approximately $175,000. The most popular price range is for move-ups priced from $140,000 to $160,000. Construction of new homes is expected to subside from this year's level because of a slight buildup of inventory and an unlikely repeat of the warm fall weather that enabled a longer building season.

The general rental market strengthened from a weak period in 1998 and 1999, when more than 750 new units were introduced to the market. The tax-credit market has remained tight for the past several years. Multifamily building permit activity, at 234 units, rebounded in 2001, returning to the decade average of approximately 200 units a year. (A cutback during the previous 2 years had helped the market come into balance following an earlier spike in construction.) Activity in 2001 included a tax-credit rental development and several condominium projects. The overall rental vacancy rate is estimated at 5 percent, and rents have increased slightly over the past year.

The tax-credit rental market is strong, with existing projects full and new projects leasing up quickly. There are approximately 600 units of tax-credit rental housing in eight developments in the Bismarck-Mandan area. Recently completed tax-credit projects are equal to or better than older (pre-1990s) market rate projects in terms of amenities. The newer projects include unit washer/dryer hookups, patios/balconies, and garages in the rent. With few units in the development pipeline, the general and tax-credit market should remain balanced.