After experiencing employment growth of 1 to 2 percent annually throughout much of the 1990s and 2000, the New England economy recorded a loss of 31,800 jobs in the 12 months ending in December 2001. As of that date, nonagricultural employment in the region totaled just over 7 million jobs. The most significant job losses were in Connecticut, primarily in the Bridgeport and Hartford metropolitan areas, and in Massachusetts. The unemployment rate in New England rose to 4.0 percent in December 2001 from 2.4 percent in December 2000. The lowest rate of unemployment was in Connecticut at 3.6 percent, and the highest in Rhode Island at 4.8 percent.

Because of the general economic slowdown and the dot.com bust, the effects of which were prevalent in New England, a considerable amount of new and subleased office space was available at the end of 2001. Vacancy rates have gone from single to double digits, and in some cases lease rates have come down by as much as 40 percent. However, in the midst of this office-space glut, the demand for laboratory space from both pharmaceutical and biotechnology firms has been exploding.

Through December 2001 residential construction, as measured by building permits, was down only 1.9 percent compared with 2000. All States were either down or flat except for Vermont, where permits for both single-family and multifamily units were up, owing primarily to activity in the Burlington market. Most other States had small decreases in single-family activity but significant increases in multifamily units. Connecticut, Maine, and Massachusetts recorded increases of 20 percent or more in multifamily permit activity. Across the region, permits were issued for 7,209 units, a 14-percent increase. Following recent trends, the majority of the new multifamily construction was in the Boston, Hartford, and Stamford-Norwalk metropolitan areas.

Sales of existing homes in New England during 2001 totaled 256,500 homes, almost equal to the volume in 2000. Connecticut and Rhode Island recorded small increases. Sales in Massachusetts totaled 94,000 homes. Tight market conditions continue to drive up sales prices by double digits in many areas. According to the Office of Federal Housing Enterprise Oversight, prices in Mass-achusetts have almost quadrupled since 1980, the highest rate of increase in the Nation (12.1 percent for the third quarter of 2001 compared with 2000). The other New England States rank in the top 16 in the country. According to the NATIONAL ASSOCIATION OF REALTORS^® (NAR), the median sales price in 2001 for an existing home in one of the two largest New England markets was $356,600 in Boston, a 16-percent increase, and $158,000 in Providence, up 15 percent.

Although rental markets in New England areas remain strong overall and relatively tight, conditions have eased with the economic slowdown of the past year. Rental vacancy rates have increased slightly, and rent increases have slowed from the double-digit increases of the past several years; these changes are most apparent at the upper end of the market. The market for affordable rental housing remains very tight, particularly in Massachusetts.

Spotlight on Hartford, Connecticut

The Hartford economy has experienced some significant setbacks recently. In the past 24 months, nonfarm employment has lost more than 8,000 jobs, offsetting gains made since 1998. Only the construction industry recorded an increase during the past year. The terrorist attacks of September 11 had a direct impact on the local economy; there were millions in claims with local insurance companies.

Residential building activity in the Hartford metropolitan area as measured by building permits increased 9 percent through December 2001, compared with 2000. Single-family building permit activity remained almost identical to last year at 3,100 homes, and multifamily activity more than doubled to more than 500 units. Both single- and multifamily activity are below the recent peak years of 1998 and 1999. Most of the new multifamily construction is located in suburban locations surrounding Hartford.

The sales market in the Hartford metropolitan area was very strong during 2001. Through October 2001, sales of single-family homes increased 6.2 percent, from 10,929 in 2000 to 11,607 in 2001. The availability of more inventory and lower interest rates supported the increased level of sales. In 2001 the median sales price of an existing home in the Hartford area was $167,300, a 5-percent increase from 2000, according to the NAR.

The rental market in the Hartford area stayed strong despite recent weaknesses in the labor market. This is primarily due to the relatively modest levels of new rental housing added to the inventory over the past several years. With the balanced market conditions, landlords are getting rent increases of 3 to 5 percent in most properties.

Plans for the revitalization of downtown Hartford continue, albeit slowly, on several fronts. Projects include Adrien's Landing Convention Center, additional hotel rooms aimed at the convention business, park system development, additional office space and parking, and, most importantly, upscale downtown rental housing. There are several new apartment projects planned for downtown, with the intention of bringing a new population base to the urban center that in turn will provide support and demand for other commercial and cultural developments. Two projects are currently under construction: the Bond Residences, a 108-unit conversion of an old hotel on Asylum Avenue, and Trumbull Center, a mixed-use development of 97 rental units, parking garage, and commercial/retail space abutting Bushnell Park. It is hoped that the success of these two projects will lead to additional development and confirm the strength of a downtown market that will attract young professionals, empty-nesters, and students.