The Mid-Atlantic economy has continued to expand at a moderate pace. Nonagricultural employment grew by 164,600, or 1.3 percent, during the 12-month period ending August 1999. Virginia captured slightly less than half of the new jobs in the region. Except for West Virginia and the District of Columbia, labor markets remained relatively tight across the region, with unemployment rates ranging from 2.8 percent in Delaware to 4.3 percent in Pennsylvania. The Richmond and Washington, D.C. metropolitan areas posted the lowest unemployment rates in the region, at 2.6 percent each.

In Virginia, the services sector continued to boost the State's economy. During the 12-month period ending August 1999, employment in services accounted for more than 50 percent of the total employment gains. Much of the growth continues to be in the high-wage, high-technology/professional services segment. More than half of all new service jobs in the State are located in the Washington area's Northern Virginia suburbs. As a result, the Washington metropolitan area recorded a total job gain of 4.3 percent (44,800 jobs) during the 12-month period ending August 1999.

The Mid-Atlantic region was hit hard by severe weather conditions during the third quarter. A prolonged period of hot, dry weather in July and August damaged agriculture crops. All of West Virginia and Pennsylvania were declared Federal drought disaster areas in August. Farm losses in West Virginia alone exceeded $100 million. In September, 35 cities and counties in Virginia and 11 counties in Maryland were declared eligible for Federal disaster assistance as a result of severe flooding from Hurricane Floyd.

Despite labor and material shortages throughout the region, residential building activity maintained a solid pace during the first 9 months of the year. Single-family building permit activity in the Mid-Atlantic region totaled more than 85,300 homes, 6 percent ahead of the same period a year ago. Virginia, with more than 33,500 homes, recorded the greatest share of permit activity in the region. Of the metropolitan area markets, the Washington area recorded the largest volume in the first 9 months of the year with more than 22,300 homes. The Baltimore area recorded the largest percentage gain, 19 percent. Richmond was second with a 12-percent increase in single-family construction.

Sales of existing homes continued to do very well throughout much of the region. In Maryland, existing home sales in the first 9 months of 1999 totaled 46,163 homes, up 15 percent over the same period in 1998, according to the Maryland Association of REALTORS^®. There was a notable slowdown in sales activity in this State due to the severe flooding in September. Home sales in Virginia also continued to show significant gains through September, up 15 percent over 1998's volume.

Rental housing markets in the region's largest metropolitan areas were generally balanced. Multifamily building permits were issued for approximately 18,000 units during the first 9 months of the year, slightly below the total for the same period last year. In the Washington area, local sources report strong demand and tight market conditions for new, high-rent apartments as a result of the growth in high-technology employment and business and professional services. Conditions are expected to ease as an estimated 17,000 units in the pipeline enter the market during the next 3 years.

A number of the downtown areas throughout the Mid-Atlantic region are in the midst of strong residential revitalization efforts. In Baltimore and Annapolis, new affordable residential communities are being planned to attract middle-income residents. MetroVentures/USA Inc. is planning a 144-unit, single-family housing development designed to emulate old-fashioned neighborhoods on an 8-acre site on the southwest side of downtown Baltimore. Home prices will be considerably lower than those found in neighboring areas like Federal Hill, Fells Point, and Camden. In Annapolis, the Anne Arundel Medical Center recently selected Madison Homes Inc. to redevelop the hospital's downtown property. The development will include 138 units including condominiums, townhouses, and single-family detached units, with 43 of the condominiums to be reserved for adults age 55 or older. Prices will range from $200,000 to $600,000. In Pittsburgh, plans were recently announced for a 120-unit, $21 million, luxury loft apartment complex near the Cultural District and Convention Center in the city's downtown.

The apartment market is also booming in downtown Richmond, with developers targeting young professionals and empty-nesters. Since the city council extended the city's tax abatement program period to 10 years, the redevelopment of old warehouse and office buildings to create multifamily housing has been escalating. The low apartment vacancy rates and rapid absorption of three recently completed apartment complexes totaling 150 units with rents of up to $1,300 have increased the interest in downtown Richmond. More than 1,000 apartment units are estimated to be either under construction or in the planning stages, including an affordable 117-unit complex with rents ranging from $425 to $625. A former tobacco warehouse is being converted into a 171-unit luxury apartment development with rents of up to $1,300 a month. HUD recently approved mortgage insurance for the residential conversion of a vacant hospital in the Fan District north of downtown. Monthly rents for two-bedroom units in the 117-unit development will range from $820 to $1,130.

Spotlight on Lancaster, Pennsylvania

The Lancaster metropolitan area (Lancaster County) is probably best known for its many Old Order communities, including the Amish and Mennonites. The area is number two in the State among metropolitan areas in population growth since 1990, having increased by 8 percent to 456,414 persons in mid-1998. Nonagricultural employment has grown steadily. From 1990 to 1998, approximately 23,000 new jobs were created, an increase of 1.3 percent annually. In the 12 months ending in August 1999, nonagricultural employment grew by an estimated 1.4 percent to more than 218,000. The unemployment rate as of August was a very low 2.7 percent.

Tourism, trade, and services have been the major factors in the area's recent growth, with trade and services accounting for more than 80 percent of the job growth since 1990. The area attracts more than 5 million tourists annually who directly support more than 6,500 jobs and bring in more than $360 million to the local economy. There are plans for a $75 million convention center/hotel to be located on Penn Square in the city. The development will involve the conversion of the former Watt & Shand department store into a 14-story, 281-room luxury hotel. An adjacent 61,000-square-foot convention center will be built with partial funding from a $15 million matching grant from the State.

Goods-producing industries account for approximately one-third of the area's employment. Armstrong World Industries is the area's largest private employer, employing about 3,000 persons in manufacturing floor coverings, acoustical tile, and ceiling and wall panels. R.R. Donnelly & Sons, which publishes The Donnelly Directory telephone books, is the area's second-largest private employer, with more than 2,000 workers.

From 1990 through the first 9 months of 1999, single-family home construction, as measured by building permits, has averaged approximately 1,900 homes annually. Due to increased residential and commercial development during the decade, the metropolitan area has been losing up to 4,000 acres of agricultural land annually. In response to the growing concerns about suburban sprawl and infrastructure costs, municipalities have begun working with the county to promote growth management and to preserve natural, cultural, and historical resources.

The housing sales market in the Lancaster metropolitan area has been flourishing. The Lancaster County Association of REALTORS^® reported record sales of 4,236 new and existing homes through August 1999, an increase of 15 percent over the same period a year ago. The median sales price of homes sold in the first 8 months of this year was $112,900. A total of 131 condominium units sold in Lancaster County from January to August 1999 at a median price of $93,700, according to the Lancaster County Association of REALTORS^®. Clock Towers, originally owned by the Hamilton Watch Company and listed on the National Register of Historic Places, began converting rental units to condominiums in June. By the end of September, approximately half of the units in the 78-unit Phase I had been sold at prices ranging from $59,900 for a one-bedroom unit to $124,900 for a two-bedroom unit. The 56 units in Phase II are scheduled to be available for sale in the Spring of 2000.

Lancaster's rental housing market is tight, with apartment vacancy rates running at 3 percent or below. Rents for two-bedroom units currently average $600 to $625. Multifamily housing construction in the metropolitan area in this decade has averaged approximately 450 units annually and occurred primarily in the suburbs. Approximately half of the multifamily construction activity in Lancaster County since 1997 has involved Low Income Housing Tax Credits (LIHTCs). The remainder has been for market-rate developments, with rents for a two-bedroom unit ranging from $800 to $1,000 monthly. Both LIHTC and market-rate developments have rented very quickly.