The economy in the Southeast region continued to slow during the past 12 months. Nonagricultural wage and salary employment declined by 0.6 percent, or 146,500 jobs, during the 12 months ending in September 2002. Kentucky and Florida had modest increases of less than 1 percent, and Mississippi, North Carolina, South Carolina, and Tennessee had small declines of less than 1 percent. Alabama registered a somewhat larger decline at slightly more than 1 percent. Georgia had substantial losses in construction, transportation, communications, and retail trade employment resulting in an overall decline in average monthly employment of 2.1 percent. The overall decline for the region between 2001 and 2002 equals the increase between 2000 and 2001. The unemployment rate for the region increased from 5.1 percent in September 2001 to 5.3 percent in September 2002. Rates for individual States ranged from a high of 5.8 percent for both Alabama and North Carolina to a low of 4.5 percent for Tennessee.

Employment in Mississippi will receive a boost from a $1.9 billion contract awarded by the U.S. Navy to Northrop Grumman Ingalls for the construction of as many as five additional Aegis-class destroyers at its Pascagoula shipyard. Production is scheduled to begin on the first ship this year and the contract will be completed in 2010. Between 2,000 and 3,000 new jobs are expected to result from this contract and from other contracts signed earlier in 2002. With a current workforce of approximately 11,000, Northrop Grumman Ingalls is the State’s largest private employer. In South Carolina Front Door Communications will invest $150 million and create 1,600 new jobs in Lancaster County, just south of the Charlotte, North Carolina metropolitan area.

Single-family building permit activity in the Southeast during the first 9 months of this year totaled 284,057 units, up 7.2 percent compared with the same period in 2001. The biggest percentage increase was in Alabama, up 16.6 percent. Permit activity increased by 10 percent or more in almost every metropolitan area in Alabama. In South Carolina volume increased 12.5 percent to 21,539 units. Charleston recorded the most significant increase in the State: Permits in this metropolitan area were up 23 percent to 3,691 units permitted through September 2002 compared with 3,000 for the same time period in 2001.

In Puerto Rico single-family construction jumped by 16 percent, from 8,797 units permitted through the first 8 months of 2001 to 10,198 permitted through August 2002. This increase is due primarily to a Government initiative to build approximately 7,000 new social interest family homes within the next 6 months. The Commonwealth Government has pledged to support the construction of at least 50,000 units of affordable housing by the end of 2004. Unit prices have a ceiling of $70,000 and will be marketed to families with incomes under $30,000 per year.

Sales housing markets throughout the region remained healthy due to strong demand for homes and low interest rates. However, the rates of increase in sales and price appreciation have slowed along with the economy. The strongest reports came from Florida, where the Florida Association of REALTORS^® reported that the average monthly number of existing homes sold in the first 8 months of 2002 was 7.5 percent above the number sold in the same period in 2001. Numerous reports indicate that low interest rates are putting homeownership in reach of a significant number of renters who previously could not afford to buy. In some cases tax-credit projects report that tenants are moving out to become homeowners. The median sales price for a new home in Miami-Dade County for the third quarter was $183,000. Prices for existing homes dropped slightly to $133,700. Steady prices and continued low interest rates pushed up sales volume in Miami-Dade County for new homes and for existing homes compared with 2001. The Florida Association of REALTORS^® reported that the average monthly number of existing homes sold in the Orlando metropolitan area during the first 8 months of 2002 was 9 percent above the number sold in the same period in 2001.

In Atlanta homes priced below $200,000 continue to sell well; however, inventory levels and length of time on the market have increased for all price ranges, particularly for homes priced above $350,000. Condominium sales in the Atlanta area declined by 30 percent in the first half of 2002, although sales have picked up at some developments in recent months. Most condominium sales are for units priced below $200,000.

Data from the North Carolina Association of REALTORS^® for the first 8 months of 2002 indicate a robust increase in the annualized rate of sale compared with that for the first 8 months of 2001. Sales increased in all but 1 of 16 markets being monitored with the greatest rate of increase occurring in the southern coastal areas and in the Asheville and Greensboro/Winston-Salem/High Point metropolitan areas. Statewide volume increased 10 percent between 2001 and 2002. Average prices rose in 11 of 16 areas reporting.

Despite more competitive market conditions in many rental markets in the Southeast region, multifamily building activity dropped only 0.4 percent through the first 9 months of 2002 compared with the same period in 2001. The number of units permitted declined to 83,533 in 2002. Declines in Georgia, North Carolina, and Tennessee were offset by increases in other States. Florida had a 17-percent increase with 42,107 more units permitted through September 2002. Alabama, Kentucky, and Mississippi recorded significant measures as well.

In North Carolina the number of units permitted fell to 9,737, down 35 percent from the same period in 2001. As of August 2002 Carolinas Real Data estimated the apartment vacancy rate at 12 percent for the Raleigh-Durham-Chapel Hill metropolitan area and 11.2 percent for the Charlotte-Gastonia-Rock Hill metropolitan area. With a 48-percent decline in permit activity through September 2002 for the Raleigh area and a 41-percent decline for the Charlotte area, market conditions should become more balanced during the coming year. In Tennessee 3,763 multifamily units were permitted through September, a drop of approximately 30 percent from the 5,342 units permitted during the same period in 2001. Rental market conditions in Memphis have firmed slightly as new construction has slowed. CB Richard Ellis of Memphis reports an overall vacancy rate in apartments of 9.3 percent in the second quarter of 2002, with completion of only 960 new units during the first 6 months of 2002. Multifamily permit activity, which peaked at 4,207 units in 2000, declined to 1,355 for the 12 months ending September 2002. In Nashville where the vacancy rate in apartments was estimated at 8 percent at the end of the second quarter, permit activity dropped from 1,632 units during the first 9 months of 2001 to 743 through September 2002.

In the Greenville and Charleston, South Carolina metropolitan areas the apartment vacancy rate is expected to remain near 9 percent over the next year. The delivery of a large number of units and a slowing economy in the Biloxi-Gulfport-Pascagoula metropolitan area has produced a weaker rental market there. The results of the May 2002 survey of the Mississippi Gulf Coast apartment market by W.S. Loper and Associates indicates a vacancy rate of 11 percent, up from 9 percent in November 2000. The recession continues to affect the Jackson metropolitan area, although to a lesser extent than in other areas of Mississippi. The construction of a Nissan plant in Madison County continues to boost employment. A midyear 2002 survey of the Jackson apartment market by CB Richard Ellis of Memphis indicated a vacancy rate of 7.4 percent, down from 7.7 percent at the end of 2001.

The Atlanta rental market remains soft with an apartment vacancy rate of nearly 10 percent. Substantial concessions are commonplace, including scattered instances of 3 months’ free rent on a 12-month lease. Some new developments are experiencing comparatively slow rent-up periods, and occupancy of older apartments is suffering in some submarkets that have a significant number of newly constructed units. At the same time that job losses have reduced rental demand, upscale developments have been losing tenants to homeownership. Although Atlanta still maintains its national lead in multifamily construction, permits for the 12 months ending September 2002 totaled 15,015, a decline of 14 percent from year-earlier figures, as developers react to the current oversupply.

In Orlando, where the tourism industry still has not reached the levels that existed just before September 11, 2001, rising vacancy rates have been reported by rental projects in most parts of the metropolitan area. Significant rent concessions of 2 months’ free rent are very common. The occupancy rate has declined during the past 12 months from 92.8 percent in September 2001 to 90.7 percent in September 2002. Despite the softening market conditions, permits were issued for 6,728 multifamily units through September 2002, up by 17 percent over the same period in 2001.