Housing production in the third quarter of 1998 is only slightly ahead of the pace of the second quarter but is considerably ahead of the pace set in the third quarter of 1997.

• Permits were issued in the third quarter at a seasonally adjusted annual rate (SAAR) of 1,581,000 units, 4 percent ahead of the second quarter's rate and 9 percent ahead of the rate of the third quarter of 1997.

• Construction was started on 1,632,000 (SAAR) housing units in the third quarter of 1998. This is 4 percent ahead of the second quarter and 13 percent ahead of the third quarter of 1997.

• Second-quarter shipments of manufactured homes totaled 369,000 (SAAR) units, about the same as in the first quarter but 3 percent above the second quarter of last year.

• Sales of existing homes reported by the NATIONAL ASSOCIATION OF REALTORS^® set a new monthly record in July and, although rates decreased during the next 2 months, they reached 4,773,000 units (SAAR) during the third quarter of 1998, the same as in the second quarter and 12 percent ahead of the third quarter last year. Because sales rates during every month in 1998 were at a greater seasonally adjusted annual rate than the annual 1997 rate, it is safe to predict that 1998 will be the best year on record for existing home sales.

• New home sales in the third quarter were at 842,000 homes (SAAR), 7 percent below the second quarter but 5 percent ahead of 1997's third quarter. September was the 13th month in a row with sales above an annual rate of 800,000. If the pace of the first 9 months continues, builders will sell approximately 870,000 new homes, breaking the previous record of 819,000 set in 1977.

• Placements of new manufactured homes in the second quarter of 1998 were at a seasonally adjusted annual rate of 319,000 units, 8 percent ahead of the first quarter and 15 percent ahead of the second quarter of 1997.

• Inventories of new homes available for sale equaled 292,000 units at the end of the third quarter, up 2 percent from the second quarter and 3 percent from the third quarter of last year. In terms of months' supply at the current sales rate, the third quarter had 4.3 months' supply, which represents the 21st consecutive month with supplies below 5 months of sales. Existing home inventories consisted of 1,980,000 homes at the end of the third quarter, down 11 percent from the second quarter and down 6 percent from the third quarter of 1997. At the current sales rate, the inventory is equal to 5.1 months' supply, down 0.5 month from last quarter and down 0.8 month from the third quarter of 1997.

• Prices for new homes changed little from the second quarter: The median price was $150,000, the average was $180,200, and the constant-quality price was $175,000. All three new home price measures increased 3 percent from the third quarter of 1997. Prices for existing homes increased 1 percent from the second quarter: The median price was $132,700 and the average was $165,800. Both existing home price measures are 5 percent above 1997 third-quarter levels.

• The National Association of Home Builders' Housing Market Index, which reflects builders' views of current sales, future sales, and prospective buyer traffic, shows that builders were optimistic in the third quarter of 1998, having set a record in July. The index was 71 for the third quarter, up 2 index points from the second quarter and up 13 index points from last year's third quarter.

The multifamily (5+ units) housing market experienced increases in production levels, poorer absorption rates, and slightly higher vacancy rates.

• Multifamily permits, at 338,000 units (SAAR), were up 6 percent from both the second quarter of this year and the third quarter of 1997. Multifamily starts were equal to 323,000 units (SAAR), 16 percent ahead of last quarter and 18 percent ahead of the third quarter of 1997.

• In the third quarter, 71 percent of the 54,900 new, unsubsidized, unfurnished apartments completed in the second quarter were leased. This was a drop in the absorption rate of 76 percent in the second quarter.

• The third-quarter rental vacancy rate was 8.2 percent, an increase of 0.2 percentage point from the second quarter and an increase of 0.3 percentage point from the third quarter of 1997.

HUD's field economists report that the regions continue to show gains in employment and falling unemployment rates. The New England, New York/New Jersey, Southeast, and Mid-Atlantic regions reported modest increases in jobs during the 12 months ending in August 1998. Employment growth in the Midwest has slowed in recent months, but unemployment rates are the lowest in the past 10 years. The rate of job growth in much of the Southwest, Rocky Mountain, and Pacific regions remains very strong. The Northwest economy, especially in Washington, is expanding at an impressive pace despite some recent cutbacks in the aerospace industry and the impact of the Asian economic situation.

The market for new homes is booming across the country. Single-family building permit activity during the first 9 months of 1998 was up significantly in every region, compared with the same period in 1997. In the high-volume production areas of Washington, D.C., and Atlanta, homebuilding was up 23 and 18 percent, respectively. Florida home builders are having the best year of the 1990s. The strong Texas market is getting even hotter, with building permits up more than 20 percent in the major markets of Austin, Dallas-Fort Worth, and Houston. Industry sources are projecting single-family building permit activity in California to hit 95,000 units by the year's end, well above the 1997 total.

Sales of existing homes were also up in every region. Existing home sales in Virginia increased 35 percent and sales in the Washington, D.C., area rose by 27 percent during the first three quarters of this year. The Midwest sales pace reached close to 1 million existing homes annually, the highest volume of the 1980s and 1990s. Chicago and Detroit lenders report that applications for mortgage loans did not slow as they normally do in August.

Rental housing markets and apartment production have held strong through the third quarter. The New England, New York/New Jersey, and Mid-Atlantic regions report balanced to tight conditions. The New York City market, however, is becoming more competitive. Southeast and Midwest apartment markets are holding their own, with good absorption and vacancy rates at or below 7 percent. The Minneapolis-St. Paul market is especially tight, with an apartment vacancy rate approaching 1 percent. Apartment construction levels are up again in the Southwest and Rocky Mountain regions. California rental markets continue to improve, providing the stimulus for a 21-percent increase in multifamily housing permits during the first three quarters of the year. In the Northwest region, the tight rental market conditions of the Seattle area have begun to spread into other Puget Sound markets.