The Midwest economy grew at a moderate pace early in 2000. During the 12 months ending in February, nonagricultural employment increased by 1.2 percent, or 295,000 jobs. The annual rate of employment growth is expected to remain around 1 percent for the remainder of the year, supported by a healthy construction industry and expansions in the services sector. The unemployment rate in the region as of February was 3.5 percent, one of the lowest in the past 25 years. Michigan's strong economy helped reduce the unemployment rate in the State to 2.7 percent, down from 4 percent in February 1999. Chicago's expanding business services sector has been a big factor in the increased demand for office space in the downtown market. Six new office towers with a total of 4 million square feet are expected to enter the inventory by 2003.

In 1999 single-family building permits were issued for 206,000 units in the Midwest, the highest annual level in more than 20 years. Home construction in the region continued to strengthen in the first 3 months of 2000, boosted by the mild Winter, healthy job growth, and consumer confidence. Permits were issued for 40,851 single-family homes through March, up 8 percent over the first quarter of 1999. Activity was up in every State but Indiana.

Wisconsin recorded a 9-percent increase in single-family permit activity to 4,437 homes in the first 3 months of 2000. In Minnesota, the Builders Association of the Twin Cities reported that new home construction in the area continues to boom at a record-setting pace. Building permit activity in the first 3 months of 2000 was up 13 percent, to 3,560 units. The increase was due in part to a banking of permits that occurred because of an anticipated change in Minnesota's energy code, which could add several thousand dollars to the selling price of a new home.

The Building Industry Association of Southeast Michigan reported that strong buyer demand for new homes encouraged builders to take out permits for 4,640 new homes in the Detroit-Ann Arbor area during the first 3 months of 2000 compared with 4,060 last year, for a 14-percent increase. Suburban Oakland and Macomb Counties accounted for one-half of the permit activity, or 2,340 units. In the city of Detroit, 50 new homes in Woodward Place at Brush Park sold in 2 months, and the builder has started construction of another 65 condominium units selling for $150,000 to $200,000. Detroit-area builders were more upbeat in March about new home sales in 2000 than they were at this time last year.

The Ohio Association of REALTORS^® reported that sales of existing homes in the State held steady at 20,500 homes in the first 3 months of 2000, but the average sale price was up 2 percent over the same period in 1999, to $130,400. First-quarter existing home sales in the Cleveland (4,100), Cincinnati (4,000), and Columbus (3,500) areas were nearly identical to record sales volume last year.

The Chicago-area sales market remained strong in early 2000, following a very good 1999. About 173,000 new and existing homes were sold last year, compared with 160,000 in 1998. Single-family building permits in the first 2 months of 2000 were up 9 percent, to 3,300 units. The Chicago Association of REALTORS^® reported that existing home sales in the city through March were up 1 percent from strong first-quarter 1999 volume, to 17,300. A number of neighborhoods in the city of Chicago are undergoing significant residential activity. Builders for the University of Illinois-Chicago's (UIC,) $500-million South-Town Campus project will start construction in the Spring on new homes, academic facilities, a conference center, and performing arts building. Approximately 1,000 new townhomes and condominium units selling for $140,000 to $500,000 are planned for the area. There are currently some 3,500 public housing units within a couple blocks of UIC's development. The Chicago Housing Authority (CHA) estimates that 2,000 public housing units eventually will be demolished, using $59.5 million in HOPE VI funds from HUD. CHA plans to redevelop the area as a mixed-income community, with 1,500 public housing, 800 affordable apartments, and 900 to 1,000 market-rate units.

Multifamily housing construction activity in the Midwest region continued to show strength. Building permits were issued for 12,637 multifamily units in the first 3 months of 2000, a 17-percent gain compared with the first quarter of 1999. Demand for rental housing in Minneapolis-St. Paul was strong across all sectors. Nearly all submarkets in the metropolitan area have vacancy rates of less than 3 percent, according to Maxfield Research Incorporated. The company's Apartment Market Report 2000 showed that approximately 2,100 new units are likely to come on the market this year, compared with 1,000 new units in both 1999 and 1998. Cincinnati's apartment market remains strong even with the recent high levels of production. Apartment vacancy rates are holding steady in the 4- to 6-percent range. The CB Richard Ellis Multifamily Market Overview 2000 reported that 2,200 new apartment units entered the market in 1999, and another 2,500 units are expected to come on the market in 2000. The Columbus-area rental market remains balanced, but vacancies have begun to drift upward in submarkets experiencing heavy production of new apartments. Cleveland's rental market continues its good performance. A first-quarter 2000 survey by the Danter Company of 81,000 market-rate apartments in the metropolitan area showed a 4-percent vacancy rate.

Chicago apartment occupancy is high, and developer interest remains strong. Draper and Kramer's Winter 2000 survey of 104,000 apartment units in the metropolitan area showed occupancy was 97 percent, up 1 percentage point from the Winter of 1999. The rental market in downtown Chicago continues to heat up, with construction expected to begin on 3,500 new units in 10 high-rise apartment buildings during the next 2 years. In the Detroit area, builder interest also is strong, and apartment occupancy is good. An owner of 9,300 new and existing rental units reported a vacancy rate of 4.5 percent as of the first quarter of 2000, the lowest in more than 10 years.

Indianapolis' apartment market, which has typically absorbed about 1,700 units annually, will see an estimated 3,700 units come on the market in 2000, according to CB Richard Ellis. The apartment market is currently quite competitive, with vacancy rates of up to 9 percent. One local source described the apartment market as soft, with widespread concessions, slow absorption of new apartments entering the market, and low occupancy, particularly in northeast Indianapolis.

Spotlight on Madison, Wisconsin

The Madison area has a very healthy economy, due in large part to the University of Wisconsin and the State government. The university, the largest local employer with 17,700 State workers, generates a $600-million annual payroll. In 1999 expenditures by the university totaled $2 billion, including $440 million by its 40,100 students. According to a report by Madison Gas and Electric Company, high-technology companies added more than 2,000 net jobs and nearly $500 million in revenue to the local economy in 1999. The report found that high-technology companies accounted for 8 percent of the area's overall employment. Over the past 19 years the number of high-technology firms in the Madison area has more than doubled. The university is currently planning the development of a $317-million Biotechnology Center. The project is expected to take up to 10 years to complete.

Nonagricultural employment increased by 61,500 jobs between 1990 and 1999, or almost 3 percent annually. Employment growth in 2000 is expected to be slower than in the past due to the area's growing labor shortage. Business services employment has grown the fastest, more than 10 percent annually, as a result of expansion in computer engineering and programming, software design, and research facilities in the area. Madison's solid economy has kept the unemployment rate at around 2 percent for more than 10 years; in February it was at an incredibly low rate of 1.4 percent. The population in the metropolitan area as of July 1999 was 428,563, an increase of 16.7 percent over the 1990 Census.

Housing production has kept pace with demand in the area. Single-family building permit activity averaged 1,700 units annually during the 1990s. Activity in the first 3 months of 2000 was up 5 percent over last year's figures, at 393 homes. Madison's east side is seeing a significant portion of the new home construction. Some 3,400 single-family homes and condominiums are planned for that area over the next 10 years, at prices ranging from $139,000 to $250,000. A 500-unit condominium development planned for the downtown area is expected to start construction in 2001. The South Central Wisconsin Multiple Listing Service reported that existing home sales in the metropolitan area has held steady at about 4,000 homes annually since 1990.

Building permits were issued for 2,137 multifamily housing units in 1999, up 15 percent over 1998. The healthy local economy continued to boost activity in the first 3 months of 2000, with multifamily permits in the metropolitan area up 23 percent, to 424 units, over the same period in 1999. The city of Madison represented 42 percent of total multifamily activity in the metropolitan area last year. Suburban communities also have seen a significant increase in activity in recent years. Despite increased supply, Madison's apartment market has been tightening during the past several years, according to the local utility company's survey of 48,000 units in the metropolitan area. The first-quarter 2000 apartment vacancy rate was 3.7 percent, compared with 4.6 percent in the first quarter of 1999 and 4.9 percent in the first quarter of 1998.