For the 12 months ending in March 2002, total nonagricultural employment in the Mid-Atlantic region dropped by 39,400 jobs, or 0.3 percent, to approximately 13.5 million. Maryland was the only State in the region to record an increase, 0.8 percent. Virginia recorded the largest decrease, 0.5 percent, because of sharp declines in the transportation and utilities, manufacturing, and construction industries. Virginia recorded a modest 0.3-percent growth rate in 2001 compared with a strong 3.4-percent rate in 2000. The Washington metropolitan area remained this region’s primary engine of job growth, but the rate of growth has slowed substantially since the first half of 2001. In the 12-month period ending March 2002, employment grew by only 0.7 percent, or 18,700 jobs, to nearly 2.8 million. Employment was up 0.4 percent in Baltimore but remained flat in Philadelphia, Pittsburgh, and Richmond.

Regional unemployment rates reached 4.5 percent for the 12-month period ending in March 2002, up from 3.8 percent during the same period in 2001. Virginia saw the largest increase in unemployment, recording a rate of 3.9 percent compared with 2.3 percent a year earlier. The rate declined 0.5 percentage point in Delaware to 3.5 percent owing to modest gains in the services, government, and retail trade areas of the economy.

Strong demand, low interest rates, and favorable weather helped maintain the strong single-family building trend throughout the Mid-Atlantic. The total number of units authorized by building permits increased 7 percent in the first quarter of 2002 compared with the first quarter of 2001. Pennsylvania, Virginia, and West Virginia led the region with 8- to 9-percent increases in each State. Among the metropolitan areas, activity was up 18 percent in Pittsburgh, 15 percent in Richmond, and 10 percent in Philadelphia, although Washington recorded a 3-percent decline.

In Washington, new home sales continued to be constrained by lot shortages. According to the Meyers Group, new home sales totaled 23,831 in 2001, down 17 percent compared with activity in 2000. Only 48 percent of these homes sold for less than $250,000. Single-family detached homes represented nearly 60 percent of total home sales. The average base price of this structure type was $335,900 during 2001, an annual increase of 13.9 percent. Condominium prices were up 20.2 percent during this same period to an average base price of $266,469. Montgomery County, Maryland led the metropolitan area in condominium sales and price appreciation; sales increased 20 percent above the previous year with a 39-percent jump in the average base price to $271,270. New home sales in nearby Baltimore dropped 14 percent in 2001 primarily because of a growing shortage of lots and a slowing economy. Nearly 55 percent of the new homes in this metropolitan area sold for less than $190,000. Condominium sales rose 4.9 percent in 2001 with the average base price rising 12 percent to $147,800.

The rate of existing home sales remained strong throughout the region as lower interest rates offset weakening employment conditions. According to the Virginia Association of REALTORS^®, existing home sales for the State totaled 10,886, down 3 percent compared with the first 2 months of 2001. The median sales price during this time period was $135,500, representing an 8-percent annual increase. Sales were up 15.4 percent in Northern Virginia. In Maryland, sales increased 12 percent and the median sales price rose 2 percent to $154,714. Home sales were also robust in Baltimore despite dwindling inventory. A total of 7,351 new and existing homes were sold during the first quarter of 2002, 8 percent higher than the same period a year ago. Real estate agents reported that the level of sales would have been much higher if more homes were available for sale. The sales inventory, peaking at 19,000 properties in March 1998, has steadily declined during the past 4 years to just 7,700 in March 2002.

Apartment construction in the Mid-Atlantic region, as measured by building permit activity, declined modestly during the first quarter of 2002. Multifamily building permits totaled approximately 25,800 units, less than 1 percent below the first quarter of 2001. Activity was down 6 percent in Virginia because many units in Northern Virginia and the Tidewater area were already in the construction pipeline. Maryland recorded a 27-percent increase. Activity was up only 1 percent in Pennsylvania owing to a sharp 40-percent decline in Philadelphia and a 33-percent drop in Pittsburgh; the decrease in Pittsburgh was also attributable to the number of units already under construction. A record 2,000 building permits were authorized in Pittsburgh in 2001, compared with a prior 4-year average of 1,600. Demand continued to exceed supply in Philadelphia, despite multifamily building permit activity averaging approximately 2,700 on an annual basis during the past 6 years. Less than 200 permits were authorized during the current quarter.

The apartment market in Philadelphia remains one of the tightest in the region, but rental market conditions are easing. After remaining below 1 percent last year, Class A highrise vacancy rates in the Center City district increased to nearly 3 percent during the first quarter of this year because new units entered the market. Developers continued to renovate existing residential and commercial properties in Center City to rental properties. Vacancies in Philadelphia’s suburban counties were reported to be less than 4 percent in most areas. Rental increases in these areas have been minimal with a few submarket areas reporting actual declines.

Rental market conditions in the Washington metropolitan area moved closer to balance during the first quarter of 2002. Vacancy rates in some areas had risen dramatically last year because a large number of new units entered the market—the highest level in more than 10 years. Most of the new units were built in Northern Virginia. Overall vacancy rates in Class A properties had increased from less than 1 percent to more than 4 percent by year’s end. The rate was much higher in Northern Virginia. According to Delta Associates, rents in this area declined by 6 percent over the 12-month period ending in March 2002. Rental market conditions remain extremely tight in Montgomery County, Maryland, with no relief in sight. Vacancy rates at Class A properties are less than 1 percent, and even though more than 2,000 units are currently under construction, these rates are expected to remain tight during the next 2 years.