Employment in the Midwest region averaged 24.6 million in the first 3 months of 2002, down 0.1 percent from the first quarter of 2001. Ohio, Indiana, Minnesota, and Wisconsin reported employment gains of less than 1 percent, which partly offset declines in Illinois and Michigan. Private surveys of business conditions in February and March showed local economies strengthening in the Chicago, Cincinnati, Cleveland, Detroit, and Milwaukee metropolitan areas. Residential construction activity in the first quarter held up well, buoyed by low interest rates and mild weather. Building permits in the region totaled 50,000 units compared with 49,000 units in the first quarter of 2001.

Single-family building permits were issued for 198,500 units in the region in 2001, the second highest annual level in the past 20 years. Home construction in the first 3 months of 2002 continued to be strong, with building permits for single-family homes up 2 percent to 39,300 units. Activity was up in all States of the region except Wisconsin and Indiana, where activity was down slightly from the first 3 months of 2001. In Minnesota, the Builders Association of the Twin Cities reported that great weather, low interest rates, and a real need for additional housing in the Minneapolis-St. Paul area kept the new construction industry busy in early 2002, with permits for new homes up 35 percent through March. Using $1 billion in public and private funds, the city of Saint Paul is encouraging builders to construct 5,000 new homes in the next 4 years, including 1,000 homes affordable to low- and moderate-income families (those who earn up to $34,000 annually). The Wisconsin Builders Association reported that 2001 was a big year for new home construction, and builders in the State expect that construction will begin on another 21,000 to 23,000 single-family units in 2002.

Existing home sales in the first quarter of 2002 were strong in most of the region’s major markets. The Ohio Association of REALTORS^® reported that existing home sales in the State were up 9 percent to 23,700, and the average sales price increased to $137,250—both record-breaking levels. In Michigan, existing home sales continued to climb in the State, with sales activity up 17 percent in the first 2 months of the year to 16,100 homes. The Illinois Association of REALTORS^® reported that sales activity in the State remained strong through March 2002 because of the Chicago area’s 20-percent increase in existing home sales.

Chicago Title and Trust Company reported that sales of new and existing homes in 2001 surpassed 2000’s high sales volume, and 2002 is expected to be another good year for home sales. Approximately 172,000 homes were sold in the metropolitan area, up 1 percent from 2000. The strong demand for new homes encouraged builders in the area to take out permits in 2001 for 27,700 single-family units, the second highest level in the past 10 years. Residential construction activity in the first 3 months of 2002 remained strong, with permits for single-family homes up 4 percent to 5,900 units. In south suburban Will County, the city of Joliet’s housing market continued to boom last year, with a record 1,575 new single-family homes starting construction. Joliet’s strong population growth in the past decade, averaging 3 percent annually, reversed years of decline during the 1970s and 1980s. Chicago continued its strong commitment to affordable housing in 2001 with the allocation of $327 million for 13,000 units, up 25 percent from $261 million in 2000.

The market for all types of housing for seniors has been very active in the Midwest. The American Senior Housing Association’s 2001 Construction Report ranked Illinois, Michigan, and Wisconsin among the top 10 States for construction of senior housing. Chicago and Detroit, each with 11 projects, ranked second among metropolitan areas to Los Angeles’ 14 properties. Suburban Chicago’s Cook and Lake Counties accounted for two-thirds of the 1,800 units under construction in the metropolitan area. Minneapolis-St. Paul also is one of the Nation’s most active markets for senior housing, according to Maxfield’s Senior Housing Update 2002. Approximately 4,000 new market-rate and affordable housing units for seniors are expected to enter the Twin Cities market during the next 2 years, bringing the total number of units to around 25,000 by 2004.

Multifamily building permit activity in the Midwest was strong in the first quarter of 2002, but activity varied widely by State. Permits were issued for 11,500 multifamily units, up 3 percent from the same period in 2001. In Minnesota, activity almost doubled to 2,000 units because of Minneapolis-St. Paul’s 96-percent increase in multifamily units. Indiana and Wisconsin also showed significant percentage gains in activity of 16 percent and 9 percent, respectively, and together with Minnesota offset losses in Ohio and Michigan. Milwaukee’s downtown market for multifamily condominiums is hot, fueled by increased demand from empty nesters and young professionals. Five condominium towers are planned for downtown, bringing the number of new condominiums for sale and rent to 2,000 units. Detroit’s apartment market is becoming more competitive because of the slowdown in the local economy and low mortgage rates. One owner of 10,000 new and existing apartments in the metropolitan area is offering rent concessions for the first time to boost occupancy.

Ohio’s major markets also showed mixed performance. Columbus’ apartment market is balanced, but vacancies have been trending upward during the past 3 years. Marcus & Millichap’s first-quarter 2002 Apartment Report predicts that vacancies this year will increase to 7 percent from 5 percent in 1998. In Cincinnati, CB Richard Ellis expects strengthening in apartment occupancy by summer because only 2,300 new apartment units will be entering the market in 2002, down from 3,000 units in 2001. Downtown Cleveland had more multifamily housing projects under construction in the first quarter of 2002 than at any time in the past decade, according to the city’s Department of Community Development. Eleven major renovation projects are under way, with more than 1,200 units likely to enter the market in the next 12 months.