Orlando, Florida The four-county Orlando metropolitan area recorded rapid population growth throughout the 1990s. According to the census, the population of the area grew at an average annual rate of 3 percent, or 42,000 persons, to 1,644,561 as of 2000. Almost 80 percent of the growth was the result of in-migration. All four counties experienced population growth in the prior decade of 28 percent or more. The fastest rates of growth occurred in Osceola County at 60 percent and Lake County at 38 percent. These two counties are in the heart of the tourist attractions and accommodations concentrated in the southern end of the metropolitan area. The rapid population growth in this area emphasizes the importance of the tourism industry to the local economy. In early 2001, the local economy began to experience a slowdown as area tourism exhibited the effects of the national recession and later in the year slowed further with the effects on air travel after September 11. Several measures of tourism activity, including hotel and motel occupancy and retail sales, remain below prerecession levels, although figures are currently above the extremely low levels experienced immediately after September 11. The segments of the tourism market that are lagging are the international market, due to flagging economies in Central and South America, and the domestic market, which is dependent on air travel. Passenger volume at Orlando International Airport is still below year-ago levels as of May, at nearly 10 percent. The strongest source of tourism comes from those who drive to the area. More positive local economic factors include the University of Central Florida in eastern Orange County, which is rapidly expanding, and the nearby concentration of simulator research and manufacturing firms. Nonagricultural wage and salary employment in the metropolitan area averaged 906,500 jobs for the 12-month period ending June 2002, a decrease of 9,300 jobs from the same period 1 year ago. Major declines have been in retail sales, hotels, and other categories related to tourism. In June the unemployment rate was 5.2 percent, compared with 3.9 percent a year earlier. Recent experience contrasts starkly with job growth in 1998, the peak of the last cycle, when approximately 47,000 jobs were added. Between 1998 and 2001, unemployment was 3 percent or less. The sales market in the metropolitan area has remained strong despite weaknesses in the local economy. Sales of existing homes, as reported by the Florida Association of REALTORS® for the 6-month period ending June 2002, totaled 12,734, up approximately 8.5 percent from the same period in 2001. For the first quarter of 2002, sales of new homes, as reported by Charles Wayne Consulting, Inc., were 13.2 percent ahead of the same period last year. OFHEO’s annual House Price Index indicates that the price of existing homes increased by almost 9 percent during the four quarters ending the first quarter of 2002. This follows an 8-percent increase for the same period a year earlier. In the context of a strong existing market and new home sales, the number of new single-family units authorized by building permits for the first 6 months of 2002 decreased by less than 1 percent, to 8,298, from 8,323 in 2001, an indication that buyers expect that the strong market will continue. During the past 9 months, rental market conditions in the Orlando area have changed significantly. The number of occupied units, or renter households, actually declined, reflecting the effects of the severe downturn in the local economy. Apartment occupancy declined from 93 percent in September 2001 to 89 percent in March 2002. In some submarkets, apartment occupancy rates as of March 2002 were reported to be below 85 percent, and significant rent concessions were being offered. The most recent data on rental occupancies reflect occupancy rates still well below 90 percent, and rent concessions continue to be widespread. Current economic conditions are expected to limit population growth, extending the time required to absorb current excess vacant units. The current increase in multifamily production, if it continues, will only serve to further weaken the market. Construction of multifamily units, as measured by building permit activity, increased from 3,704 units in the first 6 months of 2001 to 4,818 for the same period in 2002. This was well above the 4,552 units authorized in the first 6 months of 2000. The surge in production in calendar year 2002 seems to represent a trend. The increases in production are concentrated in Lake and Orange Counties. Time-share units in some counties in the metropolitan statistical area are permitted as multifamily units, and these units may, to some extent, obscure the trend in rental construction. Until recently, the total number of units under construction was declining from the very high levels of 1998 and 1999 as the market responded to declining occupancy rates. Recent occupancy and employment data do not provide an explanation for the increase in production.

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