Regional Reports

Job losses were heaviest in the Boston, Lawrence, and Lowell metropolitan areas in Massachusetts and the Hartford and Bridgeport metropolitan areas in Connecticut. Nonagricultural employment in the New England region continued to decline during the 12 months ending June 2002 to 6,984,400 jobs, a loss of 58,900 jobs, or 0.8 percent, from the June 2001 level. Almost 80 percent of the net loss was in goods production, primarily in Massachusetts and Connecticut. Massachusetts lost more than 20,000 manufacturing jobs and almost 33,000 service-producing jobs during the 12 months ending June 2002. During the period all other New England States recorded gains in service-producing jobs. The unemployment rate in New England as of June 2002 was 4.3 percent, up from 4.1 percent in June 2001. Only Maine and Rhode Island had reduced levels of unemployment in June 2002 compared with June 2001, with the unemployment rate in Rhode Island dropping from 4.9 in June 2001 to 4.1 percent in June 2002.

Residential construction activity, as measured by building permits, rose 15 percent to 23,453 units during the first 6 months of 2002 compared with the same period in 2001. In the first half of 2002, singlefamily permits were up 11 percent to 18,819 homes. Multifamily permit activity in the same period increased 40 percent. If this pace continues throughout the year, approximately 9,300 multifamily units will enter the pipeline in 2002—a significant increase from the average of 5,800 units issued permits annually between 1994 and 2001. Maine, New Hampshire, and Vermont all recorded double-digit gains in multifamily activity. Approximately 50 percent of the multifamily units in the region in the first 6 months of 2002 were permitted in the State of Massachusetts. Almost all of these units are in the Boston area and other metropolitan areas in eastern Massachusetts. The increase in multifamily activity reflects the time it takes for developers to go through the permit and regulatory processes rather than a sudden increase in production in response to the existing strong demand.

After 2 years of almost unchanged levels of home sales, the sales activity in the New England States increased in the first half of 2002. The annual sales rate increased 5.1 percent to 261,500 homes as of the second quarter of 2002, according to the NATIONAL ASSOCIATION OF REALTORS^® (NAR). Maine, Massachusetts, and Vermont recorded gains of 14, 11, and 12 percent, respectively. Continued low interest rates and an increased supply of existing homes available for sale have allowed the surge in sales to occur. With demand so strong, although inventory has increased, prices still are rising dramatically. NAR data indicate that the median price of homes sold in New England’s three largest metropolitan areas during the second quarter of 2002 was $397,700 in Boston, $185,800 in the Providence area, and $174,700 in Hartford.

According to the Office of Federal Housing Enterprise Oversight’s (OFHEO’s) rankings, the New England region, at 9.6 percent, ranks first in the Nation in price appreciation for the first quarter of 2002 compared with the same period in 2001. Three of the first four States ranked are from New England: Massachusetts, New Hampshire, and Rhode Island. These States recorded appreciation rates of 11.7, 10.1, and 12.1 percent, respectively. Additional OFHEO data indicate that of the 21 metropolitan areas with appreciation rates of 10 percent or higher, 8 are in New England.

Rental markets across New England continue to be strong, although conditions have become somewhat competitive in the high-end segment of the market. Vacancy rates have increased, and rent increases in this segment of the market are lower than in the past. The middle and lower end affordable segments of the rental market continue to maintain very high occupancy rates and tight market conditions. The tight market conditions and softer economy combined with high rental costs are again raising public concern about affordability. In Boston, where vacancy rates are still very low and the median rent for a two-bedroom apartment is $1,700, the idea of rent control is being revisited. Rent control in Boston was adopted in the 1970s and phased out in the mid- 1990s as the economic recovery took hold. Since then, rent increases have been significant, reaching double-digit rates at the end of the 1990s. Supporters of rent control are currently developing a home-rule petition for the purposes of reestablishing rent control and beginning the public debate.

Overall, New England markets hold much uncertainty. Manufacturing industries have lost a considerable number of jobs during the past year, but the medical, defense, and automotive equipment industries show positive signs. Residential markets, both sales and rental, remain strong. However, commercial real estate markets continue to suffer from excess capacity and declining rents.