The economy in the Northwest region slowed a modest amount during the past 12 months. Nonagricultural wage and salary employment in the region increased by 1.4 percent during the 12 months ending June 2001 compared with the same period ending June 2000. Idaho led the region with a 2.8-percent growth rate, followed by Washington at 2 percent. Losses in manufacturing and wholesale trade in Washington were more than offset by gains in business services, including computer and data processing, health services, and government. Employment in Alaska grew 1 percent, led by the oil, construction, and services sectors. Alaska’s manufacturing sector continued to remain weak because of declines in timber and seafood processing employment. Oregon recorded a gain of less than 1 percent over the past 12 months. Unemployment in the region averaged 5.2 percent for the 12 months ending June 2001 and ranged from 4.8 percent in Idaho to 6 percent in Alaska.

Sales of existing homes continued to be on the upswing during the second quarter of 2001, but the rate of increase in sales prices has slowed. Sales of existing homes and condominiums in the Seattle metropolitan area for the first 6 months of 2001 rose 7 percent compared with the first half of 2000; the median sales price rose 0.5 percent over the 12-month period to $232,000. Existing home and condominium sales were up 19 percent in the Bremerton area, 11 percent in the Tacoma area, and 7 percent in the Olympia area. Retirement areas in Washington continued to record big increases in sales, including Grays Harbor (38 percent), Lewis County (35 percent), and Grant County (32 percent).

Market conditions were strong in the Portland metropolitan area with sales in the first half of 2001 up nearly 14 percent compared with the same period in 2000. The median sales price in the Portland area rose 3 percent to $169,900. In Anchorage, sales for the first 6 months of 2001 increased 20 percent compared with the first 6 months of 2000. The average sales price increased 7 percent during the period to $188,000. From January to June 2001, the Boise housing market recorded a 28-percent increase in existing home sales and an 8-percent increase in the median price to $125,900.

Many homebuilders in the Northwest are focusing on first-time and mid-level markets in 2001 as the market for high-end homes has slowed considerably during the past 12 months. Single-family building permit activity for the first 6 months of 2001 rose 9 percent to 29,951 homes. In the Puget Sound area (Seattle-Everett, Tacoma, and Bremerton), permit activity was up 11 percent to 8,535 homes. In the Seattle metropolitan area, activity increased 5 percent. Single-family volume in the Portland area through June 2001 was up 14 percent compared with the same period in 2000, and the number of homes permitted in the Boise area increased 5 percent over the same time period. Homebuilding activity in Anchorage was up dramatically in the first 6 months of the year with single-family permits up 40 percent to 556 homes.

Conditions essentially remained stable in the Northwest region’s major rental markets during the first half of the year. In the Portland-Vancouver area, the rental vacancy rate rose to 4.5 percent, a slight increase compared to the same period in 2000. The Boise market area remained tight with a 3.4-percent vacancy rate according to a July 2001 report by Ada Real Estate Services; this rate was up slightly compared to the 2.8-percent vacancy rate reported for July 2000.

In the Puget Sound area, tighter market conditions prevailed, with an overall rental vacancy rate of 4 percent. Market conditions are expected to move toward a balanced condition later this year and into 2002, based on the new units in the pipeline, particularly in the Seattle metropolitan area. Rental markets in eastern Washington were typically balanced with vacancy rates in the 5-percent range. Anchorage rental markets continued to remain balanced as well with vacancies in the 4-percent range.

Multifamily building permit activity in the Northwest region during the first 6 months of 2001 totaled 9,574 units, a 1-percent decline compared with the same period in 2000. Activity in the Seattle area fell by 13 percent to 4,323 units compared with a strong first 6 months of 2000. In the Portland area, multifamily activity declined by 32 percent, totaling 1,259 units as the slowdown in the local economy resulted in reduced demand.

Spotlight on Spokane, Washington

The Spokane metropolitan area’s economy continues to expand. The annual rate of job growth has slowed after reaching a peak of 4.2 percent in 1994, but during the past 3 years the rate of growth has ranged from 1.6 to 2.1 percent. During the 12 months ending in June 2001, employment grew by 1.7 percent. Almost half of the new jobs created in the past year have been in the services sector, mainly in health services. The manufacturing sector was down during the past 12 months due to declines in primary metal industries, particularly aluminum. The unemployment rate for the 12 months ending in June 2001 averaged 5.8 percent, up slightly from a year ago.

The Spokane area has experienced a moderate but steady growth in population since 1990. As of the 2000 census, the population of the Spokane area was 417,939. The city of Spokane grew by 1 percent annually during the 10-year period and now comprises 46 percent of the metropolitan area’s population.

The relatively stable economy, affordable prices, and low mortgage interest rates kept the sales market in Spokane moving during the past 6 months. Approximately 75 percent of homes listed for sale are priced below $160,000, compared with less than 10 percent of the homes in the Seattle area. The median sales price for existing homes in the first 6 months of 2001 was $119,400, up 5 percent from the same period in 2000. According to the Spokane Multiple Listing Service, 3,228 existing homes were sold in the first half of 2001, up 8 percent from the same period in 2000. New home sales increased 4 percent for the first 6 months of 2001, with an average sales price of $169,325.

Manufactured housing is a major component of the housing market in the Spokane metropolitan area. Manufactured housing comprised 20 percent of all new units added to the market during the 1990–2000 period according to a State survey. As of the 2000 census, manufactured housing units represented 10 percent of the housing inventory while single-family units made up 66 percent and multi-family units totaled 24 percent. Due to continued affordability, the homeownership rate in the Spokane area was 70 percent.

Homebuilding activity in the Spokane area averaged 1,500 homes annually between 1998 and 2000. Through the first 6 months of 2001, single-family permits were up 6 percent to 651 units (compared with the first half of 2000).

Multifamily housing building activity peaked in 1996 with nearly 2,000 units, after which developers scaled back amidst temporarily soft market conditions. Since 1998, multifamily building has averaged 800 units per year. Developers continue to remain cautious and focus on retaining occupancies at existing projects; the number of multifamily units permitted in the first half of 2001 was 29 percent below the rate for the first half of 2000. The rental market is still somewhat competitive. A March 2001 survey by Washington State University estimated the Spokane rental vacancy rate at 6.6 percent compared with 6.1 percent in March 2000.

Outside the city of Spokane, funding has been secured for an innovative affordable housing project, Riverwalk Point I. The project will provide 52 units of low- to moderate-income family rental units and is expected to be complete by fall 2002. The project’s funding includes Federal, State, and local government sources as well as several private sources. The project received more than $140,000 in HUD HOME Funds from Spokane County.

As the Spokane area’s economy and population grow, there is a new focus on development in the downtown area. A number of projects are under way including the rehabilitation of a 500-room hotel that has been closed since 1985, a new museum scheduled to open in December, a landmark theater undergoing an extensive renovation, and efforts to construct a light rail line between downtown and the high-technology enclave of Liberty Lake. New housing also is being developed in the downtown area. A project to make loft-style condominiums at an old warehouse is currently under construction. The units are expected to sell for $90,000 to $150,000. There are a number of other developments in the planning stages, aimed at converting older commercial properties to housing, retail, and office space.

The office market, meanwhile, has taken off with Class A vacancy rates measuring just 2.6 percent according to a survey by Auble, Jolicouer, and Gentry in conjunction with Kiemle & Hagood Co. and Tomlinson Black Commercial, Inc. The report indicates that rental rates for downtown commercial space are rising and could increase by as much as 5 percent this year. The tightening market bodes well for a proposed 25-story office tower in downtown. If built, it would be the city’s first new tower in 20 years.