The following summaries of housing market conditions and activities have been prepared by economists in the U.S. Department of Housing and Urban Development's (HUD's) field offices. The reports provide overviews of economic and housing market trends. Each regional report also includes a profile of a selected housing market that provides a perspective of current economic conditions and their impact on the local housing market. The reports are based on information obtained by HUD economists from State and local governments, housing industry sources, and from their ongoing investigations of housing market conditions carried out in connection with the review of HUD program applications.

The economy of the New England region continues to expand with employment up by about 107,400 new jobs during the 12 months ending May 1997 -- a 2-percent increase. All six New England States had employment gains from 1 year ago. Massachusetts had the largest share with more than 49,200 new jobs created, and Connecticut ranked second with more than 23,700 new jobs. New Hampshire had another strong showing with more than 22,800 new jobs created. The service-producing industries led the upswing in economic growth with 66,200 jobs created during the past 12 months, while employment in the manufacturing sector remained essentially unchanged. Employment in the retail trade sector also increased substantially by about 16,100 jobs in the 12 months ending May 1997. Total employment for New England as of May 1997 was 7,124,400.

As of May 1997, the seasonally adjusted unemployment rates for the States in the New England region ranged from a low of 2.8 percent in New Hampshire to a high of 5.7 percent in Rhode Island. Vermont was second lowest in the region with 3.8 percent, followed by Massachusetts with 4.2 percent and Connecticut at 5.2 percent.

Homebuilding in the region, as measured by single-family building permits, showed continued strength during the second quarter of 1997. During the first 6 months, permits were issued for 16,744 units, almost unchanged from the volume in the same period in 1996. Massachusetts (7,270 units) and New Hampshire (1,954 units) showed strong gains of 3.7 percent and 3.9 percent, respectively, over the comparable period in 1996.

Reflecting the improving economy and market conditions, the number of multifamily units permitted in the first 6 months of 1997 (2,976) was more than double the activity for the comparable period in 1996. All States but Rhode Island showed substantial increases in activity. Massachusetts experienced a solid 200-percent increase to 1,181 units and is on a pace to its best year since 1990. Activity in the Boston area totalled 847 units, slightly more than one-quarter of the region's total.

Existing home sales were steady in the region. Connecticut had a small decline in sales during the first quarter of 1997 compared with 1996 -- from 51,600 to 48,800. The market in Massachusetts is doing much better with sales at 80,350 during the first quarter of 1997 compared with 74,200 in the first quarter of 1996. Rhode Island was relatively flat over the same period with sales volume increasing from 12,600 to 13,300 in the first quarter of 1997.

In the Boston area, local commercial developers speculate that an increase in development of new Class A office space is on the horizon. Vacancy rates are low, and rents are high enough to support new construction. A recent survey of Class A office rents in downtown Boston indicates that rents have broken the $40-per-square-foot barrier. Because of escalating rents in the Boston area, employers looking for Class A space at lower rents have begun to look at the Hartford and Providence areas.

New England rental markets continue to tighten as the economy moves forward with its expansion. The hottest markets continue to be around Boston's Route 128 area; the Portsmouth-Nashua area in southern New Hampshire; and the Portland, Maine, area. Absorption of new rental housing in the Greater Boston area has continued at a strong pace. In the Route 128 area, apartment vacancy rates remain at 2 percent or less. Steady economic growth coupled with very low levels of apartment construction in the region have kept pressure on the existing rental stock. In Cambridge, Massachusetts, 2 new rental developments with a total of more than 300 units are scheduled to break ground before the end of the year.

Spotlight on New London-Norwich, Connecticut

The New London-Norwich area's transition from a defense-oriented economy to diversified employment continues at an accelerating rate. The New London-Norwich metropolitan area currently has the fastest growing economy in the State of Connecticut. During the 12 months ending in May 1997, employment increased 3.6 percent to 147,842 jobs, and the unemployment rate fell to 5.2 percent. The continued growth of the Native American casinos has made the area the country's third-largest gaming space in terms of square footage after Las Vegas and Atlantic City.

Job growth in trade, tourism, and casino employment continues to more than offset the loss of jobs at the U.S. Navy facilities and other defense-related industries. For every goods-producing job lost, approximately 2.5 service-producing jobs are being created. The replacement of high-paying jobs by low-paying ones is further tightening the area's already tight rental market.

Single-family building permit activity in the New London-Norwich area increased considerably beginning in 1993. From 1990 through 1992, single-family activity in the area averaged 550 homes annually. From 1993 through 1996, activity increased to an average of 835 homes annually. Activity in the first half of 1997 totalled 389 units, which was a slight 3-percent drop from 1996 activity for the same period. The increase in single-family activity is due partly to the improving economy of the area and partly to an increase in the construction of seasonal homes.

The rental market has tightened considerably during the past 2 years, as most of the recent net in-migration to the area has been renter households. Very little new inventory has been added to the market since 1990. From 1990 through 1993, multifamily activity averaged fewer than 50 units annually. Although activity picked up beginning in 1994, the number of units has still been relatively small, averaging slightly more than 125 units a year. The demand has resulted in considerable pressure on rents. Occupancy is very high, with vacancy rates in well-managed properties amounting to no more than normal turnover.

The sales market continues to be relatively stable, not only in number of sales but also in median sales price. Since 1994 the area has averaged about 3,600 sales annually with a median sales price of close to $110,000. The average annual sales volume since 1994 is a 40-percent increase from the level of sales at the end of the 1990-91 recessionary period.