The Southeast economy continued to slow in the fourth quarter of 2002. Employment in the region averaged 24,355,400 jobs for the 12 months ending November 2002, a decline of 130,400 jobs, or 0.5 percent, from the previous 12-month period. The primary reason for the slower growth was losses in the transportation, manufacturing, and construction sectors, which offset gains in the service and government sectors. All States recorded losses except Florida and Kentucky, where employment increased by 0.1 and 0.6 percent, respectively. The unemployment rate in the region averaged 5.2 percent for the 12 months ending November 2002, down from 5.5 percent for the same period in 2001.

Despite the weaker economy, single-family building permit activity in the region has been strong. Permits were issued for 370,000 new homes during 2002, 8 percent above the level for 2001. Activity increased in every State, with gains ranging from 5 percent in Mississippi to 18 percent in Alabama. For 2002, 9,500 more single-family units were permitted in Florida than in 2001, which was the biggest increase in volume in the region.

Low mortgage interest rates helped to sustain a strong sales market in the Southeast. The NATIONAL ASSOCIATION OF REALTORS^® reported increases in sales volume of at least 3 percent for the third quarter of 2002 for every State in the region except Kentucky. Median sales prices of existing homes also showed strength. For 2003 housing markets in the Southeast are expected to continue to perform at solid levels overall.

The Florida Association of REALTORS^® reported that the average number of existing homes sold monthly in the first 11 months of 2002 in the State was 10 percent above the number sold in the same period in 2001; in the Orlando area the increase was 21 percent. Multiple listing service (MLS) data from the North Carolina Association of REALTORS^® for the first 11 months of 2002 indicate statewide volume was up 9 percent between 2001 and 2002.

Chandler Reports, LLC, data for the Memphis area indicate that 3,186 new homes were sold in Shelby County during 2002, an increase of 8.7 percent over 2001. Existing single-family home sales numbered 14,865, up 5.4 percent from 2001. The average price of new homes sold during the year was $201,693, which was slightly less than the corresponding figure for 2001. The average price of existing single-family homes was $128,582, an increase of 3.4 percent from 2001. The Knoxville Association of REALTORS^® reported an increase in single-family sales of 6.6 percent for the third quarter of 2002 over the same period in 2001. The median price for a three-bedroom, single-family home increased by 2.1 percent to $109,000. Data provided by the Mississippi Gulf Coast MLS indicate home sales were up 18 percent for the 12-month period ending November 2002 compared with the preceding 12-month period.

According to industry sources, new home sales in Puerto Rico declined approximately 20 percent during 2002, prompting developers to revise their strategy for 2003. In 2002 the industry built approximately 5,000 units, of which approximately 1,000 had not been sold by the end of the year. The unsold inventory is composed of units priced above $100,000. Developers are optimistic that the units eventually will sell, but it is anticipated that they will remain on the market for a longer period because of the slowing local economy.

Multifamily construction activity in the region continued to show strength in 2002 despite weakening market conditions. Permits were issued for 110,000 units during 2002, up 2 percent over the number for 2001. Increases of 42 and 17 percent were reported in Mississippi and Florida, respectively. Approximately 42 percent of the activity in Mississippi was in the Jackson metropolitan area, where the Nissan assembly plant is under construction. Some of the increase in Florida stems from increases in condominium construction. Condominiums in some areas are being marketed as entry-level housing as prices for detached single-family homes continue to rise. The number of multifamily units permitted in the West Palm Beach-Boca Raton metropolitan area for 2002 totaled 3,909 compared with 3,171 for 2001, an increase of 23 percent. M/PF Research, Inc., expects supply to outpace demand, particularly in the North Palm Beach County submarket, where 2,400 new units are scheduled to be delivered by the end of September, causing occupancy to fall to approximately 94 percent.

The Atlanta rental market continues to soften with rental vacancy rates now above 10 percent. Multifamily permits for 2002 totaled 15,708, a decline of 8 percent from year-earlier figures. Although approximately 9 percent below the peak construction year of 2000, the recent rate of construction is more than 20 percent above the rate experienced in the late 1990s, which is when the local economy was expanding rapidly. Given the current softening, Atlanta’s pipeline of apartments under construction, the largest in the Nation, is a concern.

With the exception of Nashville, conditions in Tennessee’s major rental markets were somewhat soft overall at the end of 2002. The Greater Nashville Apartment Association reported overall occupancy in conventional apartments at 93.7 percent for the third quarter of 2002. The strength of the local automotive, tourism, and healthcare industries and a decline in multifamily construction have contributed to a strong apartment market. The unemployment rate in the area was at 3.3 percent in November 2002, one of the lowest in the Nation. In Memphis, CB Richard Ellis of Memphis reported an overall apartment vacancy rate of 9.7 percent in the third quarter. As a result of the softer market conditions, multifamily permit activity, which peaked at 4,207 in 2000, declined to 1,518 units during 2002. The Apartment Association of Greater Knoxville reported an overall occupancy rate of approximately 91 percent in the third quarter of 2002. The number of multifamily units authorized by building permit during 2002 increased by 39 percent over 2001 to 1,148 units, representing the highest rate of construction since 1996.

Integra Realty Resources reported recent apartment occupancy at 94 percent overall in Louisville; however, in the city’s eastern suburbs, where much of the recent construction has been concentrated, softer market conditions continue to be reported. The number of multifamily units authorized by building permits declined to 1,006 during 2002.

The Greenville, South Carolina, metropolitan area is struggling to absorb 1,000 multifamily units built over the past year, and softer market conditions are evident throughout the area. The apartment vacancy rate remains above 10 percent. According to the Carolinas Real Data Apartment Index, more units were completed during the 6 months ending November 2002 than in any other 6-month period over the past 4½ years. In addition construction started on more than 270 units, and another 800 units are in the planning stages. The Index also reported that, as of November 2002, 66 percent of the apartment communities in the area were offering rental concessions. Given the situation, the overall apartment vacancy rate is expected to remain above 10 percent for the next 12 months.

DaimlerChrysler AG confirmed plans to construct a $754 million van plant in the city of Pooler in the Savannah metropolitan area. When operational in 2006, the plant is expected to produce 110,000 vans annually and employ 3,300 workers. In 2002, 723 multifamily units were permitted in the metropolitan area, a 43-percent increase over 2001. Much of the Savannah area’s recent rental construction has occurred in the western suburbs.