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Housing activity, along with employment, labor force, taxes and exports, are among the major
indicators in measuring economic performance. Most of these economic indicators were
pointed in a positive direction in 1998, evidence of a healthy and strong economy. This
article will focus on the different aspects of the housing statistics.
Total Housing Production
According to the recently released housing statistics from the Bureau of the Census,
Connecticut permit authorizations reached 11,863 units in 1998. As the graph indicates, in
1998 we experienced the largest growth in the period since 1990. There were eight months
out of the year that housing permits issued set records. Compared to a year ago, total
housing production increased 26.9 percent from the 9,349 in 1997 to 11,863 in 1998, the
biggest percent increase since 1987.
Single-Family vs. Multi-Unit Homes
In 1998, 9,130 permits were authorized for single-family dwellings, accounting for 77
percent of all the permits issued. Condominium and apartment buildings with five units or
more shared almost 20 percent of the market.
Counties
In 1998, Fairfield County had the largest number of new residential permits with 2,978,
followed by Hartford County with 2,790, and New Haven County with 2,301. All three
counties set records for new permits issued in this decade. Among counties, Fairfield
posted the greatest percentage increase in authorizing housing units compared to the
previous year, 17 percent. Litchfield County recorded the smallest increase of 5.7 percent
from 732 units in 1997 to 774 units.
Municipalities
Danbury led the State in permit issues during 1998 with 662 units, up 174 percent over
the 1997 total of 242 units. Manchester ranked second with 483 permits, an increase of 162
units, up 50 percent over the 1997 total of 321 units, followed by Hamden with 458,
Middletown with 254, and Glastonbury with 246 units.
Net Gains/Demolitions
When taking demolition into consideration, Danbury had the highest net gain of 904
units, Manchester placed second with 477, and Hamden was the third with 455. The city of
Hartford had the largest demolition permits issued with 1,200, New Haven with 370,
followed by New Britain, Bridgeport and Waterbury with 281, 276, and 109 units
respectively.
Median Home Sales Price
According to the Connecticut Policy and Economic Council (CPEC), Connecticut's
median sales price rose 1.4 percent from $138,000 in 1996 to $140,000 in 1997. The number
of home sales increased by 3,356, or 8.5 percent. The mean home price in Connecticut was
slightly over $204,000, compared with $195,000 a year earlier. This increase suggests that
homes were more expensive in 1997 than in 1996.
Construction Value
The valuation of construction is the cost of construction as recorded on the building
permit. This figure usually excludes the cost of on-site development and improvements, and
the cost of heating, plumbing, electrical and elevator installations. The new home average
construction value in Connecticut on a single unit was $138,321 in 1998, up 6.1 percent
from the previous year.
U.S. Housing Market
An examination of the U.S. housing market shows that 1998 was also a strong year for
the nation. Overall, U.S. housing starts, on a seasonally adjusted basis, were 1.62
million, up 9.9 percent from 1.48 million in 1997. Single family units of 1.28 million
were up 12.4 percent compared with 340,000 multi-family units, up 1.4 percent.
Nationally, existing home sales of 4.78 million were at their highest level in the last
five years, up 13.5 percent. The Northeast U.S. with 900,000 existing unit sales, up only
10.9 percent, was behind all other geographic regions. The South, with 2 million existing
sales units, up 17.3 percent, led both the Midwest, up 13.0 percent, and the West, up 13.2
percent (both 1.3 million units).
Existing home prices also showed a 5.2 percent increase in the Northeast, tied with the
South and lower than both the Midwest, up 6.0 percent, and the West, up 7.7 percent. An
existing home in the Northeast had a median price of $149,200 in 1998, higher by 14.7
percent than the U.S. 1998 median existing home price of $130,000.
Connecticut Economy
Clearly, the housing market continues to be strong. Data from the Bureau of the Census
indicated a 26.9 percent increase compared with a year ago. The rest of the economy also
experienced growth, with a two percent employment gain, one of the strongest since 1992,
the lowest unemployment rate in two decades, the largest number of auto registrations
processed, personal income outpacing the inflation rate, and the stock market breaking
10,000 points. Therefore, we can proudly claim that 1998 was a stellar year with the
housing sector playing a significant role in the State economy.
The second of Harvard School of Business Professor Michael
Porter's four competitive strengths that form the basis for inner city development is
the inner city's potential for connecting with regional clusters. Industry clusters
that may exist in the inner cities are positioned to play an integral role in the activity
of larger, regional clusters.
The Initiative for a Competitive Inner City (ICIC), a national
not-for-profit organization founded at Harvard in 1994 and chaired by Michael Porter, will
soon be identifying the industry clusters in five Connecticut urban centers, namely
Bridgeport, Hartford, New Britain, New London, and Waterbury. Connecticut is the first
state in the nation to develop a strategy to simultaneously improve the economic potential
of five cities statewide.
Working with the Governor's Council on Economic
Competitiveness and Technology and the Department of Economic and Community Development,
ICIC expects to link interdependent industries. Businesses typically located and
prospering in the dozen cities Porter has studied have included food processing, storage
and distribution, communications, health services, tourism and entertainment, consumer
retail services, financial services, education, media, construction, and real estate.
Identifying the specific clusters will facilitate matching of
local residents with job opportunities. The goal of the initiative is greater income and
wealth for inner city residents as well as business development.
Commissioner James F.
Abromaitis of the Connecticut
Department of Economic and
Community Development announced
that Connecticut communities
authorized 886 new
housing units in May 1999, a 15.7
percent decrease compared to May
of 1998 when 1,051 were
authorized.
The Department further indicated
that the 886 units permitted
in May 1999 represent a decrease
of 13.7 percent from the 1,026
units permitted in April 1999. The
year-to-date permits are up 4.2
percent, from 4,110 through May
1998, to 4,284 through May 1999.
"Our year-to-date totals for
1999 continue to surpass those of
1998, a year in which we experienced
the largest growth in this
decade," Commissioner Abromaitis
said.
Reports from municipal officials
throughout the state indicate that
Middlesex County with 64.7
percent showed the greatest
percentage increase in May compared
to the same month a year
ago. Tolland County followed with
a 16.7 percent increase.
Fairfield County documented
the largest number of new, authorized
units in May with 185. New
Haven County followed with 184
units and Hartford County had
174 units. Newtown led all Connecticut
communities with 27
units, followed by Groton and
Wallingford, each with 26, and
Hamden and Southington, each
with 25.
The table on the next page
profiles all of Connecticut's
169 cities and towns by five
categories of economic indicators
for 1998. Below are some highlights
from the latest annual
average data prepared by the
Connecticut Labor Department's
Office of Research.
Labor Force
Stamford had the biggest resident
labor force of 65,942, while the
smallest was in Union with 381
persons.
Unemployment Rate
Voluntown's 8.0 percent was the
highest unemployment rate last
year. Hartford's percentage of
unemployed persons dropped
significantly from 10.0 percent in
1997 to 6.7 percent in 1998.
Establishment
The largest number of business
establishments was located in
Stamford with over 5,000 units
1998, adding 4.3 percent more
new businesses over the year.
Employment
Hartford had the largest number of
jobs last year, adding 1,806 jobs
over the year. After losing over
1,000 jobs in 1997, New Haven
recorded the largest gain in jobs
during 1998, adding 2,883.
Wages
In 1998, the highest annual wage
of $82,561 was paid to employees
of firms located in Greenwich.
Workers at businesses in the town
of Union averaged the lowest at
$15,783.
The Connecticut coincident
employment index rose,
but remained slightly below its
February peak, with the release of
(preliminary) April data. The
Connecticut leading employment
index, although still lower than its
level twelve months ago, has risen
slightly each of the last four
months. Thus, the coincident
employment index tells us that the
Connecticut economy continues to
have significant economic expansion.
The leading index, however,
has been giving off mixed signals
for the past year.
Nonfarm employment currently
stands at 1,664,800. At its peak in
February 1989, it was 1,678,300.
Thus, nonfarm employment falls
13,500, or 0.8 percent, below its
previous peak. If the Connecticut
economy continues to grow, it
should surpass the February 1989
peak in nonfarm employment
within the year, possibly before
January.
As we go to press, the June 29
to 30 meeting of the Federal Open
Market Committee (FOMC) has not
yet occurred. Much speculation
abounds about whether the FOMC
will increase interest rates because
of an overheating U.S. economy.
The resignation of Alice Rivlin, vice
chairwoman of the Federal Reserve,
and more recent comments
by Chairman Greenspan makes an
interest rate increase more likely.
Ms. Rivlin was a staunch supporter
of the view that the
economy was now better positioned
to sustain non-inflationary
growth. Although her resignation
becomes effective on July 16, she
will not participate in the June
meeting. As noted in this column
before, the future health of the
Connecticut economy hinges in
significant ways on the health of
the national economy. Were the
FOMC to raise interest rates, this
could slow the national economy
and subsequently slow the Connecticut
economy as well. Connecticut
recovered from the most
recent "Great Recession" later and
more slowly than the rest of the
country, but has experienced
much more healthy growth since
January 1996. An increase in
interest rates will not be welcome
news in Connecticut. Nevertheless,
the FOMC must remain vigilant
and snip incipient inflation in the
bud before it can flower.
In summary, the coincident
employment index rose from 95.4
in April 1998 to 99.4 in April
1999. Two components of the
index point in a positive direction
on a year-over-year basis with
higher nonfarm employment and
higher total employment. One
component points in a negative
direction with a higher insured
unemployment rate. Finally, the
fourth component, the total
unemployment rate, remains
unchanged.
The leading employment index
fell slightly from 90.9 in April 1998
to 90.2 in April 1999. Four index
components sent negative signals
on a year-over-year basis with a
higher short-duration (less than
15 weeks) unemployment rate,
higher initial claims for unemployment
insurance, a shorter average
work week of manufacturing
production workers, and lower
Hartford help-wanted advertising.
The fifth component sent a positive
signal on a year-over-year
basis with higher total housing
permits.
SOURCE: Connecticut Center for or Economic Analysis, University of Connecticut. Developed by Pami Dua [Economic Cycle
Research Institute; NY,NY] and Stephen M. Miller [(860) 486-3853, Storrs Campus]. Kathryn E. Parr and Hulya Varol [(860) 486-0485, Storrs Campus] provided research support.
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