Third Quarter 2022 HUD Report: Nonfarm Payrolls and Housing Market Update

The most recent HUD report, Third Quarter 2022, was released for New England, which reports on market conditions related to home sales and apartments in Connecticut, Rhode Island, Massachusetts, Vermont, New Hampshire, and Maine.

Overview

In Q3 2022, New England's economy saw job growth, but lower than the Q3 2019 record high. Job growth slowed YoY in 8 of 11 sectors, but 4 still had more jobs than in Q3 2019. All 6 states added jobs but with slower growth than a year prior, and 4 states had fewer jobs than pre-pandemic levels. The housing market remained tight, but home sales declined due to rising mortgage rates, while apartment market conditions in the 8 largest cities varied from balanced to tight.

New England saw YoY nonfarm payroll growth ranging from 2.4% in Vermont to 4.1% in Massachusetts, which was faster than the 3.8% national rate. Job gains were led by leisure and hospitality, professional and business services, and education and health services, with all states except Vermont seeing growth in all three sectors. Home sales in the region declined 7% YoY, but home prices rose 9%. New home construction increased while apartment vacancy rates rose or remained unchanged in 5 of 8 markets, with average rents rising in all 8 markets.

Economic Conditions

The job growth in New England slowed down in Q3 2022 compared to the previous year. Nonfarm payrolls rose by 3.4%, adding 247, 000 new jobs, slower than a 6% increase the previous year. The growth rate was the third slowest among the 10 regions defined by HUD. Job growth occurred in 10 of 11 payroll sectors, but slowed down in 8 of them, all service-providing sectors. The sectors that led job growth were leisure and hospitality, professional and business services, and education and health services. Massachusetts had the highest decline rate in the region at 9.1%, while Connecticut had the lowest at 5.7%. Connecticut was the only state in the region to surpass the national average.

Sales Market Conditions

Sales housing market conditions were tight throughout New England during the third quarter of 2022, unchanged from a year earlier. Conditions were tight, partly because of improved economic conditions and a decline in the already low supply of homes for sale. Home sales, however, declined during the past year, partly because the average 30-year fixed mortgage rate increased. Connecticut's supply of for-sale inventory fell the most in the region, to 2.2 months, down from 2.6 the previous year, but was the highest level of inventory of homes for sale in the region. The respective months of supply in Massachusetts were down 0.2 and 1.6 months. Reductions in home sales occurred in all states in the New England region, ranging from 4 percent in Connecticut, Massachusetts, and Rhode Island to 16 percent in Vermont. Average home sales prices rose in all six states in the region, ranging from an increase of less than 1 percent in Connecticut to 15 percent in New Hampshire.

Continued tight home sales market conditions in the region contributed to a decrease in the percentage of home loans that were seriously delinquent or had transitioned into real estate owned (REO) status during the past year. The current rate is identical to the national rate and is the fifth lowest of the 10 HUD regions. Homebuilding activity in the region during the third quarter of 2022 increased to the highest third-quarter level of construction activity since 2007 in response to continued tight market conditions.

Apartment Market Conditions

In eight major metro areas, the apartment market was balanced to tight. Five of the eight areas saw vacancy rates rise or stay unchanged but still below the 5.5% national rate (CoStar Group). One of the biggest hikes was in Hartford, increasing 0.5 percentage points to 4.1% due to high apartment completions (Global Commercial Real Estate Services).

Rents in all eight metro areas increased, with six outpacing the nationwide average 6% growth (CoStar Group). The eight largest metro areas comprised 87% of all completions, compared to 83% in the previous year. Multifamily construction activity, measured by permitted units, rose in the region, compared to a decline a year earlier. This was the highest Q3 level since 2001. Connecticut’s multifamily permitting nearly tripled to 910 units, with half of the 8 counties contributing to the increase, including a 510-unit boost in Fairfield County (Bridgeport metro area).