Housing sales up
In the December 2 edition of the Summary of Commentary on Current Economic Conditions, commonly called the Beige Book, eight Federal Reserve Districts reported an economic uptick. In fact, all but two Fed districts reported increased activity or improved conditions, with Philadelphia and Richmond seeing mixed results. At the end of the year, home sales increased in every district but San Francisco, where activity was steady and Kansas City, which experienced a decline. Lower-priced homes typically purchased by first-time home buyers outpaced sales of higher-priced homes.
The districts project the extension and expansion of the home buyer tax credit could give an added impetus to the expected seasonal sales upturn this spring. Despite the improved activity, prices have remained at their low levels. Boston, Philadelphia, and Cleveland experienced price declines, Richmond remained steady, while Dallas reporting some “firming” in prices. New residential construction activity is at low levels in most districts, but Chicago and Minneapolis are exceptions to this trend. Rising vacancy rates and falling rents both impact the weakness in commercial real estate. Landlords are focusing on tenant retention, negotiating lease extensions at low rents and with favorable allowances. Loan demand continues to decline or remain weak and credit quality continues to deteriorate, most districts said. The exception to this is residential mortgages, which is experiencing a steady demand.
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