The Beige Book: April 2007

The Federal Reserve Bank gathers anecdotal information on current economic conditions through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information.

The Federal Reserve has issued its Beige Book report for April. The Fed commented on the national real estate and construction market as follows:

Residential real estate activity continued to weaken in many Districts. Housing markets were described as falling or soft in the San Francisco and Richmond Districts. Year-over-year, home sales declined in the Cleveland, Atlanta, and Kansas City Districts, and home sales were reported as mixed throughout the St. Louis District. The Minneapolis District noted that, for the Minneapolis–St. Paul metro area, home sales were down in the first quarter of 2007 compared with a year ago. Home sales continued to weaken in the Dallas District, but demand remained good by historical standards. In contrast, the Boston District reported that the volume of residential sales across New England shows signs of increasing, though prices remained below 2006 levels. The Dallas District reported that inventories are rising for both homes and building lots. Inventories of unsold high-end homes were noted in the New York and Chicago Districts, and sales of high-end homes were weak in the Kansas City District. Meanwhile, homes in more moderate price ranges were reported as selling well in parts of the New York, Kansas City, and Richmond Districts.

Many Districts saw a decrease in homebuilding. Residential construction decreased in most areas of the Minneapolis, Chicago, and St. Louis Districts. New home construction remained low in most areas of the Atlanta District and many builders anticipate further modest declines. Residential construction remained sluggish in the Kansas City District and builders generally expect home starts to remain flat. Additionally, the Dallas District reported that builders are significantly curbing home starts.

Commercial real estate markets continued to be active across most Districts. Commercial real estate markets remained robust in the St. Louis and New York Districts, and the Kansas City District reported solid gains. While vacancy rates were little changed in the Chicago and Richmond Districts, vacancy rates declined in most cities of the San Francisco and Kansas City Districts. Vacancy rates edged down in some markets of the New York District, with Manhattan office vacancy rates slipping to their lowest levels since 2001. The Minneapolis District noted that office vacancy rates declined in the first quarter of 2007 in the Minneapolis–St. Paul area. The Dallas District reported that office leasing has slowed.

Commercial construction continued to expand throughout most Districts. Atlanta reported that the pace of commercial development during the first quarter of 2007 exceeded year-ago levels. Backlogs in the Atlanta and Cleveland Districts were equal to or greater than they were a year ago. The Cleveland District also reported that activity among commercial contractors has increased over last year’s levels. In the Chicago District, non-residential construction remained stable compared with a year ago. The Richmond District generally noted little change in new commercial construction. Several non-residential building projects are planned or under construction in the St. Louis and Minneapolis Districts. Heavy building also increased in the Minneapolis District since the previous report. Commercial and public construction activity has expanded in some areas of the San Francisco District, and the Kansas City District reported, following a period of little growth, that construction has risen there as well.

Read the entire report here.

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