The Beige Book: June 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 June. The Fed commented on the national real estate and construction market as follows:

The real estate and construction industries were marked by continued weakness in the residential sector and increasing strength in the commercial sector. Most Districts characterized their housing markets as soft or weak. San Francisco reported that sales volumes for both new and existing homes fell further in most areas, with modest price declines in some parts of the District. Minneapolis described the District’s housing markets as mostly weak, and Dallas described the District’s housing markets as soft, noting high cancellation rates for new home sales in Dallas and continued slowing in the Houston market. Philadelphia reported no improvement in the housing market, and Cleveland reported that new home sales were stable but prices were down. Atlanta reported that sales stabilized at low levels in parts of Florida but continued to decline in Georgia. Reports from Richmond and St. Louis were mixed, with sales stabilizing or improving in some areas but declining in others. The most positive report on housing markets came from the New York District where there were signs of strengthening in New York City, parts of Long Island, and some close-in New Jersey suburbs. However, housing markets in the rest of the New York District remain sluggish. No District reported an increase in new home construction. Moreover, inventories and days on the market continue to rise in some Districts, although the Kansas City District has seen a reduction in inventories. Realtors in the Philadelphia, Cleveland, and Atlanta Districts anticipate that the weakness in the housing market will last several more months at least.

There was widespread improvement in commercial real estate markets in recent months. More than half the Districts reported that leasing activity was picking up in most of their major markets and vacancy rates were falling. Boston, New York, Philadelphia, and San Francisco also mentioned increases in office rents. Four Districts (Philadelphia, Richmond, Minneapolis, and Dallas) reported strong demand for industrial space, especially warehouse space. Chicago, on the other hand, reported that industrial development was sluggish. All the Districts that mentioned commercial construction activity gave positive reports.

Read the entire report here.

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