Beige Book June 2008

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:

Residential real estate markets were generally weak across most of the nation.  District reports indicated flat or declining home sales in Boston, New York, Cleveland, St. Louis, and Dallas, and contacts in Philadelphia did not expect housing activity to expand strongly this year.  Contacts in San Francisco reported that housing markets remained exceptionally weak, although a few reports pointed to some recent pickup in home sales attributed to increased affordability.  Scattered reports from Philadelphia and Kansas City indicated seasonal improvements.  Inventory levels of new and existing homes remained high or were rising in New York, Philadelphia, Cleveland, Richmond, and San Francisco.  Home sales prices decreased somewhat in Boston, Atlanta, Kansas City, and San Francisco, but remained relatively stable in Richmond and Chicago.  The New York and Chicago Districts noted that some potential buyers had difficulty in obtaining financing.  Residential construction declined in Chicago, St. Louis, and Minneapolis, but was flat to slightly higher in parts of the Atlanta District and spiked in areas of the Dallas District where demand for apartments was solid.  Homebuilders in Cleveland expected no improvement in the housing industry for the remainder of 2008, and Chicago reported that limited credit availability for new developments had caused many builders to suffer losses on existing projects.  Richmond and San Francisco noted an increase in home foreclosures.

Commercial real estate conditions varied in April and May, with some Districts reporting that activity had softened.  Leasing activity eased in Boston, New York, Philadelphia, Richmond, and San Francisco.  Minneapolis, however, reported that market activity was up modestly, while activity was mixed across the St. Louis District.  Vacancy rates edged higher in Boston, Kansas City, and San Francisco, as well as in pockets of the Richmond and St. Louis Districts.  Absorption was negative in Boston and in Minneapolis for both office and manufacturing space.  Overall rents were on the rise in New York, but were stable or beginning to slip in Boston, Philadelphia, Richmond, and Kansas City.  Sales trended downward according to the New York, Philadelphia, and Kansas City Districts.

Reports on nonresidential construction activity were mixed.  Contacts from Chicago and Minneapolis saw slight increases in activity.  Philadelphia, Cleveland, Richmond, Atlanta, and Dallas, however, reported easing or weak levels of construction.  A number of Districts–Cleveland, Richmond, Chicago, and Dallas–reported that obtaining financing remained difficult for some projects.

Click here to read the full report.

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