The Fed’s Beige Book is out

The Federal Reserve Board’s Beige Book report on the economy is out. Inquiring minds are searching for answers. Here is the Real Estate Summary section:

Real Estate and Construction

Residential real estate activity improved since the last report. Most Districts noted an increase in home sales and construction prior to the April 30th deadline for the homebuyer tax credit, with contacts in many of these Districts also indicating a corresponding slowing in activity in May. Tight credit, the elevated inventory of homes available for sale, and the “shadow inventory” of foreclosed properties on banks’ balance sheets held back residential development in the New York, Cleveland, Atlanta, and Chicago Districts. Commercial real estate activity generally remained weak. Office, industrial, and retail vacancy rates continued to drift upward in many Districts putting downward pressure on rents. However, lower rents were said to have led to an increase in leasing activity in New York, Philadelphia, Richmond, Kansas City, Dallas, and San Francisco. The elevated inventory of existing properties for sale or rent continued to weigh on new private nonresidential construction. However, stronger industrial demand was noted in several Districts. Public construction increased in Philadelphia, Cleveland, and Chicago, but slowed in Minneapolis.

The above mention of “shadow inventory” is the first seen in, at least, a very long time. The San Francisco real estate section said this:

Real Estate and Construction

Demand for housing in the District appeared to be little changed from the previous period, while demand for commercial real estate deteriorated a bit further. Home prices continued to edge up in some parts of the District, and although the pace of home sales remained mixed across areas, it appeared largely stable on net. However, contacts continued to note that the limited availability of nonconforming “jumbo” loans has restricted sales of higher-priced homes in some areas. Scattered reports pointed to some modest improvements in residential construction, most notably in the repair and remodel sector. Conditions worsened somewhat further in commercial real estate markets, with vacancy rates for office and industrial space edging up in many parts of the District. However, contacts reported continued improvements in leasing activity for some market segments of the District as tenants seek to secure favorable terms.


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