Winter Weather Slows Residential Real Estate Growth: Beige Book
Residential real estate markets showed improvement, according to the March issue of the Beige Book from the Federal Reserve. But like many economic sectors, the unusually harsh winter weather across America this year slowed growth. Improvement in the residential real estate market has been primarily in the low-end and starter home sector, the result of the extended homebuyer tax credit. The Philadelphia, Cleveland, Kansas City, and Dallas Federal Reserve Districts reported that sales were strongest in that sector, both due to the tax credit and the difficulty obtaining financing for higher-end homes. The St. Louis and Richmond districts reported mixed results, but in Richmond, the district noted better weather might have created residential housing improvement. In the January Beige Book, all but two Fed districts reported increased activity or improved conditions, with Philadelphia and Richmond seeing mixed results. Residential real estate markets remained weak or softened further in the New York, Atlanta, and Chicago districts and there was little change in the San Francisco district, the Federal Reserve Board said. The March edition of the Summary of Commentary on Current Economic Conditions, commonly called the Beige Book, came out Wednesday, the second of eight editions published throughout the year. The book reports anecdotal information on current economic conditions in each of the 12 Fed districts through reports from bank and branch directors and interviews with key business contacts, economists, and other market experts. While the Minneapolis, Kansas City and Dallas districts showed improved levels of residential construction, the remaining districts said the industry was down or stagnant. The Atlanta District reported Georgia builders were suffering the most in its district, and in San Francisco, an over-supply of homes is hurting new construction. Overall, home prices were flat or declined slightly, with the Boston and San Francisco districts reporting signs of improvement. In commercial real estate (CRE), conditions remained weak or declined further, most districts reported. However, some districts observed slight stabilization or modest signs of improvement. CRE activity was weaker in the Richmond, Minneapolis, Kansas City, Dallas, and San Francisco districts, though Dallas noted that leasing fell at a slower rate and San Francisco cited increased leasing in some segments, the Beige Book said. In Boston and Philadelphia, conditions remain weak, but the districts reported improvement in sales of commercial space. While New York City remains constricted, the New York district said other markets in its region are experiencing steadying vacancies and rents. Activity remained weak throughout the St. Louis district. More CRE tenants are pushing for, and receiving rent concessions is several districts. With the exception of some federal stimulus projects and other public construction jobs, CRE construction activity remains at a slow trickle, in part due to the unavailability of credit for commercial development and transactions. However, San Francisco noted a slight improvement in financing availability. The next edition of the Beige Book is schedule for an April 14 release. Write to Austin Kilgore.