National economic activity continued to expand in October and November, while real estate activity across the nation was inconsistent and varied, according to the latest Beige Book from the Federal Reserve Board.
Meanwhile, lending typically held steady or increased.
Reports on residential real estate activity were mixed across the 12 Federal Reserve districts. About half of the 12 districts reported an increase in home sales.
Many Districts indicated that sales in the multifamily sector were stronger than sales in the single-family sector.
Home prices were little changed in most Districts, although prices increased in the Richmond, Atlanta, Dallas, and San Francisco Districts.
Employment gains were widespread across Districts in October and November, if limited by flat wage growth.
The following is from the Beige Book report:
In September, closed sales of single-family homes increased from a year earlier in four of the six New England states. Massachusetts experienced declining year-over-year sales for an eighth consecutive month; contacts in New Hampshire were unavailable to provide data.
The median sales price for single-family homes decreased in three of the four states with sales increases; Maine was the exception, with a year-over-year increase in median sales price. Prices in Massachusetts remained flat, ending 23 consecutive months of year-over-year price rises.
Massachusetts contacts say buyers are not willing to overextend themselves financially as home prices move higher, but some expect prices to remain flat, some say they will decline, and others expect an increase in the coming months; among the latter, one contact notes that preliminary October data show a modest increase in price compared to October 2013. Scarcity of inventory remains a concern in Massachusetts, with another consecutive month of year-over-year declines in inventory.
Contacts in Massachusetts say new listings are insufficient to meet demand; they emphasize a need for new construction and for more sellers to list properties. By contrast, inventories are plentiful in Vermont, where there is more than 20 months of supply; Realtors typically say a market is balanced when there is six months of supply–the current level in Rhode Island. Contacts across the First District believe recent market trends will continue in coming months.
Residential real estate contacts say they are generally content. Many contacts are optimistic about the new Qualified Residential Mortgage rule, expecting it to ease down payment and credit score requirements and thereby help qualified consumers afford and purchase a house.
Second District-New York
The District's housing markets have taken on a somewhat softer tone in recent weeks. New York City's residential rental market has shown signs of softening: Rents in Manhattan and Brooklyn are reported to be steady to down slightly from a year ago, though they continue to rise modestly in Queens.
Overall, New York City's co-op and condo market showed continued strength in October and early November–sales activity was down modestly from a year earlier but was still described as brisk, and lean inventories and strong demand continued to nudge up prices, which are reported to be running about 5% higher than a year ago. Single-family markets in Long Island and Staten Island — as well as in northern New Jersey, where there remains a large overhang of distressed properties —have lagged somewhat.
The Buffalo-area market is characterized as having shifted from a seller's market to one that is more balanced, with sales activity leveling off and inventories continuing to build. Across New York State more broadly, the median selling price for single-family homes has edged down in recent months and was down slightly in October relative to a year earlier. New single-family construction activity has been sluggish, while multifamily construction has been robust.
Third District homebuilders have reported lower traffic and declining numbers of contract signings since the previous Beige Book period. Builders report that first-time homebuyers remain scarce and that contracts for new homes with existing homeowners are often burdened by contingencies to sell their current home.
Builders are entering a seasonally slow period that will likely extend over the remainder of the year; contacts reported starting some additional homes on spec to maintain sufficient activity for their construction crews. Although existing home sales tend to decline at this time of year, residential real estate brokers observed that sales were greater than expected.
On a year-over-year basis, closings and pending sales are turning positive again in most major markets. Brokers continued to note some difficulties with buyers securing financing and with contingent contracts as buyers struggle to sell their own homes. Brokers do not expect overall sales in 2014 to surpass 2013 levels, but remain optimistic for a return to growth in 2015.
Sales of new and existing single-family homes varied across geographic markets during the past six weeks. Several builders and real estate agents, who experienced slow sales during the summer, reported rising activity in September and October.
In total, home sales showed a modest decline in the fourth quarter when compared to the third quarter. A couple of builders noted that they believe the decline is more than a seasonal effect. Reports on year-over-year home sales were mixed.
Most builders expect that activity will stay at current levels, though they expressed concern about a potential rise in interest rates, continued strict lending standards, and rising development costs. Multifamily development remains strong.
New-home contracts were mainly in the move-up price-point categories. First-time buyers still have difficulty qualifying for mortgages. A majority of builders reported raising prices on homes during the past couple of months in response to increased costs for labor and materials. The upward trend in selling prices of existing homes has flattened out, but the current average price remains higher than the average level for 2013 by a few percent.
District housing market activity increased modestly on balance since the previous report. Realtors continued to report steady levels of buyer traffic with slight increases in sale prices. Most brokers reported low levels of housing inventories, although contacts in Northern Virginia and the District of Columbia had slight increases.
Average days on the market decreased in central Virginia and in the District of Columbia, but increased slightly in the Carolinas and Northern Virginia. A Northern Virginia Realtor reported greater movement in the $200,000 to $900,000 price range, but had fewer buyers for homes priced above $1 million, and said condo sales were stagnant.
A contact in South Carolina reported tepid condo sales and steady demand for single-family homes priced below $250,000. Realtors reported no change in new home construction. Multifamily leasing was strong in Charlotte and Baltimore.
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District brokers indicated that growth in home sales has slowed since the previous report. A growing share of contacts reported that home sales fell short of their plan in October, and most contacts noted that home sales were flat or down slightly compared with a month ago.
Brokers continued to report modest home-price appreciation. The majority of brokers indicated that inventory levels remained flat from the prior month's level and noted that buyer traffic was flat to down. Brokers indicated that they expect home sales to remain flat or decline slightly over the next three months.
Reports from District builders have been a bit less positive, on net since the previous report. A majority indicated that construction activity met their plan in October, but that new home sales had fallen short of their plan.
Many builders characterized construction activity and new home sales as flat to slightly down from the previous report, while the inventory of unsold homes was flat to slightly up. They continued to report modest home-price appreciation. Their outlook for new home sales and construction activity over the next three months was mixed.
Construction and real estate activity increased moderately over the reporting period. Residential construction rose in both the single- and multifamily markets.
Builders expected that an improving economy and continued low interest rates would help support steady growth in new construction.
Home sales picked up more than expected in both urban and suburban markets. Inventories of existing homes for sale also increased, as rising house prices prompted sellers to enter the market. Nonresidential construction expanded at a moderate pace, led by demand for industrial and office buildings.
Eighth District-St. Louis
Home sales decreased in the Eighth District on a year-over-year basis. Compared with the same period in 2013, September 2014 year-to-date home sales were down 4% in Louisville, 3% in Little Rock, 7% in Memphis, and 5% in St. Louis.
September 2014 year-to-date single-family housing permits decreased in the majority of the District's metro areas compared with the same period in 2013.
Permits decreased 8% in Louisville, 25% in Little Rock, and 3% in St. Louis. Permits increased 4% in Memphis.
Residential construction activity was mixed compared with last year. In the Minneapolis-St. Paul area, the value of October residential permits decreased 9% compared with October 2013.
However, the value of October residential permits in Sioux Falls increased 61% from the same period last year.
October residential building permits in Billings increased significantly in value from last year for both single-family and multifamily buildings.
Residential real estate market activity also increased since the previous report. In the Sioux Falls area, October home sales were up 5%, inventory increased 4%, and the median sales price increased 8% relative to a year earlier.
October home sales in western Wisconsin were up 20% from last year; the median sales price was up 3%. Home sales were up in Montana in the third quarter compared with last year. Minnesota home sales were up 4% from the same period a year ago in October, the inventory of homes for sale increased 8%, and the median sales price rose 2%.
Tenth District-Kansas City
District real estate activity edged up in October and November, as a slight decline in residential real estate activity was offset by moderate growth in commercial real estate activity.
Residential home sales decreased slightly, reflecting typical seasonal sales patterns, with sales of low- and medium-priced homes continuing to outpace sales of higher-priced homes.
Home prices increased modestly, and inventories decreased slightly since the previous survey period. Expectations for residential real estate sales and prices were slightly positive, but inventories were expected to continue to decline modestly.
Housing starts increased at a modest pace, and construction supply sales were flat. Residential construction activity was expected to increase modestly as contacts anticipated higher sales, starts, and traffic of potential buyers.
The District's housing sector softened slightly during the reporting period.
Slower growth in home sales was partly attributable to seasonal demand changes, although some of the weakening was attributed to higher home prices as well.
Two contacts said that builders were not purchasing lots as readily as they have in the past. Outlooks were mostly optimistic, but a few contacts noted concerns about price affordability and the potential impact of an increase in mortgage rates on housing demand.
Twelfth District-San Francisco
Real estate activity advanced during the reporting period, albeit less consistently across the District for residential properties than for commercial properties.
Contacts from some urban areas reported that home prices continued to increase rapidly; in other urban areas, however, prices stalled. In rural areas of the District, home prices generally increased at a moderate pace.
Some contacts reported that, despite active construction and ample inventories, new homes have been selling at notably higher prices than comparable existing homes.