Housing MarketReal Estate

Inventory needs to increase to balance housing market: Fed Beige Book

Housing sales, construction declined across all 12 Federal Reserve districts amid elevated rates

High inflation has reduced consumers’ purchasing power, which has led to weakened sales and construction across all 12 Federal Reserve districts. While home prices have started to inch down, more inventory is needed for a balanced housing market, the Federal Reserve Beige Book said.

“Housing markets continued to weaken, with sales and construction declining across [all 12 Federal Reserve] districts,” according to the Federal Reserve Beige Book released on Wednesday. The report noted that “most bankers reported that residential mortgage demand remained weak.”

Bank and branch directors, community organizations and economists interviewed for the Fed Beige Book expect little economic growth in the months ahead. 

“Consumer spending increased slightly, with some retailers reporting more robust sales over the holidays. Other retailers noted that high inflation continued to reduce consumers’ purchasing power, particularly among low-and moderate-income households,” the report said. 

Available home inventory has remained low since the previous Federal Reserve Beige Book report, which was released in November 2022, as many sellers decided not to list — affecting the New York and Boston districts in particular. In other markets, including the Cleveland district, low inventory levels hindered home prices from dropping further. 

In turn, builders are offering concessions, such as offering lower-priced products and less costly features, in hopes of luring in buyers to the market, the report noted. 

Following are excerpts of statements on housing conditions from each of the 12 Federal Reserve districts – drawn from the recently released Federal Reserve Beige Book.

The information and data for the current Beige Book was collected on or before January 9, 2023 and was based on interviews with bank and branch directors, community organizations and economists. 


Boston – Home sales posted further substantial declines in November, and closed sales were down by 20 to 30% on a yearly basis. Single-family homes saw a sharp slowdown in sales from the previous report, whereas the declines for recent condo sales were slight-to-moderate.

Inventories remained down on an over-the-year basis in Rhode Island, Massachusetts and Vermont, but by a much smaller margin than in the previous report. In other markets, inventory growth accelerated substantially from the previous report. 

Contacts expect home prices to continue to level off in the near term, and stressed that further inventory growth was still needed, despite cooling demand, in order to achieve a more balanced market.

New York – The residential sales and rental markets showed further signs of cooling in late 2022. Real estate contacts in upstate New York reported that prices have flattened out, and that sales volume and buyer traffic have continued to wane — attributed in part to unusually harsh winter weather.

In and around New York City, sales of both single-family homes and apartments fell fairly sharply, while prices were flat to down modestly. Still, the inventory of available homes remains quite low throughout the district, as many sellers have decided not to list. 

Residential rental markets weakened further, though the high end of the market has shown some resilience. In New York City, rents have trended down modestly since peaking last summer, though they remain higher than a year ago. Landlord concessions have also somewhat increased.

Elsewhere, rents have generally been steady, though one contact in upstate New York noted that already high rents have continued to trend up. Rental vacancy rates, while still quite low, have risen modestly. 

Philadelphia – Homebuilders continued to report weak demand and a modest decline in contract signings for new homes. Some smaller builders are able to maintain steady work by offering price concessions or by offering new lower-priced products with a smaller footprint and less costly features.

Existing home sales fell modestly in most markets following a steep decline in the prior period. Brokers noted that the softer market is (slowly) shifting back toward a balance between buyer and seller. Days on the market are lengthening, and home inspections are becoming the norm again. However, housing affordability worsened. 

Cleveland – Residential construction and real estate activity declined further. Contacts continued to cite elevated interest rates as the main factor hindering demand. One real estate agent said that the housing market was in a recession and stated that the only reason that there had not been significant declines in home prices was because of extremely low inventory levels.

Richmond – There was reduced market activity this period, partially due to the usual seasonality, with a decline in the number of listings, decreased buyer traffic, and increased days on market. Respondents indicated that there were fewer closed and pending home sales as elevated mortgage rates and low housing inventory have impacted volume.

Sales prices have decreased modestly from their peak in the spring. However, sellers were offering more concessions to complete transactions. 

New home builders were also offering more discounts and/or incentives to sell their remaining housing inventory. New home construction costs were lower than their recent peak but were still above pre-pandemic levels. There also was a significant pullback in investor activity in the single home market. 

Atlanta – Despite more moderate price growth and a recent drop in mortgage interest rates, housing demand continued to deteriorate. Sales fell sharply across the region and inventory levels rose. Most homes sold for below the asking price, and the number of days on market reached near pre-pandemic levels. 

Builders continued to reduce new home construction in response to declining demand. According to builder contacts, demand in the entry-level and second home markets was the weakest, and cancellation rates remained high. A significant share of builders cut prices and increased incentives to attract buyers. 

Chicago – Construction and real estate activity decreased moderately over the reporting period. Residential construction activity declined modestly overall, led by a pullback in single family homebuilding. Residential real estate activity fell moderately. Home prices moved down modestly, but rents were up modestly. 

St. Louis – Activity in the residential real estate market has continued to slow since the previous report. In November, month-over-month median rental rates on new leases fell in all four major district metropolitan statistical areas (MSAs) for both one- and two-bedroom apartments. Rates continued to slow or remained the same in all four major district MSAs during December. 

Building permits in the Midwest and South have continued to fall sharply since the previous report, even after accounting for seasonal factors. However, construction contacts continue to work through backlogs.

Across the district, total home sales have dropped 4.2% since the previous report, and inventory has slowly started to increase — up 2.75% — during that time. Average time on the market for residential housing also increased during the fourth quarter of 2022. 

Minneapolis – Single-family residential construction continued to decline. December permitting activity was much lower than a year ago in most of the district’s larger markets. For example, single-family permits in the Minneapolis–St. Paul region in December were less than half their levels from a year earlier.

Residential real estate [sales] continued to decline for similar reasons. Closed sales in November and December were widely lower compared with last year. In Sioux Falls, South Dakota, December sales dropped by 48% year over year. In some markets, new listings declined as sellers waited for better market conditions, yet inventories of homes for sale increased with the large drop in sales.

Kansas City –  In residential real estate, builders of new single-family homes noted an uptick in the number of buyer cancellations for projects underway. In recent weeks, those canceled purchases were backfilled by secondary buyers seeking homes. However, contacts indicated they expect “a bigger cliff of cancellations will hit builders in the spring.”

Dallas – Activity in the single-family housing market continued to decline. Home sales and prices fell further, and cancellations stayed elevated. In homebuilding, buyer incentives were widespread and construction costs were generally high, putting downward pressure on builders’ margins. Outlooks weakened. Apartment leasing softened beyond seasonality, with occupancy and rents slipping modestly. 

Housing affordability remained a key concern amid higher rents, and some struggling households have moved further away from urban cores, leaving them without public transportation access and further away from nonprofit resources.

San Francisco – Residential real estate activity weakened further in recent weeks. Demand for new and existing single-family housing fell modestly across the district, primarily driven by high prices and mortgage costs. Contacts reported that selling prices began to come down and rental rates were stable on balance. Construction of single-family housing dropped moderately as existing projects reached completion and starts fell modestly. 

Leave a Reply

Your email address will not be published. Required fields are marked *

Most Popular Articles

3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please