Beige Book: Home prices flat, declining in all districts

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FEDERAL RESERVE — All twelve Federal Reserve Districts reported that real estate and construction activity was little changed, on balance. Residential construction, sales and prices remained flat, at low levels, particularly for single-family homes.

The Federal Reserve’s “Beige Book,” published eight times per year, examines current housing and other economic conditions based on boots-on-the-ground, anecdotal information from bank and bank branch directors, key business contacts, economists, market experts, and other sources.

Little has changed from the prior report

That said, Philadelphia, Cleveland, and Minneapolis noted small increases in single-family construction, and construction of multifamily dwellings continued to increase at a moderate pace in Boston, Philadelphia, Cleveland, Kansas City, Dallas, and San Francisco.

Home sales remained weak overall, and home prices were reported to be either flat or declining across all of the Districts.

In contrast, rental demand continued to rise in a number of Districts.

Commercial real estate conditions remained weak overall, although commercial construction increased at a slow pace in most Districts.

Boston, Philadelphia, St. Louis and Cleveland cited some gains in demand for construction of education, healthcare, and institutional-related buildings, and New York reported an increase in hotel development.

Furthermore, Philadelphia, Cleveland, and Chicago noted an increase in demand for manufacturing and distribution facilities. Vacancy rates remained elevated, but Boston, Atlanta, Chicago, Minneapolis and Dallas reported an increase in leasing activity and Philadelphia and San Francisco indicated rising investor interest in well-leased office space.

Banking, finance

Financial activity was reported to have weakened some since the last report. Dallas noted that the improvement in financial conditions had stalled, and Chicago indicated a further tightening of credit conditions, particularly for financial firms.

Consumer loan demand moved lower according to respondents in Cleveland, Chicago, and Kansas City, and it held steady in New York and San Francisco. However, New York, Philadelphia, Cleveland, Richmond, Chicago, and Kansas City all noted an increase in mortgage refinancing activity given lower mortgage rates and Cleveland also noted continued strength in auto lending and increased demand for business loans.

Meanwhile, business loan demand was described as down somewhat in Philadelphia, Chicago, St. Louis, and Kansas City and was little changed in most other Districts. Loan standards were described as still tight for many classes of borrowers. That said, several Districts indicated that strong competition among banks for high quality borrowers was leading to lower rates and fees for these customers.

Source:  FRB: Beige Book, October 19, 2011.

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