Housing shines in Beige Book report

Although consumer spending and the labor market are still weak, the U.S. economy is showing signs of improvement in residential real estate and business services, according to a report by the Federal Reserve. The monthly survey of activity in 12 regional divisions of the United States, commonly known as the Beige Book, held up the housing market as its shining star, with sales of low and middle-priced creating a nationwide uptick in the residential real estate market.

“[Districts] reported that sales were boosted by the government’s tax credit for first-time home buyers,” the October report said. Resale activity edged up in parts of the New York district, and Chicago indicated that construction on existing developments has edged up.

New and existing-home sales remained flat in the Philadelphia region, while home sales continued to decline throughout the St. Louis district. Sales of higher-priced homes were very slow in Philadelphia, which noted that builders continue to offer increased buyer incentives. Sales of higher-priced homes were very slow in Philadelphia, Cleveland and Kansas City, while real estate agents in the Boston and Cleveland districts were uncertain about the future of home sales once the tax credit expires. Home prices continued to be depressed because of the volume of foreclosures and short sales.

Residential construction activity showed little improvement in most markets. Atlanta reported a lull, and Cleveland expected new home construction to proceed at a slow pace. St. Louis reported that home construction has declined, while in the Kansas City area, housing starts have stabilized.

Commercial real estate continued to weaken across all 12 districts, according to the report. An inability to obtain credit was often cited as a problem for businesses that wanted to purchase or build space. High vacancy rates were noted as a key concern, especially for landlords who were not offering concessions. And, while industrial real estate in the Richmond area was generally weak, renewed interest by retailers to revisit postponed expansion plans was also noted.

Finally, public nonresidential construction activity funded by federal stimulus projects was a source of strength in the Cleveland, Chicago, Minneapolis and Dallas districts, but gains were often offset by state and local government cutbacks.