Fed Says Residential Real Estate Remains Weak

In its July Beige Book report, the Federal Reserve reports most residential real estate activity was little changed and remained weak, although construction and activity in the residential rental market continued to improve since the previous Beige Book.

For six Districts, activity in the nonresidential real estate market has improved slightly for specific submarkets, although conditions generally remained weak across all twelve Districts.

The Fed says since the last Beige Book, overall loan volumes have increased in three Districts, decreased in two Districts, and were relatively flat, often with mixed trends across the banks' portfolios, in five Districts. Credit quality was steady or improving.

Residential real estate sales in almost all Districts were little changed from the last Beige Book. Activity edged up in the Richmond, Atlanta, and Minneapolis Districts. Of the Districts reporting on home prices, most said that they were flat or declining. The Boston and Richmond Districts reported steady prices; the Philadelphia and Atlanta Districts reported that prices were steady to down slightly; and the Kansas City and New York Districts reported that prices were down. Increasing inventories of unsold homes in the Boston, New York, and Kansas City Districts have restrained building in the single-family housing sector. Residential construction activity overall was mixed, though it increased in the Minneapolis District. Since the previous Beige Book, construction and activity in the residential rental market have continued to improve in the New York, Chicago, Dallas, and San Francisco Districts.

Nonresidential real estate activity improved somewhat in the Boston, Philadelphia, Cleveland, Chicago, St. Louis, and Dallas Districts. The Chicago District reported strong demand for industrial facilities, particularly from the automotive sector. The Philadelphia District reported improvements in terms of lower vacancy rates for office space, industrial space, and apartments; the Chicago District reported generally lower vacancy rates. The New York, Richmond, Atlanta, Minneapolis, Kansas City, and San Francisco Districts all reported generally weak activity in nonresidential real estate. Construction in the Minneapolis District stalled in areas because of flooding and unavailability of state building inspectors due to the Minnesota state government shutdown. Health care and apartment construction was a bright spot for the Atlanta District. Activity was weak in the Kansas City District, but firms that supply construction materials reported increased sales and stable prices. San Francisco reported stable but high vacancy rates in many parts of the District.