Dallas Fed: Texas Housing Starts Rise

According to the Federal Reserve Bank of Dallas, the Texas economy continues to expand, although at a slow pace, with employment growing at a 0.1 percent annual rate in September. Texas home sales fell in September, but single-family permits and housing starts rose. Texas exports inched up in August, and manufacturing activity increased in October, according to the Texas Manufacturing Outlook Survey’s production index.

Housing starts in Texas rose 13.4 percent in September after falling 0.5 percent in August. September starts were up 24.2 percent from last year. Texas existing-home sales decreased by 2.1 percent in September and are up 11.8 percent year over year. Home inventories remain at 7.1 months. Texas single-family housing permits rose 2.6 percent from August to September.

Beige Book: Dallas District Sees Increase in Home Sales

Reports from the twelve Federal Reserve Districts indicated that economic activity continued to expand at a modest pace, though some Districts noted mixed or weakening activity. The St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco Districts all reported either modest or slight expansion. 

Residential real estate activity remained weak overall, although a few Districts noted some slight improvements. Contacts in the Boston, Atlanta, Minneapolis, and Dallas Districts reported an increase in home sales over the previous year's weak levels; however, the uptick in the Atlanta District was concentrated mainly in Florida. The remaining Districts all reported stable or slower sales from the previous survey period, with several citing greater economic uncertainty as the primary cause. 

Both the New York and Philadelphia Districts reported that a growing backlog of foreclosures in New Jersey continued to weigh down the housing market. Home construction was down or stagnant in most Districts, with the exception of Minneapolis and Kansas City. However, several Districts indicated an improvement in home remodeling activity, and the New York, Philadelphia, and Cleveland Districts reported increased demand for multi-family housing projects. 

Home prices were flat to slightly down in several Districts, although New York said prices in many areas edged higher but remained below year-ago levels. Contacts in the Boston District reported competitive pricing by sellers with even lower prices negotiated by buyers, but in the Cleveland District many builders have shifted away from discounting. Inventories were elevated or rising in the Boston, Atlanta, and Kansas City Districts, particularly for existing homes, and demand for apartment rental space increased in the San Francisco and Dallas Districts.

Commercial real estate conditions remained weak or little changed in most Districts, although some improvements were noted by New York, Minneapolis, and Dallas. Commercial real estate activity was sluggish in the Boston, Cleveland, Richmond, Atlanta, Kansas City, and San Francisco Districts. 

However, San Francisco noted some areas have benefited from technology sector growth, and Boston noted investor demand for prime office buildings remained strong. New York said office vacancy rates declined noticeably in the Buffalo and Rochester metro areas and modestly in Manhattan and Long Island. Lower commercial rents helped push down vacancy rates in the Kansas City District, and the Dallas District noted strong demand for leased space in Houston due to solid energy activity. 

Commercial construction was characterized as weak or limited by Cleveland, Atlanta, Chicago, and Kansas City, although Atlanta noted some strength in the healthcare sector. St. Louis described conditions as mixed, with some improvement in education and energy-related construction, while Minneapolis District contacts reported an increase in small retrofitting projects and rebuilding in flood-damaged areas. The Chicago District noted continued strength in industrial construction, particularly in the automotive sector. Credit for commercial development remained an obstacle for small retailers in the Richmond District, although Boston said aggressive competition among lenders led to reduced borrowing rates.

Fed To Keep Interest Rates Near Zero

The Federal Reserve Announced today it would seek to keep interest rates near zero into 2013.

The Fed says economic growth so far this year has been slower than expected, there's been a deterioration in overall labor market conditions in recent months, and the unemployment rate has moved up. Moreover, household spending has flattened out, investment in nonresidential structures is still weak, and the housing sector remains depressed.

In addition, downside risks to the economic outlook have increased. The Federal Open Market Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

The Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent. The Committee reports it currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

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.