The latest federal report on the state of the economy includes a widespread consensus that the housing market's immediate future is mired in high inventories, slow sales and flat and falling home prices.
Rather than statistical evidence, the Federal Reserve's "Beige Book", published eight times a year, is the only major economic report that gathers anecdotal evidence from 12 district bank and branch directors as well as economists, market experts and other sources in those districts.
Contacts discuss a variety of economic indictors, from agriculture, consumer spending and energy, to employment, major industry sectors' performance and wages.
This year's first Beige Book, covering the period from November to early January, offers this district-by-district snapshot of the residential real estate market.
For the most part, it can be summed up in three words: conditions look bleak.
First District: Boston
Residential real estate markets across New England were reported extremely soft.
Home prices were falling in Massachusetts. The median single-family price declined 4 percent from November 2005 to November 2006 -- the 10th straight month of price declines. Condominium prices increased nearly 2 percent for the November to November period but that was the first year-over-year price increase in five months.
Massachusetts, Connecticut, and New Hampshire are experiencing 10 percent or more reductions in year-over-year sales.
In Massachusetts, the average number of days on the market has increased to 130 days for single-family homes and 120 days for condos, both up by more than 35 days just since November. A Rhode Island source reported almost six times as many listings as last year. Massachusetts' single-family home inventory was up 25 percent from a year ago in November 2006, while the condo inventory was up nearly 37 percent.
It will be spring before indicators can give a clear indication of the New England market's direction for 2007, the report said.
Second District: New York
New York State real estate agents report that both sales and prices for single-family homes were lower than a year earlier in the fourth quarter. Manhattan's co-op and condo market were an exception but only because prices didn't change up or down very much.
Single-family home construction activity in New York and New Jersey continued to weaken in November, with housing starts slipping by 30 percent from a year earlier. Multi-family permits were flat.
In the resale market, discretionary sellers were bailing out and that has reduced the inventory of existing homes on the market, but the pool of new home buyers is also down.
Manhattan's apartment rental market is stronger with rents up 5 percent on the year with the greatest recent rent boosts in smaller, entry-level units. Few new rental buildings are under construction, but investor's condos are helping keep rents from skyrocketing.
Third District: Philadelphia
Little was discussed about the district's residential real estate market, except that mortgage lending for both new and equity loans has declined and the home loan lending sector was uncertain.
The related employment sector revealed increased health care costs as employees are being asked to burden a greater share of employers' expenses. Wage crimping means spending power shrinkage and that never bodes well for housing markets.
Fourth District: Cleveland
New home construction was mixed but most builders said a decline in sales continued into November. Virtually all builders expect 2007 to be on par with the second half of 2006. Material costs have leveled off with a decrease in lumber prices, which, along with decreased demand, means lowers prices. Builders' so-called "spec" building has, well, left the building.
Home prices in the district have been steady during the past six weeks and contractors have just about hit bottom on offering discounts and are looking to shrink their labor force rather than drop prices any further.
Fifth District: Richmond
House prices held steady across most areas of the district with residential real estate agents reporting a modest pickup in home sales since the last Beige Book.
Richmond sources reported December sales were 9 percent better than in 2005. Fairfax sources reported some rebounding in sales, as did housing market contacts in Charlotte and Asheville and Greenville.
The housing demand, a new loan program for lower income households and new housing developments coming on line helped boost the residential mortgage market in Greenville.
Reports from Fredericksburg, VA, and Tidewater indicated no real change in the number of housing starts or building permits, due to lackluster demand.
Sixth District: Atlanta
Florida reported the district's greatest declines in sales and new construction. Elsewhere, reports of sales and starts were mixed, while inventories of homes remained high throughout the area.
Most Florida real estate agents reported price reductions on existing listings and there were scattered reports of price declines elsewhere in the district.
Weak market conditions are expected to persist over the next few months in the district, except in southern Louisiana and Mississippi, where the outlook for residential construction was much stronger. Post-hurricane rebuilding efforts along the Gulf Coast continued to boost market activity.
Seventh District: Chicago
Even as much economic activity in the district expanded during November and December, residential construction and real estate activity continued to decline in most areas. Household lending also moderated.
Builders reported numbers of unsold, speculative homes remained high and that showroom traffic fizzled. Other contacts reported steady or declining home values in many areas. One Illinois source said many builders were adding non-price incentives to sell new homes.
Low mortgage rates didn't buoy the number of home loan applications and demand for new home equity loans declined.
Eighth District: St. Louis
Home sales declines were widespread in the district. Compared with the same period in 2005, year-to-date home sales in November 2006 were up 7 percent in Memphis, but down 4 percent in St. Louis; down 2 percent in Little Rock; and down 1 percent in Louisville. During the same period, housing permits fell sharply in every metro area compared -- down 30 percent in Louisville, 24 percent in St. Louis, 11 percent in Memphis, and down 10 percent in Little Rock.
Ninth District: Minneapolis
Residential real estate and construction activity decreased, but higher home remodeling activity was reported in several markets, including Rochester and Sioux Falls, as contractors shifted focus to the stronger remodeling sector.
Both bankers and builders in Bozeman said the residential real estate market is oversupplied.
Tenth District: Kansas City
Residential real estate activity remained on the decline in December and early January. Home sales declined and inventories remained above year-ago levels. Weakness reportedly were concentrated in the higher-priced segment with less anemia in lower-priced home market.
Home prices were unchanged from a month ago and remained below year-ago levels. Expectations for sales in the coming months were mixed. Some sources anticipate declining prices others were more bullish due to low interest rates and a generally positive economic outlook in the district.
Eleventh District: Dallas
Along with Richmond, more favorable comments came from this district, as overall construction and real estate activity was quite strong, but slowing. Home sales were moderating and inventories were creeping up.
Builders reported cancellation increases, fewer starts and most of the weakness in the lower-priced homes. The Dallas/Fort Worth market was the weakest metro area in the district, but other areas were still considered hot with rising home prices.
Apartment occupancies declined in Dallas and Houston, but the reverse trend was expected as temporary residents from Hurricane Katrina packed their bags. Rental occupancy rates remained above 90 percent with a 96 percent occupancy rate in Austin where rents were rising.
Twelfth District: San Francisco
The pace of home sales and price appreciation deteriorated further for existing and new homes in virtually all areas. The hottest areas, including parts of Southern California and San Francisco Bay area, saw only low, single-digit home price appreciation.
Homebuilders worked down unsold inventory by offering significant incentives. Condo starts were particularly hard hit by reduced starts as slower home sales overall clouded construction.
