Housing markets generally remain on the decline, prices are falling in some areas, new home construction is weak, the mortgage market is mixed and only a few areas show strong demand for owner-occupied housing, according to a federal report on a dozen U.S. regions.
The Federal Reserve's last Beige Book report for 2006 is as grim as ever and based on Anecdotal information on current economic conditions in each of the 12 Federal Reserve districts.
The report is compiled from district bank and branch directors as well as interviews from key business contacts, economists, market experts, and other sources to examine a host of economic sectors including manufacturing, technology, labor, consumer spending, retail, services, tourism, banking, finance and residential and commercial real estate, among other sectors.
Based on the report, here's what's reported in the residential real estate sector in each district.
First District--Boston
Little was offered on the Boston and New England areas' residential real estate market, but the commercial sector was "upbeat" as vacancies continued to fall with rents up or stable. Rents had risen so much this year in downtown markets that more and more tenants were moving to suburban spaces.
Commercial investment remains "remarkable" as investors expect strong returns going into 2007.
The Office of Federal Housing Enterprise Oversight reported that third quarter home prices in New England revealed the smallest gain from the second quarter, compared to other regions. Among the five states that saw home price declines from the second to the third quarter this year, three of them were in New England.
Second District--New York
New York state also had a quarter-to-quarter home price decline, according to OFHEO, but the Beige Book reveals a mixed housing market -- tighter rents but sales pickups in the co-op and condo market. Northern New Jersey, however, continues to reveal a "sluggish" housing sector as single-family permits fell "sharply" in the third quarter as multi-family permits remained "strong."
Builders are offering steep discounts on new homes as selling prices have dropped below last years in New Jersey. Conversely, New York home prices remain moderately above last years, even with high inventories.
Third District--Philadelphia
Sales were declining in November representing a sharp slow down that began in the summer. Inventories are up for existing homes and home builders reported "significant" increases in cancellations and are reducing prices to move homes.
"Homebuilders and real estate agents expect the pace of sales to slow further during the winter. While most expect sales to recover next spring, several said they do not anticipate a substantial rebound."
Fourth District--Cleveland
Since early October, half of the Feds contacts report a pick up in home sales while the other half reports slow or declining sales. Builders expect that the correction will continue until at least mid-2007. Backlogs for builders have decreased about 30 percent as builders discount home prices by 5 to 8 percent.
Fifth District--Richmond
Residential mortgage lending has tightened and volume is "weak," but some increased demand in the new homes sector helped to stabilize loan volume. Contact reported builders slashing home prices prompted more sales. The tighter money approach focused on properties, rather than applicants.
Home sales were done 17 percent in the nation's capital from a year ago and some say the trend will persist for two more years. Richmond, VA, contacts said home sales fell below 2005 levels. Buyers were picking apart resale home prices. Greenville, SC's growing economy, however, kept home sales in the positive category.
Sixth District--Atlanta
Florida was the hardest hit market in this region, experiencing the "most significant declines" with condos feeling the brunt of the downturn. New home construction was well off last year's frenzied rate. Weak market conditions are expected to "persist" for another six months, or at least over the next several months.
Seventh District--Chicago
Residential construction and real estate activity continued to decline in most areas. One exception was Milwaukee, where home builders reported high traffic through model homes and strength in the construction of upper-end homes. One contact said that lot sales were soft and that some people who already owned lots were waiting for construction costs to come down before building. Overall, bankers noted "stagnation" in mortgage applications for home purchases with demand for home equity loans also declining.
Eighth District--St. Louis
The district was mixed. Year-to-date home sales in October in Memphis were up 8 percent, but down 1 percent in Louisville and down 3 percent in Little Rock and St. Louis. In September, year-to-year building permits declined 33 percent in Louisville, 23 percent in St. Louis, 12 percent in Little Rock, and 11 percent in Memphis. In contrast, permits increased roughly 3 percent in Jackson, Tennessee.
Ninth District--Minneapolis
"Residential real estate continued to slide." The median home sales price for Minneapolis-St. Paul fell 1 percent in October, and closed sales were down almost 20 percent. In Billings, MT, home sales were down slightly from a year earlier, but dollar volumes were down more. More than 75 percent of respondents in Minneapolis expect housing starts to be down in their communities this year, but most don't expect that to adversely affect their sales, profits, investment or hiring.
Tenth District--Kansas City
Home starts continued to drop and were below year-ago levels. Residential real estate agents reported continued declines in home sales, with additional decreases anticipated. Inventories of existing homes were still well above year-ago levels but largely unchanged from the previous survey. Home prices were steady in most cities and still well up from a year ago in Albuquerque and Oklahoma City. Colorado, however, reported moderate price declines and expected further easing in the future.
Eleventh District--Dallas
Dallas was also mixed. Sales are still strong in Houston, but down "significantly" in the Dallas/Fort Worth area. Buyers are shunning lower-priced homes and home builders and real estate agents noted increased uncertainty and uneasiness among buyers, but blamed that on reports of weakness in other parts of the country.
Meanwhile, apartment demand remained solid as rents rose. Even after Katrina evacuees departed, apartment occupancies are at or above 90 percent in most Texas metros.
Twelfth District--San Francisco
The pace of home sales and price appreciation continued to slow for existing and new homes, with particularly weak conditions in the new home segment. Home builders have been offering significant incentives amounting to as much as 10 percent of the listed prices. Residential construction activity has fallen substantially, in line with reduced demand.
Growth in commercial and industrial loans continued to offset declines in residential mortgage originations. Contacts provided scattered reports of delinquencies on loans to home builders.
