Beige Book: Real estate's lighter shade of blue

Mr. T's day in court

When the Federal Reserve Board hit the streets to collect economic information from professionals with boots on the ground, it found some anecdotal evidence of stabilization in the real estate sector.

by Broderick Perkins
© 2008 DeadlineNews.Com


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Deadline Newsroom - When the Federal Reserve Board hit the streets to collect economic information from professionals with boots on the ground, it found some anecdotal evidence of stabilization in the real estate sector.

According to the board's April 16, 2009 Beige Book, "Many Districts said factors such as home buyer tax credits, low mortgage rates, and more affordable prices led to a rising number of potential buyers. The Richmond, Atlanta, Minneapolis, Kansas City, and San Francisco Districts noted a modest improvement in sales in some areas."

Eight times a year, the Fed seeks out and summarizes comments about the economy from business leaders and other contacts throughout the 12 federal reserve districts. Comments are independent and not obtained from those working for the Federal Reserve system.

When those queried discussed the real estate sector, "there were some signs that conditions may be stabilizing."

The Beige Book reported:

• Even as new home construction activity fell further and inventories remained bloated, several districts, including Atlanta and Kansas City, said that inventories of unsold homes had turned down slightly.

• Home prices continued to spiral overall but in some areas prices were unchanged or declining at a slower rate, as low mortgage rates fueled some refinancing activity. "Outlooks for the housing sector were generally more optimistic than in earlier surveys, with respondents hopeful that increased buyer interest would lead to better sales."

• Commercial real estate battered by unemployment continued to deteriorate over the past six weeks as demand for commercial space continued to dry up. Reports of increases in subleases were up along with rental concessions. Conditions pressured commercial property values to fall and construction to slow. "Several districts noted increased postponement of both private and public projects. Nonresidential construction is expected to decline through year-end, although there were some hopeful reports that the stimulus package may lead to some improvement."

• In banking and finance, weaker housing loan demand ruled. However, in the districts of New York, Richmond, and Kansas City, demand for residential real estate loans was on a slight upswing and residential refinancing activity remained brisk. The loan pipeline, however, was clogged with more stringent appraisals and tougher underwriting standards.

Mixed bag of districts

A closer look at individual 12 districts revealed some optimism.

• The Boston district generated optimistic comments about an increase in open house attendance and low prices.

• New York district comments included worries about a sizable phantom inventory of apartments -- new condo units that are unsold but not yet listed, especially in Brooklyn. Sales in New Jersey were attributed to properties with fairly steep price reductions. In upstate New York, prices were steadier.

• In Philadelphia's district, open house looky-loos were more common, but perhaps because of a seasonal trend of buyers watching prices drop.

• In the Cleveland district, the only positive sign was builders being less pessimistic than earlier in the year. Commenters said the region is waiting for federal stimulus money to begin construction of low-income housing as general contractors worked with skeleton crews.

• Richmond commenters reported a "modest pickup" in home sales, but a more "significant increase" in higher priced homes. Some also reported increased activity in open house events and even multiple offers.

• Atlanta district home sales remained weak, but were up in select areas on a year-over-year basis, most notably in Florida. Inventories declined slightly in March.

• Chicago district's residential construction was minimal, but with some increase in model home traffic in recent weeks. Declining mortgage rates renewed refinancing and higher demand for home equity loans

• In the St. Louis district, residential sales were down as much as 30 percent as construction continued to decline. The Fed reported no good housing news from this district.

• Minneapolis area's residential market is in a virtual holding pattern with slow residential construction and housing permits down 44 percent from a year ago. February residential permits declined in Rochester, MN and Fargo, ND as well.

• Kansas City district home sales rose slightly from the previous survey, and expectations for future sales also improved, even as activity remained well below year-ago levels. Real estate agents reported better demand for lower-priced homes and foreclosed properties. "Mortgage originations increased sharply, with home refinances particularly strong."

• In the Dallas district, housing remained week, but commenters were more optimistic about the spring selling season than they were at the end of 2008. Home sales remain well below year-ago levels, but respondents noted that home buyer traffic was better than expected. Builders endured a "painful decrease in home production," with smaller developers shuttering their doors. Outlooks "remained grim" for 2009.

• The San Francisco district revealed continued weakness, despite "sustained sales gains in some areas," attributed to price declines, high rates of foreclosures and low mortgage rates. Overall, however, the level of new and existing home sales remained very low in most areas, as did construction activity for new homes.

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© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also a National Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!

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Word On The Street: Housing Market Grim

Instead of number rows, pie charts and bar graphs, another way to look at the real estate market is to get down to earth and put your ear to the ground. Read the Beige Book.

by Broderick Perkins
© 2008 DeadlineNews.Com

Deadline Newsroom - Want to know what the experts on the street are saying about the housing market?

Log onto the Federal Reserve's Beige Book and you'll get a one-of-a-kind, down-to-earth examination of the real estate market and its place in the greater economy.

Don't expect another statistically slanted state of the housing market. You won't get another mind-numbing numerical rendition of realty market conditions.

Instead, eight times a year, the Beige Book asks those with boots on the ground to scope out the real estate landscape and tell it like it is.

The feds gather anecdotal evidence from federal district bank and branch directors, economic and business contacts, economists, real estate market experts and others to compile what's perhaps the federal government's most digestible economic report.

The latest report is no exception. Concise and to the point, the sources say pretty much what you probably already know.

Manhattan's condo and co-op market is still hot with home price appreciation up 5 percent in the past year, but that's about it.

From the first district in Boston to the twelfth district in San Francisco, residential real estate markets in the New Year have been slow, slower and sluggish.

Market sources from Chicago, Cleveland and Richmond, Virginia report some growing interest in new home traffic, but that hasn't translated into greater sales.

Housing sales thus far this year were hit hardest in Boston, Minneapolis, Richmond, and St. Louis, according to the report.

Sources from Chicago, Kansas City, and Philadelphia reported particularly tight credit conditions as the primary reason for slow sales -- especially in the low and mid-price ranges.

High inventories made matters worse just about everywhere as residential construction declined or remained low.

It may be a lot easier to get what the Beige Book is saying, but the word on the street sounds pretty much like numbers on the spreadsheet.

• More housing trends.
• More from the Beige Book.

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© 2008 DeadlineNews.Com

Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews.Com, a real estate news and consulting service, and the new Deadline Newsroom, DeadlineNews.Com's new backshop. In both cases, it's where all the news really hits home.

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Blue Notes From the Beige Book

by Broderick Perkins
© 2007 DeadlineNews.Com

Deadline Newsroom – Using perhaps the gloomiest language yet this year, realty market sources on the ground around the nation found little cheer in a housing market that appears on the verge of hibernation.

Anecdotal evidence from the Federal Reserve's 12 banking districts suggests further that this winter's housing market could get slammed into a deep freeze that likely won't thaw in the spring.

As the housing market cycles down into what's traditionally the slowest buying season of the year, the seventh of the Federal Reserve's eight Beige Books a year tells the tale of a tired and trying housing market.

Tight credit and higher energy prices are the primary culprits blamed for turning previous market froth into a frosty precursor of what could become a Big Chill.

Adding commentary rather than statistical evidence about the nation's housing market, the Beige Book gathers anecdotal information on a variety of economic indicators, from agriculture, consumer spending and energy, to employment, industry performance and wages.

Comments are solicited from representatives of the reserve's dozen district branch banks as well as from economists, market experts and other sources in those districts.

District-by-district, from the October 17, 2007 Beige Book, here's what sources in the field had to say about the residential real estate market since August.

• Boston, First District -- There was some positive August-to-August data from state real estate associations showing increases in sales and median prices for homes and condos, but the Book reported that data conflicted with more comprehensive information that included foreclosure sales, for sale by owner listings, and new home sales. Sources say, overall, prices and sales are down in Connecticut, Massachusetts, New Hampshire and Rhode Island. Unfinished condominium developments (some with only 10 percent to 15 percent of units sold) are in "very bad shape" as talk heated up over converting condos to rentals.

• New York, Second District -- Housing markets were mixed with New Jersey home builders reducing construction levels. Builders "all but ceased seeking approvals" for new developments. New home prices fell 10 percent as new home and existing home sellers tried to get ahead of the market by pricing properties more realistically. New York State real estate associations said both sales of existing single-family homes and prices were down. Conversely, the Manhattan market remained steady and "relatively strong" with condo and co-op sales rebounding more than 60 percent from a year ago. Likewise some Manhattan rents were up 15 percent from a year ago due to a dearth of available units.

• Philadelphia, Third District -- A source said flatly, "the middle is dead" in the district's new and existing home markets with little more activity in the high and low ends. Builders reported making "large price reductions with little effect on sales." Exiting home sales declined since August in nearly all corners of the district. Sources did not expect a turnaround any time soon, due also to large inventories. Several sources said they expected housing demand to "remain subdued for some time." Buyers will "recognize a deal, if you give the houses away," said one source.

• Cleveland, Fourth District -- Sources said a late summer surge in sales was considered a seasonal adjustment rather than a trend. New homes sales were down compared to the same period last year, builders discussed reducing workforces, and cancellations and price discounts were up, but inventories were shrinking somewhat. Sources remained uncertain about the timing of a turn around.

• Richmond, Fifth District -- Area real estate agents reported "generally sluggish home sales," with two advising sellers "just sit and wait" and "stay where you are unless you absolutely have to sell." Scattered reports said conditions were improving and expectations were growing for improved home sales in the coming months. Home price appreciation was "very modest." Rents were reported as "firm" with vacancy rates "unchanged."

• Atlanta, Sixth District -- Home builders and real estate agents said new and existing sales remained well below year-ago levels in September as the pace of new home construction "continued to decline sharply" as inventories rose.

• Chicago, Seventh District -- "Residential construction and home sales continued to weaken in most areas of the District." Tightening credit for jumbo mortgage loans was specifically mentioned as contributing to the declines in local housing markets. Builders added price discounts and incentives, but showroom traffic became more sporadic and many customers were forced to withdraw from contracts after failing to sell their own home.

• St. Louis, Eighth District -- Home sales weakened more throughout the District. Compared with the same period in 2006, August 2007 year-to-date home sales increased 1.4 percent in Louisville, but declined 3 percent in Little Rock, 7.4 percent in greater St. Louis, and 13 percent in Memphis. Residential construction continued to decline. August 2007 year-to-date single-family housing permits fell in all major metro areas compared with the same period in 2006.

• Minneapolis, Ninth District -- Residential construction remained slow. The value of permitted units in the Minneapolis-St. Paul area was down 38 percent in August from a year earlier. In contrast, a representative of a western Montana builders' association described recent activity there as consistent with recent strong years. In Sioux Falls, the value of new residential construction in September was down slightly from the previous year.

• Kansas City, Tenth District -- Residential real estate activity declined further, home sales weakened in September and were expected to slow further with flat home prices and rising inventories. Demand for low- to mid-priced homes remained strong, but sales of higher-priced homes were weak.

• Dallas, Eleventh District -- Lower priced homes felt most of the market softening as builders curbed construction and took the edge off inventories. Sources pushed out their forecast for recovery of the housing sector to 2009. Apartment demand picked up, and rental rates increased, causing sources to reveal optimism. There was concern that competition from rental housing will increase when the peak of adjustable rate mortgages reset in 2008.

• San Francisco, Twelfth District -- Tighter lending standards for home mortgages took greater tolls on sales of new and existing homes in most areas. Title and escrow sources said sales activity "fell as much as 40 percent" in some areas during the last few months. The reduced pace of home sales restrained price growth, particularly for lower-priced homes, which have been most affected by changing credit terms and conditions in the subprime-mortgage market.

• New Wave Optimism Means Calling An End To Housing Slump
• Economy 'Certainly Close' To Realty-Made Recession
• Beige Book: Lackluster Housing Market
• Homeownership Rate Slides Again
• State of the Real Estate Union: Beige
• Federal Reserve's Grim Real Estate Report


© 2007 DeadlineNews.Com

Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews.Com, a real estate news and consulting service, and the new Deadline Newsroom, DeadlineNews.Com's new backshop. In both cases, it's where all the news really hits home.

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