Housing Remains Weak, Economy Slowing: Fed

The Federal Reserve’s latest Beige Book report, released Wednesday and containing updates on a range of macroeconomic factors spanning the twelve Federal Reserve Districts, paints a picture of a broadly slowing economy and a U.S. housing market that remains in the doldrums. Many districts described business conditions as “weak,” “soft,” or “subdued,” according to the Fed’s summary of district-level reporting. Telling in the data is a possible emerging trend towards slowing orders from overseas; exports have been one of the U.S. economy’s few bright spots in recent months. With the economy slowing, consumers are also limiting their spending to essential items, as well, according to the Fed report. See the full Beige Book. Real estate, mortgage lending weak-to-weaker The report also provided evidence that residential real estate has yet to turn around; demand for housing was reported to be still moving down in Boston, New York, Chicago, St. Louis, and San Francisco, while residential real estate activity was reported as “sluggish” in Philadelphia, Cleveland, Richmond, Atlanta, Minneapolis, and Dallas. Chicago reported a faster rate of decline in residential construction since the last report as well as delays and cancellations in residential building projects, while Richmond and Kansas City reported that lower and mid-price houses were selling at a better rate than more expensive houses. Atlanta and Dallas reported that inventories of unsold new houses were edging down, the Fed said. The Fed also noted “weakening demand for residential mortgages” in most districts, underscoring the effects of much tighter lending standards and the near-disappearance of the non-agency mortgage lending market. In particular, residential mortgage lending fell in New York and Richmond, remained slow in Chicago and Dallas, but gained slightly in Philadelphia, according to the Fed. Even in New York’s ultra-hot Manhattan, which has weathered the downturn far better than most local markets, the NY Fed noted signs of strain: “Manhattan’s rental market has slackened somewhat: average asking rents were reported to be running 2 to 4 percent lower in July and August than a year earlier, and the rental vacancy rate, though still below 2 percent, is reported to have climbed noticeably over the past year,” the report read. That said, the Fed’s districts were not unanimous in predicting further softening. Surprisingly, the Altanta Fed noted that “most contacts did not anticipate further significant weakening” in residential real estate, although it said that most prospects for the area’s market “remain subdued.” For more information, visit http://www.federalreserve.gov.