FED beigebook June 5, 2013
Overall economic activity increased at a modest to moderate pace since the previous report across all Federal Reserve Districts except the Dallas District, which reported strong economic growth. The manufacturing sector expanded in most Districts since the previous Beige Book. Most Districts noted slight to moderate gains in consumer spending and a moderate increase in vehicle sales. Tourism showed signs of strength in several Districts. A wide variety of business services expanded, and transportation traffic increased for producer, consumer, and trade goods. Residential real estate and construction activity increased at a moderate to strong pace in all Districts. Commercial real estate and construction activity grew at a modest to moderate pace in most Districts. Overall bank lending increased since the previous report. Credit quality and deposits increased, while credit standards were largely unchanged. Agricultural conditions remained mixed across Districts, as weather patterns varied. Overall activity in the energy sector was flat, and mining was down.
Hiring increased at a measured pace in several Districts, with some contacts noting difficulty finding qualified workers. Wage pressures remained contained overall, although several Districts reported a modest or moderate rise for selected occupations. Districts reported level prices to mild price increases; some manufacturers raised prices and some increases for input prices were noted.
Real Estate and Construction
Residential real estate and construction activity increased at a moderate to strong pace in all Districts.
Several Districts reported that higher demand and low inventory of homes available for sale are resulting in multiple offers on properties. Almost all Districts reported higher home sale prices. The Kansas City District reported concerns that appraisals were not keeping pace with price increases.
Foreclosed properties available for sale have declined significantly in the San Francisco District. The rental market remains tight with noticeable increases in rental rates in the New York District. Residential construction increased across all of the reporting Districts. Several Districts noted increases in multifamily projects. The Minneapolis District reported that many markets saw huge percentage increases in building permits from a year ago. Builders are cutting back on discounting in the Cleveland District. The Richmond District noted that increased construction has pushed up the price of building lots, and the Atlanta District reported that the lack of available lots has constrained building activity. The Philadelphia District commented that builders are facing problems, as the long housing recession has disrupted the supply chain for materials and the pool of skilled workers.
Commercial real estate and construction activity expanded at a modest to moderate pace in most Districts. The New York District reported that the Manhattan market is particularly robust. The Chicago District noted that an increase in demand for leasing was pushing up commercial rents, with strong demand from the health care sector. However, a market in the Boston District indicated no change in commercial rents or vacancy rates since the previous report. A market in the Richmond District had more hotels complete construction, and retail space was absorbed at a faster pace.
Commercial construction continues to expand. The Philadelphia District said that most construction activity is related to ongoing demand for industrial warehouse space, higher education facilities, and public utility infrastructure. The Atlanta District reported that most activity was coming from buildto-suit projects. The Dallas District noted an increase in office building construction. The Cleveland District said that many projects are in development, but new inquiries are weak. The San Francisco District noted that in some regions, construction of publicly funded commercial projects has slowed due to funding constraints from state and local governments.
SECOND DISTRICT--NEW YORK
Construction and Real Estate
Residential real estate markets in the District have strengthened further since the last report.
New York City’s home sales and rental markets have shown further signs of tightening—on both the sales and rental sides. Both apartment sales prices and transaction volume continue to run well ahead of a year ago in Manhattan and especially in prime areas of Brooklyn, reflecting a low inventory of available units. The rental market also remains tight: rents continue to rise at a roughly 6-7 percent annual rate in Manhattan and at a somewhat faster pace in Brooklyn; the Queens rental market is also seeing a pickup. Long Island, where the housing market had been generally flat until recently, has seen a recent sharp pickup in pending home sales and a drop in the inventory of homes for sale.
Northern New Jersey continues to see modest, steady improvement in its housing market. With a relatively low inventory of new homes, prices are rising gradually; however, a sizable overhang of distressed properties is reported to be restraining price appreciation. A real estate contact in western New York reports increasingly strong market conditions: inventories have fallen, bidding wars have become increasingly common, and home prices have been rising.
Commercial real estate markets across the District have also shown signs of improvement thus far in the second quarter. Manhattan’s office market has been particularly robust: vacancy rates are little changed, despite a sizable block of new development coming onto the market; asking rents
are up roughly 5 percent over the past year. Elsewhere in the region, office markets are mostly steady to stronger: vacancy rates fell in Long Island, northern New Jersey, Rochester and Albany and were little changed in the Long Island and Buffalo markets. One exception is the Westchester/Fairfield county market, where vacancy rates have risen to a ten-year high, and office rents have been declining. The market for industrial space has been steady to stronger: vacancy rates have declined modestly in the Long Island and Westchester/Fairfield markets and held relatively steady in northern New Jersey and across upstate New York.