Beige Book Illustrates Weakness in Real Estate, Pickup in Refinancing

The ""Federal Reserve"":http://www.federalreserve.gov released a new market-gauging rendition of its Beige Book Wednesday. The publication recounts signs of ""slow to moderate"" economic growth across 11 of the 12 Fed districts. The St. Louis district was the lone dissenter, reporting a decline in economic activity.

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Residential real estate activity overall was described as ""generally sluggish,"" while commercial real estate activity was depicted as ""lackluster"" across most of the nation. Mortgage refinancing, however, was said to have grown at a ""rapid pace.""

""Beige Book findings"":http://www.federalreserve.gov/fomc/beigebook/2011/20111130/default.htm are based on commentary and observations collected by the 12 Fed districts from businesses and contacts outside of the central banking system. The latest version covers the reporting period from early October through mid-November.

Overall bank lending increased only “slightly” since the last report, according to the Federal Reserve. However, one bright spot could be found in the refinancing of home loans as homeowners looked to cash in on the period’s rock-bottom interest rates.

From the previous report issued in mid-October, the Fed described loan demand for the most part as “declining.” Then too, the one exception noted was an increase in mortgage refinancing in many districts, but even since then, Fed contacts are seeing greater demand from homeowners applying for a new refinanced loan.

Changes in credit standards and credit quality varied across districts. Philadelphia, Kansas City, San Francisco, and Dallas all reported improvements in loan quality, with Dallas contacts touting a decline in problem loans.

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Cleveland, Chicago, and St. Louis noted relatively unchanged credit quality. Boston, Richmond, and Atlanta saw some tightening of lending standards.

In New York, bankers reported declining delinquency rates for commercial and industrial loans, but no change in delinquencies for other loan categories.

The central bank says residential real estate activity increased somewhat, but conditions were varied across districts.

Philadelphia, Richmond, Minneapolis, Kansas City, and Dallas reported improvements in their residential real estate markets. New York, Boston, Cleveland, and San Francisco reported flat activity at relatively low levels, while Atlanta and St. Louis indicated decreased sales.

Single-family home construction remained weak, while multifamily construction picked up in New York, Philadelphia, Cleveland, Chicago, and Minneapolis.

On the commercial real estate front, Boston, New York, Chicago, Minneapolis, and San Francisco indicated roughly unchanged activity. Atlanta and Kansas City noted slight improvements. Philadelphia and Dallas reported mixed activity. Richmond and St. Louis noted that vacancy rates increased.

In terms of labor markets, hiring was generally subdued, but some firms with open positions reported difficulty finding qualified applicants.

Stable employment levels or subdued hiring were mentioned by New York, Philadelphia, Cleveland, Atlanta, Chicago, and Dallas. Assessments of labor market conditions were mixed in Richmond and St. Louis, while Minneapolis reported reduced availability of labor.

In Boston, demand for workers at services firms grew, but hiring among manufacturers was limited. In Kansas City, hiring plans among manufacturers remained solid, while expectations of future hiring among manufacturers in Philadelphia nearly doubled.

Meanwhile, Boston, Philadelphia, Cleveland, Richmond, Atlanta, and Minneapolis noted that some firms looking to fill open positions were having difficulty finding qualified workers, particularly for high-skilled manufacturing and technical positions. Atlanta noted there was growing concern that the skills of the unemployed were deteriorating.