Fed’s Beige Book Points to Housing as Recovery Stumbling Block

The ""Federal Reserve"":http://www.federalreserve.gov released its latest rendition of the popular ""_Beige Book_"":http://www.federalreserve.gov/fomc/beigebook/2010/20101201/default.htm Wednesday. Economic conditions across the country were described as ""continuing to improve, on balance."" On the housing front, though, contacts in the field said markets remain ""depressed"" and have weakened further since the October report.
[IMAGE] Beige Book findings are based on anecdotal information gathered by the 12 Fed districts from businesses and contacts outside the Federal Reserve. Data included in the latest version covers the reporting period from early October to mid-November.

Residential real estate activity remained at a “low level” in all districts. The Philadelphia, Atlanta, St. Louis, and Minneapolis districts reported further weakening in home sales. Boston, New York, and Richmond characterized markets as “soft.” Cleveland, Kansas City, Dallas, and San Francisco described their markets as “sluggish.” The Chicago district reported that high inventories of unsold homes continued to be a drag on local markets. Reports on residential property prices were mixed.

In the ""Atlanta district"":http://www.federalreserve.gov/fomc/beigebook/2010/20101201/6.htm, comments from residential brokers indicated existing home sales have weakened further. Many brokers, most notably in Florida, reported that recent servicer moratoriums on distressed sales led to a stall in activity. Despite weak buyer traffic, the outlook for sales growth over the next several months improved somewhat from representatives throughout the region.

Contacts from the ""Boston area"":http://www.federalreserve.gov/fomc/beigebook/2010/20101201/1.htm continue to attribute home sales declines to the expiration of the tax credit. Respondents there expect year-over-year declines for the rest of the year and worry that 2010 sales will be lower than 2009. At the same time, the median price of homes and condos is edging up in most parts of the region, but some contacts say the rise is due to increased activity in higher-end properties.

The availability of mortgage financing, particularly for condominiums, remained a constraint for homebuyers in the ""Chicago district"":http://www.federalreserve.gov/fomc/beigebook/2010/20101201/7.htm, although lower mortgage rates led to an increase in refinancing. Residential development of new properties was minimal, as builders were instead concentrating their work on existing distressed properties.

In the ""Cleveland area"":http://www.federalreserve.gov/fomc/beigebook/2010/20101201/4.htm, most new home sales are occurring in the move-up buyer categories, with a majority of the

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contacts there reporting that they have lowered the list prices of their homes.

In the ""Dallas district"":http://www.federalreserve.gov/fomc/beigebook/2010/20101201/11.htm, Realtors said the higher end of the market is selling better, a reversal of the late 2009 and early 2010 trend. Respondents said lenders in the Dallas district are still requiring a 20 percent down payment in most cases, which doesn’t bode well for the entry-level homebuyer.

Home prices in the ""Kansas City district"":http://www.federalreserve.gov/fomc/beigebook/2010/20101201/10.htm edged down and sales continued to fall heading into the typical winter lull. Contacts there noted that the starter home market remained active, but long lead times for selling mid- and upper-priced homes were boosting inventories and limiting ""move-up"" opportunities.

Residential real estate activity in the ""Minneapolis district"":http://www.federalreserve.gov/fomc/beigebook/2010/20101201/9.htm dropped due in part to problems closing transactions for bank-owned properties. October pending sales in Minneapolis-St. Paul fell 36 percent from the previous year, while inventories increased and prices were flat. Sales decreased slightly in Sioux Falls, but average prices increased.

Housing markets across the ""New York district"":http://www.federalreserve.gov/fomc/beigebook/2010/20101201/2.htm were described as “steady to softer” since the last report. Prices have drifted down across much of upstate New York. Buffalo-area Realtors report weakening for lower-priced homes. In northern New Jersey the market is still largely composed of distressed sales. Activity in New York City's co-op and condo market has slipped more than the seasonal norm, though a recent flurry of activity is reported for homes in the range of $8 million or more.

In the ""Philadelphia district"":http://www.federalreserve.gov/fomc/beigebook/2010/20101201/3.htm, sales of higher-priced homes have been slower than sales of lower-priced homes. Property prices have been flat to down in most markets, although contacts noted that the rate of price decline has eased recently. The widely shared view among agents there is that the real estate market will not come back until economic conditions improve and there are more jobs.

Most Realtors in the ""Richmond district"":http://www.federalreserve.gov/fomc/beigebook/2010/20101201/5.htm continued to report limited sales activity, but several indicated that consumers have started to shop for homes again. Several agents noted that more sellers were opting instead to rent their properties.

Activity in the residential real estate markets of the ""San Francisco district"":http://www.federalreserve.gov/fomc/beigebook/2010/20101201/12.htm generally remained unchanged at very low levels. The pace of home sales moved very little, despite improved affordability from low mortgage rates and past price declines. Continued high rates of foreclosure caused the availability of new and existing homes to remain elevated.

Home sales declined throughout most of the ""St. Louis district"":http://www.federalreserve.gov/fomc/beigebook/2010/20101201/8.htm. Compared with the same period in 2009, September 2010 year-to-date home sales were down 7 percent in St. Louis, 1 percent in Little Rock, and 4 percent in Memphis, but increased 8 percent in Louisville.