The latest Beige Book from the Federal Reserve Board, based on information collected before November 14, 2012, summarizes comments received from businesses and other contacts outside the Federal Reserve to provide a snapshot of the U.S. economy, and its outlook. The results are culled from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources in twelve major market sectors: Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco.
The summary for real estate and banking across all twelve sectors follows:
Real Estate and Construction
Overall, markets for single-family homes continued to improve across most Districts with the exception of Boston and Philadelphia. Residential real estate markets in the New York District were mixed but generally firm prior to the storm. Selling prices were steady or rising. Boston, New York, Richmond, Atlanta, Kansas City, and Dallas noted declining or tight inventories. The Cleveland District indicated that the number of single-family housing starts had increased since our last report and from a year ago; most sales contracts were in higher price-point categories. Similarly, Richmond noted more residential work in the high-end home category for the first time in three years, and builders cited significant pent-up demand in the first-time buyer segment. Atlanta indicated that existing home sales were up slightly compared to a year ago and reported that investors were more active in Florida than in the rest of the District. In Chicago, residential construction increased at a slow but steady pace in October and early November, and construction increased for single-family as well as multi-family homes. St. Louis reported that residential real estate market conditions continued to improve, and Minneapolis indicated that segments of construction and real estate were growing at a double-digit clip. Kansas City characterized residential real estate activity as brisk and noted that a solid rise in home sales had reduced home inventories. Dallas noted that single-family housing activity remained strong, with both new and existing home sales activity increasing. San Francisco reported that home demand continued to strengthen and that home sales continued to grow on a sustained basis in most areas, spurring new home construction. However, sales growth generally slowed for both the condominium and single-family home markets in the Boston District, and the Philadelphia District noted that October began as a disappointing month for some Realtors, only to be punctuated by Hurricane Sandy.
Construction and commercial real estate activity generally improved across Districts since the last report. Gains, albeit modest in most cases, were reported by Philadelphia, Richmond, Chicago, and Minneapolis. The gains among Cleveland's contacts were tempered by reports in recent weeks of a slowdown in inquiries and a decline in public-sector projects. Kansas City described activity as holding firm and noted that real estate markets remained stronger than a year ago. Demand for office and industrial space continued to increase in Dallas, although contacts at some businesses said they were "holding back on expansions due to uncertainty." Several Districts noted segments of little change in commercial real estate activity. Boston described market fundamentals as flat, and San Francisco depicted market conditions as stable but with pockets of strength for large infrastructure projects such as roads and bridges. Commercial and industrial conditions were mixed in the St. Louis District and throughout most of New York prior to the hurricane. New York added that, while office markets across upstate New York were unaffected by the storm, there were some signs of recent softening.
Banking and Financial Services
Loan demand generally was either mixed or slightly stronger across most Districts in recent weeks. Among those noting mixed results, New York reported that demand for consumer and especially commercial and industrial loans weakened, but commercial and residential mortgage demand was steady. Richmond said that a small commercial banker was encountering a slight improvement in overall loan demand but added that consumer loans were unchanged from "meager" levels and small business loans were virtually non-existent. Chicago noted that small business loan demand experienced modest growth, but a decrease in credit demand occurred among middle-market customers. According to St. Louis contacts, overall lending activity was essentially unchanged over the period. St. Louis added that, while credit standards for commercial and industrial loans were largely unchanged, both the demand for these loans and the number of inquiries ranged from moderately lower to moderately higher. Used car loan demand was weak in the Dallas District, although first mortgage and energy-related lending increased. San Francisco cited weak-to-moderate business loan demand, but consumer lending expanded further with the help of auto loans and home mortgage refinancing; however, San Francisco noted that lending activity as a whole was unchanged. Most remaining Districts, including Philadelphia, Cleveland, Atlanta, and Kansas City reported moderate increases in total loan demand. In the Philadelphia District, banks reported widespread bank and ATM closings due to Hurricane Sandy.
Credit standards and credit quality were somewhat improved, on net, since the last report. Chicago, St. Louis, and Kansas City noted that credit standards on most types of loans were unchanged, and Dallas cited a loosening of credit standards, which contributed to very competitive loan pricing. Atlanta cited contacts who reported that underwriting standards had become more restrictive and burdensome since its last report, both in terms of credit scores and information requests. With respect to loan quality, New York reported that delinquency rates increased in the consumer and commercial and industrial segments but held steady in the residential and commercial mortgage segments. Philadelphia contacts cited moderate improvement. Cleveland and Richmond noted improvements in delinquency rates across consumer and business loan categories. Richmond added, however, that some contacts were concerned that banks were increasing their risk exposure by making longer-term loans in an effort to get higher yields. Kansas City and San Francisco also mentioned moderate improvement in loan quality.
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