Housing Mixed in Largely Positive Beige Book

The Federal Reserve reported continued growth in economic activity through the United States over the past month, reinforcing recent reports that the economy is moving in a more positive direction after a dismal first quarter.

The central bank's latest Beige Book report, released Wednesday, shows that economic activity expanded in nearly all 12 Fed districts, with New York, Chicago, Minneapolis, Dallas, and San Francisco all reporting moderate growth. The remaining districts characterized their own expansion as modest, except for Boston and Richmond, which both noted a slightly slower pace of growth.

Moving forward, most districts are optimistic in their outlook, the Fed said.

Reports on real estate activity were mixed across the country, though low inventory and rising home prices were common themes in most districts.

Boston, New York, Atlanta, Kansas City, and Dallas all reported that residential home sales remain constrained by dwindling inventory levels, though home sales in Atlanta and Kansas City accelerated at a slight to modest pace.

Home sales also rose in Philadelphia, Cleveland, and Richmond.

Sales softened in Boston, New York, Chicago, and St. Louis, with Chicago pinning some of the decline on rising home prices. Chicago posted double-digit annual price gains in the latest S&P/Case-Shiller report but remains among the cities with the lowest price indices as of April.

In a positive turn for supply, residential construction generally increased nationwide, with only St. Louis and Minneapolis reporting declines in activity.

Building challenges remain, however. Cleveland and San Francisco each reported that a shortage of vacant lots has held back further both in homebuilding, and Cleveland, Richmond, Atlanta, Chicago, Kansas City, and Dallas all reported a shortage of skilled construction and craft workers.

Districts were split on home lending activity. New York, Philadelphia, St. Louis, and Dallas all reported growth, while Richmond, Atlanta, and Kansas City posted slight declines in demand.

Credit quality was stable or improved in most areas, with Dallas and New York reporting moderate and strong improvement, respectively. Out of the 12 districts, only San Francisco posted a decline in credit quality.

At the same time, lenders in some districts are resorting to riskier terms to remain competitive, with contacts in Chicago and Philadelphia expressing growing concern.