Fed Measures Residential Real Estate

Economic activity increased in the U.S., according to the latest “Beige Book” from the Federal Reserve. The Beige Book is a Federal Reserve System publication about current economic conditions across the 12 Federal Reserve Districts. The Book is published eight times per year, and summarizes key economic conditions by each of the Fed districts. 

An important factor in economic conditions currently is the risk of a recession. The risk of a recession is on everyone’s mind, both in the U.S. and around the world. Realtor.com notes that Germany is already teetering on the brink of recession and the U.K. is facing unrest related to “Brexit”, while in the U.S., a rapidly escalating trade war with China is increasing fears. However, despite these risks, real estate should be safe, unlike in 2008.

Eight of the 12 Federal Reserve Districts reported modest to moderate growth. The majority of Districts indicated that manufacturing expanded, but that growth had slowed, particularly in the auto and energy sectors. New home construction and existing home sales were little changed, with several Districts reporting that sales were limited by rising prices and low inventory. Commercial real estate activity was also little changed on balance. Most Districts reported modest to moderate growth in activity in the nonfinancial services sector, though a few Districts noted that growth there had slowed. 

According to the Book, residential real estate markets saw ongoing price increases and mixed sales results; contacts in a couple of markets cited greater “balance” as local shortages of housing inventory eased somewhat. While retailers (including an auto dealer) and manufacturers said sizable tariff increases would pose significant problems if they occurred and many respondents cited uncertainty, outlooks remained mostly positive. 

Closed single-family sales were up year-over-year from November 2017 to November 2018 in Rhode Island, Boston, and Maine, and down in Massachusetts and New Hampshire. Residential markets in Rhode Island and Boston became more balanced in recent months, with growing supplies of homes for sale and moderation in the pace of home price appreciation. Despite a seller’s market environment, contacts said real estate was a preferred investment choice, given the volatile U.S. stock market.