Fed Beige Book: Real Estate, Broader Economy Growing

Real estate activity continues to grow, with all Fed districts except one reporting that residential construction expanding according to the Federal Reserve’s most recent Beige Book. The exception – the Kansas City District -noted that “increased lumber and drywall costs limited construction”. The Fed’s positive take on construction activity is consistent with December’s growth in housing starts.

The Beige Book also confirmed that existing home sales have expanded or held steady in 11 Districts. The Boston District “attributed strong sales growth to low interest rates, affordable prices, and rising rents.”

Lending activity continues to improve, albeit at a moderate pace. The Beige Book indicated that frictions in mortgage lending may be showing signs of recovering in certain regions of the country. Overall, loan demand was higher or held steady in nine of the ten districts. Credit standards remained “largely unchanged,” though two Districts, Atlanta and Chicago, reported that standards may have “loosened some”. In the Atlanta District, aggressive competition for highly qualified borrowers was leading a growing willingness on the part of banks to increase their risk tolerance and loosen credit standards.

For the economy as a whole, in its previous release, the Beige Book cited broad growth, but acknowledged that Hurricane Sandy disrupted activity in some parts of the economy. The picture is now more positive, with the Fed noting that “economic activity has expanded with all twelve districts characterizing the pace of growth as either modest or moderate.” In particular, “activity in the New York and Philadelphia districts has rebounded from the immediate impacts of Hurricane Sandy.”