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Fed Reports Winter Cools Inventories

Fed Reports Winter Cools Inventories

In its latest report on the economy, Federal Reserve economists report that winter weather has contributed to a slowing of real estate markets and inventories are low in most districts.

The Fed’s latest Beige Book reports that residential real estate markets continued to improve in several areas, albeit modestly. Boston and New York gave mixed reports on sales, and Philadelphia, Cleveland, Minneapolis, and Kansas City noted a decrease in sales. Many Districts cited low inventories of housing and continued home price appreciation.

Reports on residential housing markets were somewhat mixed. Many Districts continued to report improving conditions but noted that growth had slowed. Most of the Districts indicating otherwise attributed the slowing pace of improvement to unusually severe winter weather conditions. Home sales increased in Richmond, Atlanta, Chicago, St. Louis, and Dallas, while sales were down in Philadelphia, Cleveland, Minneapolis, and Kansas City. Boston and New York reported that the trend in sales for their Districts was mixed. New home construction increased in Richmond, Atlanta, Chicago, St. Louis, and Minneapolis, and remained flat in Kansas City, and was down slightly from the previous period in Philadelphia. Most Districts reported low levels of home inventories and indicated that home prices continued to appreciate. The outlook for sales and residential construction was positive in Boston, Philadelphia, Cleveland, Atlanta, and San Francisco.

Strong multifamily construction was cited in New York, Cleveland, Richmond, Atlanta, and Dallas, while Boston indicated that its pipeline of multifamily construction was declining. Dallas experienced rent growth above its historical average, while New York reported mixed trends in rent growth. Cleveland noted that it expects healthy growth in rents this year.

District reports of loan demand and volume were mixed. Demand for residential mortgages decreased in New York, Richmond, St. Louis, and Kansas City, and softened in Philadelphia and Dallas. Cleveland and Atlanta noted increased demand for new purchase mortgages, while mortgage refinancing declined in New York, Richmond, Atlanta, and Kansas City.

New York noted modest declines in delinquency rates. Cleveland reported delinquencies were stable or trended lower, and St. Louis indicated delinquencies for most types of loans decreased. Loan quality in Kansas City improved compared with a year ago and continued to strengthen in Dallas. Bankers in Cleveland and Atlanta voiced concerns about recently enacted regulations and the potential negative impact on lending.

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