Slow and Steady for Increasing Housing Prices

The economy is sluggish, but not necessarily for the real estate market.

The economy seems to be stuck in “moderate” or “modest,” at least if the most recent run of Beige Books from the Federal Reserve is any indication. That’s better than being stuck in neutral, and a lot better than being in reverse, but it’s still disappointing somehow. Strong growth should follow a deep downturn. That’s the way it’s happened for a long time for the American economy, but this recovery seems to be defying that pattern. According to the latest Beige Book—officially the “Summary of Commentary on Current Economic Conditions by Federal Reserve District,” which in this case is based on commentary collected by the central bank before July 3—economic activity expanded from mid-May through June in all 12 Federal Reserve Districts. But the adjectives of choice to describe that growth (again, in most districts) was “moderate” or “modest.”

Improvements in consumer spending varied by district, the report said. In some places, low energy prices helped boost spending, while some border districts noted weakness tied to the strong dollar. Automobile sales increased almost everywhere, which dovetails with other recent data on healthy car-buying patterns nationwide. Auto manufacturers and industry suppliers in some places benefited from these sales trends, with the exception of Cleveland, which reported year-over-year declines in production at auto assembly plants. Otherwise manufacturing activity was uneven across districts. Tourism expanded in most regions, except in New York, where activity slowed (for some reason).

While the economy as a whole might be stuck in a sluggish moderateness and modesty, reports on residential and commercial real estate markets were more generally more positive, though not quite everywhere. Home sales increased for most districts, although Philadelphia and Dallas reported mixed sales trends, and New York reported a decline in sales volume (the districts, it needs to be noted, typically include much more territory than the city they’re named after). Most districts reported home price appreciation, though not too much—again, that jibes with data from other sources that report a slow but steady appreciation in home prices. Residential construction activity varied across most of the country.

Commercial real estate activity increased at a “modest” pace for several districts, according to the Beige Book, while non-residential construction, especially multifamily, was strong in many places. Several districts, including Chicago, St. Louis and Kansas City, reported that commercial real estate activity was mostly positive. Low and declining vacancy rates were highlighted in several places, including the St. Louis, Kansas City and Dallas districts. New York reported that availability rates varied by submarket and property type. Rents were noted as being up slightly, increasing, or rising in Philadelphia, Richmond and Dallas.