Fed report shows cooling real estate markets
September 9, 2004
Banks find price moderation, slowing of home sales
There are signs of cooling in housing market activity, including signs of moderation in home-price appreciation or sales in several markets across the country, according to an economic report that is a collaboration of 12 regional Federal Reserve Banks. New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Kansas City and San Francisco all reported some moderation in home-price increases and/or home sales, according to this "Beige Book" report, and median home prices in Texas remained relatively flat.
But the market has still been very favorable, the report states. "Home price appreciation, home sales, and residential construction activity remained at high levels in most districts."
The Federal Reserve Bank of San Francisco prepared the report based on information collected from the regional banks, and information was collected prior to Sept. 1.
According to the New York regional report, New Jersey homebuilders say "the market for new homes remains tight and prices remain buoyant, reflecting escalating land costs. One contact expresses concern about affordability, noting that a growing proportion of buyers are opting for adjustable-rate mortgages. Lumber prices, though substantially higher than a year ago, have leveled off in recent months, but concrete prices have continued to rise."
And there is reportedly "some cooling in the resale market" for the region, "reflected in a growing gap between asking and offering prices and a rising number of homes on the market. Manhattan's rental market has continued to improve, particularly at the high end, and rents on new leases, though still down roughly 5 percent over the past year, have continued to rise in recent months."
In the Philadelphia region, sales of existing homes have been steady but "homebuilders reported a slowing in sales in August. Some builders said the slowing was primarily seasonal and they expect sales to pick up by the end of September. Builders reported that they have been raising prices in response to rising material costs and that the price increases have had little negative effect on sales. Both builders and real estate agents expect the pace of sales to remain strong unless mortgage interest rates move up significantly."
For the Cleveland area, the pace of home sales slowed in July and early August. "Sales during this period were also below those of the same period a year ago," the report states, and this slowing pace was evident at various price points. "Some builders suggested that the recent weakness reflected weaker economic conditions in the Midwest and reported stronger home sales for their firms elsewhere in the country," the report states.
Home sales slowed in some areas in the Richmond, Va., region but were vibrant in other areas. A real estate agent in Fairfax, Va., for example, said homes "seemed to be staying on the market a little longer," according to the report, while an agent in Odenton, Md., reported a strong market.
The Atlanta region reported some "deceleration" in the housing market in August, with areas in Florida reporting a low inventory and a strong market. "Increased building activity associated with the hurricanes will likely put additional strain on construction material and labor resources in Florida," the report states.
In the St. Louis region, "July year-to-date single-family housing permits were up in most of the District's metropolitan areas compared with July of last year. Year-to-date permits through July in the greater St. Louis area increased by 23.3 percent in July compared with the same period last year. Home construction in July increased by 31 percent in the Louisville metro area compared with July 2003, and contacts in southern Indiana and north central Arkansas reported that construction is still increasing in these areas," the report states.
In the Kansas City region, "single-family housing starts edged down in many cities and were also slightly below year-ago levels in a majority of areas," the report states. The Dallas region reported that apartment markets are suffering "as construction slightly outpaces the growth of demand." And the San Francisco region reported that the Southern California housing market is softening in some areas, as "the pace of home-price appreciation has begun to slow."
Copyright 2004 Inman News