Whether it is beige or khaki or pretty much any neutral or bland color, i have never been a big fan. We all know that when preparing real estate for the market in Upstate South Carolina, I am going to preach that neutral colors are best. If I had a dime for every contractor khaki paint job I had seen in the past year, I would be writing this blog from the beach. But another way that the color beige has turned my stomach lately is when I read the Beige Book.
The Federal Reserve Board recently released their report about the economy called the Beige Book.And as usual, it is filled with news that all of us need to be aware of regarding current conditions with the economy in America. Sometimes it has good news, and sometimes, like this issue, it is not too pretty.
Consider the Fed's views on real estate & construction:
Real Estate and Construction
Activity in residential real estate markets declined further. Most District reports highlighted evidence of very low or declining home sales, which many attributed to a sustained lull following the expiration of the homebuyer tax credit at the end of June. Some Districts, such as New York and Dallas, noted that the expiration of the tax credit created especially weak conditions for lower-priced homes, while others, including Philadelphia and Kansas City, identified the high end of the market as the primary weak spot. Residential construction activity declined in most areas in response to weak demand. Cleveland, St. Louis, and Minneapolis were the exceptions to this pattern of declining activity, with reports from their contacts indicating that residential construction activity improved of late. Inventories of available homes rose in general, although the availability of new homes in Atlanta was held down by the slow pace of new home construction. Price movements were mixed, with most Districts reporting stability or declines of late; a few, notably Boston, Minneapolis, and San Francisco, noted that prices rose in some areas compared with the previous reporting period or last year. Richmond reported that recent home sales were "dominated by foreclosure and short sales," and Chicago reported an increase in the supply of foreclosed homes for sale.
Demand for commercial, industrial, and retail space generally remained depressed. Vacancy rates stayed at elevated levels in general and rose further in a few Districts, placing substantial downward pressure on rents. Asking rents continued to decline in parts of the New York and Kansas City Districts. High vacancies and negative absorption held nonresidential construction activity to the bare minimum in most Districts. A few Districts reported exceptions to weak conditions. Cleveland noted improved construction activity for industrial use and educational infrastructure; this raised overall activity above year-earlier levels and prompted modest hiring by builders. Chicago reported an increase in inquiries for commercial redevelopment and rising construction activity for public projects, but Richmond reported that state and local governments cut back on construction projects.
Does this sound very positive to you? Considering the Fed says that they saw continued growth in national economic activity during the reporting period of mid-July through the end of August, but with widespread signs of a deceleration compared with preceding periods.And without a doubt, real estate might be considered one of the areas that is a sign of deceleration. But is it the same in Upstate South Carolina as elsewhere in the country? Well yes and no. The banks being jerks about lending still continues. And while YTD home sales are actually above the 2009 levels at this point, we are still looking at over 20 months of inventory. But is months of inventory a good indicator of the housing market anymore?
I am starting to think that for certain areas in Upstate South Carolina, months of inventory may not be as helpful in determining the health of the market as we might believe. With sales being so slow, but prices not plummeting since we did not experience a bubble of the proportion that other areas did, it may be that relying on just this statistic could be misleading.
If we look at all the indicators in the Beige Book besides real estate, it appears that there are some positive signs. But how positive the news is can be debated since of the 12 regions the Fed tracks, economic activity was up in seven and had slowed or was mixed in five. Not an overwhelming majority by any means.
Unlike many times in the past where real estate would lead the country out of a recession, it is different now. It may be that the real estate market is going to be the last sign of the economy recovering. And with the upcoming elections, it may be next year before we really know which direction the country and the economy is headed. I hope not but it just might turn out that way.
