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Beige Book Bleeds Red For Real Estate

by Peter G. Miller
November 28th, 2007

The Federal Reserve is out with its “Beige Book,” a look at how the economy is doing nationwide and in each of the 12 Federal Reserve Districts.

On the housing front, the Fed says that “Demand for residential real estate remained quite depressed, with only a few tentative and scattered signs of stabilization amidst the ongoing slowdown. Most Districts pointed to further increases in the inventory of available homes, with the earlier tightening of credit conditions for mortgage lending continuing to create barriers for some buyers. Consequently, prices on new and existing homes sold were reported to be down on a short-term or year-earlier basis in most Districts. The pace of homebuilding remained very low in general, and builders continued to shelve projects and lay off workers in many areas; contacts generally do not expect a significant pickup in homebuilding until well into next year at the earliest.”

Among scattered positive signs, said the Fed, “co-op and condo sales in New York City picked up during the survey period, Richmond reported favorable readings on home sales in a few areas, and Kansas City reported that home inventories fell a bit in the Denver metro area. Weak home demand had mixed effects on conditions in rental markets: Chicago reported that builders’ conversions of new homes to rental property put downward pressure on rents, while Dallas noted that demand for apartments picked up, in part because some potential homebuyers are unable to qualify for mortgages.”

Plainly one of the reasons for falling demand is that exotic financing has largely dried up. The toxic loans of the past few years are a vanishing species, while FHA loans sparkle and shine.

For the full report, go to:

http://www.federalreserve.gov/fomc/beigebook/2007/20071128/FullReport.htm

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