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April 18th, 2013

Beige Book more positive than latest figures suggest



iStock_ConstructionWorkerThe Federal Reserve’s Beige Book, a report from the 12 Federal Reserve districts across the country, paints a much brighter picture of the current real estate and construction markets than what we saw in the latest pending home sales report.

While pending sales have leveled off to a certain degree, the Federal Reserve reports that conditions are continuing to improve across its 12 districts. But the one factor both reports have in common is that limited inventory is continuing to put a strain on housing growth.

Two things to keep in mind:

  1. The Beige Book is based on data collected on or before April 5.
  2. The latest pending sales report only covers through February, it’s a forward-looking index since it reflects the number of contracts, not closings.

Beige Book

According to the Beige Book report, “Residential real estate activity continued to improve in most Districts, and some Districts, including Cleveland, Richmond, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco, noted increased momentum since the last report. The New York District, in particular, noted especially strong improvement in residential real estate—both in for-sale housing and apartment markets.”

Pending sales

The last reading from the National Association of Realtors Pending Home Sales Index reveals that sales have pretty much flattened out, with the index dropping 0.4 percent in February after a January report was revised downward. However, it is currently 8.4 percent above year-ago levels.

“The volume of home sales appears to be leveling off with the constrained inventory conditions, and the leveling of the index means little change is likely in the pace of sales over the next couple months,” Lawrence Yun, NAR chief economist, said in a release.

New construction—the savior?

“Only new home construction can genuinely help relieve the inventory shortage, and housing starts need to rise at least 50 percent from current levels,” said Yun.

The Fed said new construction is indeed picking up steam, with only one district reporting a deceleration in activity.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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