July 29, 2014 | Updated 12:24pm

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Thursday, July 17, 2014, 11:58am

Fed Beige Book: Tepid Economic Growth In First District

Economic growth continued on a sluggish upward trajectory this summer, with demand for residential real estate remaining strong despite year-over-year sales declines and most contacts expressing cautious optimism about the economy, said the Federal Reserve in its most recent Beige Book report.

According to the Fed, commercial real estate contacts across the First District, which includes all of New England except for Connecticut's Fairfield County, gave mixed reviews. Leasing activity is down in Hartford in recent weeks, a fact attributed in part to usual seasonal patterns and in part to weak fundamentals.

In Boston, office rents continue to display a modest upward trend, thanks to a lack of new inventory coming to market. A limited amount of speculative office construction is underway in Boston's Seaport District, but contacts foresee constraints on similar construction in the form of high costs and limited financing. A regional lender to commercial real estate saw a surge in loan volume in recent weeks, a fact the contact attributes to changes in business strategy. According to contacts, hiring in both Portland and Hartford - and hence added office demand - held back by a scarcity of young, educated workers in these cities.

Contacts expect that Boston will continue to see at least modest improvement in commercial real estate fundamentals moving forward, while contacts in Providence and Hartford point to uncertainty surrounding the outcomes of upcoming elections in their respective states as a factor that could restrain economic growth in the near-term.

On the residential real estate side, realtors told the Fed of steady foot traffic at open houses and multiple contacts insist that demand remains strong despite year-over-year declines in sales in May in four of five reporting states: Connecticut, Massachusetts, Rhode Island and Vermont. Realtors cited inventory shortages, perceived lack of job security and economic uncertainty as the cause behind falling sales.

Contacts told the Fed that lack of inventory is a particular problem in Massachusetts, where listings have fallen on a year-over-year basis for 27 consecutive months. At the same time, contacts in that state report seeing increases in new listings in selected areas. Despite declining sales, the median sales price of single-family homes in May continued to rise on a year-over-year basis in Massachusetts. For the same period, median sales prices were flat in Connecticut.

Condominium sales in May are down relative to a year ago in Connecticut and Massachusetts. The median sales price for condos in May increased from a year ago in those states. Looking forward, contacts in Connecticut note they are busy with pending deals, while pending sales figures for June are below year-earlier levels in Massachusetts and Connecticut. Nonetheless, realtors across the region told the Fed they are hopeful that closed sales numbers for June will show improvement from a year ago.

Contacts in the retail sector report either slight declines in sales or modest increases. Tourism is enjoying very strong growth, while manufacturers report mixed results. Consulting contacts report moderate to strong growth. While manufacturers report no commodity price pressures, some retail contacts note price increases for some inputs. Some firms in the District are engaged in significant hiring and others are doing little to no hiring, largely in line with business performance.

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