Compared to earlier in 2011, the 12 Federal Reserve districts saw mostly expanded economic activity in late November through the end of the year, but the same cannot be said of the housing market.
The Fed’s most recent economic survey was encouraging, depicting an economy that has made a lackluster by steady rebound from a near re-bottoming in the spring/summer period.
But the optimism ended abruptly in the Fed’s so-called Beige Report when the category of “real estate and construction” came up.
“Activity in residential real estate markets largely held steady at very low levels, with the exception of further increases in the construction of multifamily residences,” the Fed reported. “The pace of single-family home sales remained quite sluggish throughout the country…”
The Fed finding is another reminder of the altered landscape of homeownership emerging out of the housing market collapse. Rental prices are anticipated to continue steady growth throughout 2012, while single-family home prices are seen as finding a bottom before year’s end.
Homeowners who have or will go through foreclosure are helping swell the ranks of renters. Moreover, a sluggish economy with high unemployment is keeping first-time homebuyers – or those “underwater” on their mortgages – from taking advantage of the most affordable single-family market in decades, as mortgage rates remain near record lows.
From the Fed’s report:
“Construction of single-family homes remained at depressed levels in most areas and fell further in some, such as the Philadelphia, St. Louis, Minneapolis, and Kansas City Districts. However, Cleveland reported that activity improved during the past couple of months. In contrast to the soft market for single-family residences, the market for rental units tightened in some areas, such as the New York and Richmond Districts, and construction of multifamily residences rose in the Boston, Philadelphia, Chicago, Kansas City, and Dallas Districts.”
Some districts, such as Boston and Atlanta, noted home sales exceeding levels from twelve months earlier. But those increases were “mainly because the earlier levels reflected a substantial drop following the expiration of the homebuyers’ tax credit in mid-2010.”