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Posts Tagged ‘Beige Book’

[HUD] Housing Market Conditions, Loan Mod Redefault Risk

March 29, 2010 | 11:23 pm | |

[click to open map]

Today I received a nice note from an economist at HUD saying they are using the market report series we prepare for Prudential Douglas Elliman in US Department of Housing and Urban Development’s US Housing Market Conditions site, specifically their annual Regional Activity summary. Using-our-market-reports-aside, its a pretty good overview of what happened in each region. Sort of reminds me of a Beige Book-like housing analysis.

Not only that, but they provide access to a slew of data, research papers and reports as well as interactive maps that allow you to drill down to local levels.

This isn’t a sales pitch so check it out.

Here’s a hot button research paper on their site now:

Loan Modifications and Redefault Risk: An Examination of Short-Term Impacts

A primary concern with loan modification efforts is the seemingly high rate of recidivism. Within 6 months, more than one-half of all modified loans were 30 days or more delinquent and more than one-third were 60 days or more delinquent (OCC and OTS, 2008). Do these high rates of redefault imply that loan modifications are failing?

I would say as currently structured – YES.

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[Fed Up] October 2009 Senior Loan Officer Opinion Survey

November 11, 2009 | 9:31 pm | |

I’m thinking maybe credit isn’t going to lead us out of the recession. Banks are getting much enjoyment out of the wide spreads for now – gearing up for future carnage in commercial, auto loans, credit cards and industrial loans. This is apparent in the The October 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices that was released on Friday. Its kind of the Beige Book equivalent of anecdotal credit practices.

The report basically showed that fewer banks are tightening mortgage credit policy and mortgage demand is up. Of course this doesn’t mean much yet since bank lending policy can’t really can’t get much tighter.

In the October survey, domestic banks indicated that they continued to tighten standards and terms over the past three months on all major types of loans to businesses and households. However, the net percentages of banks that tightened standards and terms for most loan categories continued to decline from the peaks reached late last year.2 The exceptions were prime residential mortgages and revolving home equity lines of credit, for which there were only small changes in the net fractions of banks that had tightened standards.

About 25 percent of banks, on net, reported in the latest survey that they had tightened standards on prime residential real estate loans over the past three months. This figure is slightly higher than in the July survey but is still significantly below the peak of about 75 percent that was reported in July 2008. For the third consecutive quarter, banks reported that demand for prime residential real estate loans strengthened on net. About 30 percent of banks reported tightening standards on nontraditional mortgage loans, which represents a decline of about 15 percentage points in net tightening from the July survey. Only about 5 percent of domestic respondents, on net, reported weaker demand for nontraditional mortgages, the smallest net fraction reporting so since the survey began to include questions on the demand for nontraditional mortgages in April 2007.


[Beige Book] Less Bad = Begun To Stabilize, Moderated

July 30, 2009 | 12:57 am | |

The Federal Reserve just released the Beige Book which provides anecdotal commentary on the economy nationally and across the regions of its member banks.

Here’s real estate and mortgage excerpts from the overall report. The macro take away is the pace of economic decline has “begun to stabilize” or “moderated.”

Residential real estate markets stayed soft in most Districts, although many noted some signs of improvement.

Real Estate and Construction

Residential real estate markets in most Districts remained weak, but many reported signs of improvement. The Minneapolis and San Francisco Districts cited large increases in home sales compared with 2008 levels, and other Districts reported rising sales in some submarkets. Of the areas that continued to experience year–over–year sales declines, all except St Louis–where sales were down steeply– also reported that the pace of decline was moderating. In general, the low end of the market, especially entry-level homes, continued to perform relatively well; contacts in the New York, Kansas City, and Dallas Districts attributed this relative strength, at least in part, to the first–time homebuyer tax credit. Condo sales were still far below year–before levels according to the Boston and New York reports. In general, home prices continued to decline in most markets, although a number of Districts saw possible signs of stabilization. The Boston, Atlanta, and Chicago Districts mentioned that the increasing number of foreclosure sales was exerting downward pressure on home prices. Residential construction reportedly remains quite slow, with the Chicago, Cleveland, and Kansas City Districts noting that financing is difficult.

Banking and Finance

In most reporting Districts, overall lending activity was stable or weakened further for most loan categories. In contrast, Philadelphia reported a slight increase in business, consumer, and residential real estate lending. As businesses remained pessimistic and reluctant to borrow, demand for commercial and industrial loans continued to fall or stay weak in the New York, Richmond, St. Louis, Kansas City, Dallas, and San Francisco Districts. Consumer loan demand decreased in New York, St. Louis, Kansas City, and San Francisco, stabilized at a low level in Chicago and Dallas, and was steady to up in Cleveland.

Residential real estate lending decreased in New York, Richmond, and St. Louis. Dallas reported steady but low outstanding mortgage volumes, while Kansas City noted that the rise in mortgage loans slowed. Refinancing activity fell dramatically in Richmond, decreased in New York and Cleveland, and maintained its pace in Dallas. Bankers in the New York District indicated no change in delinquency rates in all loan categories except residential mortgages, while Cleveland, Atlanta, and San Francisco reported rising delinquencies on loans linked to real estate.

Banks continued to tighten credit standards in the New York, Philadelphia, Richmond, Chicago, Kansas City, Dallas, and San Francisco Districts; and some have stepped up the requirements for the commercial real estate category, in particular, due to concern over declining loan quality. Meanwhile, Cleveland and Atlanta reported that higher credit standards remained in place, with no change expected in the near term. Credit quality deteriorated in Philadelphia, Cleveland, Kansas City, and San Francisco, while loan quality exceeded expectations in Chicago and remained steady in Richmond.


[Market Report Pulse] Sales Contract Data Can Mean Nothing

January 16, 2009 | 2:44 am | |

One of the most sought after trending tools for housing markets is contract data. Not listing data, not closed data. Contract data.

Compile a lot of data across all regions, property types and price strata and you are golden. You are observing the market as close to the “meeting of the minds” as is humanly possible – you have its proverbial pulse.

I thought to write about the concept of reporting contract data after I got a call from The Real Deal about a new contract-based real estate market report. Their founder is a very creative, very smart and very successful marketer of real estate, first as an agent and then as a marketing expert for new developments. Visually, the report is beautifully done, consistent with the quality of their firm’s marketing materials and online presence. However, they might consider dropping the name of “real-time” from the report. It’s monthly. I understand the intention, but the use of the phrase “real-time” infers a live feed, which this report is not. Isn’t “monthly real-time” an oxymoron?

A quote from The Real Deal article:

It tracks contracts info. To me, that’s what reflects the marketplace and where we are currently, not closed information, which is actually a look back in history.

Another company attempted “real-time” a few years ago by treating real estate listings like the stock market and began publishing a “ticker” type interface. I have to give them credit for the innovation, but it never really got people’s attention.

But I digress

What is contract data exactly?

It’s a property sale with an executed (both parties signed) contract – It is usually 45-60 days ahead of a closing date if new development data is excluded. Actually this 45-60 day time frame is currently expanding as lenders become more difficult to deal with. New development data in the mix could lag the market by 1 to 2 years.

I sort of dealt with contract activity in the most recent market report numbers in my 4Q 2008 Manhattan Market Overview but not in the traditional sense of aggregating contract data and trending it.

Our appraisal firm began to see a pattern in late September 2008 where current contracts of properties we were appraising, were clearly lower than contracts signed in the summer of 2008. The range was roughly 15% to 20%. My 20% number has been widely referenced by the Fed, Goldman Sachs and others, and in fact, page one of AM New York published the number “20%” in red on the entire cover. But our conclusions were based on more of a case by case analysis, similar to a repeat sales analysis.

I don’t currently issue contract reports but I certainly aspire to, but only when I have credible results. Periodically I’ll see one of my appraisal competitors distribute a press release with their own contracts tabulated. I’ll see real estate brokers and marketing agents issue contract reports.

Readers oooh and ahhhh over the relevancy of contracts because the data is perceived to be fresh and current. In principle it is current, but in practice it is much more subject to skew than other data.

I also wonder why methodologies are never fully provided, especially those prepared by marketing groups or departments.

Here are the issues that make much market analysis of contract reports suspect, despite perhaps the best intentions of the authors.

  • Quantity of data — the key issue that makes much analysis unreliable – absent from the public domain.
  • Location of the data — contract data tends to be sourced from a few institutions or entities so its availability and the potential for skew is very serious.
  • Unit mix of the data — This is subject to skew depending on the source of the data – what type of business they have – who their customers are (low end, high end, studios, 3-bedrooms, etc.)
  • Source of the data — The four largest real estate brokerage firms probably account for 80% of all sales in Manhattan. I know each of the senior management teams so I am fairly confident they will not release contract data in bulk to anyone outside their company, especially to a competitor.

I have never met a broker that will share contract data in bulk because it can jeopardize their company’s sales and commissions. We are able to get contract data periodically, but not in bulk. If producers of contract reports can win me over on these key issues, I am ready to jump in with two feet. NAR publishes a pending contract index and frankly, not many people I know believe the results.

In other words, contract data is the Holy Grail, but I am not convinced it’s yet achievable as a reporting tool.

Now give me a sales contract specific to the appraisal we are working on and I am happy ’cause that’s a whole ‘nother story.

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[FedSpeak] Beige Colored Glasses

December 3, 2008 | 4:31 pm | |

The Federal Reserve just released the Beige Book, at 2pm today which provides anecdotal commentary on the economy nationally and across the regions of its member banks.

Here’s real estate and mortgage excerpts from the overall report.

Nearly all Districts reported weak housing markets characterized by reduced selling prices and low, but stable, sales activity.

Real Estate and Construction

Residential real estate continued at a slow pace nationwide. Sales were down in most Districts, but mixed activity was noted in the Boston, Atlanta and Minneapolis Districts. Boston, New York, Cleveland, Richmond, Atlanta, Chicago, Minneapolis, Kansas City and Dallas noted decreases in housing prices. Inventories of unsold homes remained high in the New York, Atlanta, Kansas City and San Francisco Districts, but declined in Chicago and Minneapolis. Philadelphia, Richmond, Chicago and Kansas City reported relatively stronger demand for lower- and middle-priced “starter homes.”

Commercial real estate markets weakened broadly. Vacancy rates rose in Boston, New York, Richmond, Chicago, Kansas City and San Francisco, but were mixed across markets in the St. Louis District. Leasing activity was down in almost all Districts. Rents fell in the Boston, New York and Kansas City Districts. Despite reductions in construction materials costs, commercial building activity declined in many Districts with tighter credit conditions as a factor.

Banking and Finance

Business and consumer lending activity continued to slow in most Districts. New York reported weakening loan demand in all categories, while Kansas City and San Francisco also witnessed substantial lending declines. Lending activity in other Districts was mixed among loan categories. In contrast, Philadelphia indicated that its banks saw loan volume rise in November, and some regional banks reported picking up new business borrowers. Cleveland reported that business loan volume has been steady to higher, and some bankers reported actively marketing their loan business.

Credit standards rose across the nation, with several Districts noting increases in loan delinquencies and defaults, especially in the real estate sector. Credit conditions remained tight. Chicago reported that FDIC actions and Federal Reserve lending had improved liquidity and slowed deposit outflows. Dallas indicated that government capital investments have led larger institutions to feel less constrained in their lending, while some smaller banks reported that scrutiny from regulators was making new deals more difficult to forge.

Here’s the NY District perspective from you know who.

A major residential appraisal firm reports substantial deterioration in New York City’s housing market over the past two months: prices of Manhattan co-ops and condos are reported to have fallen by 15 to 20 percent since mid-summer, though it is hard to get a clear handle on prices due to thin volume–much of the recent activity is reportedly from desperate sellers. Transaction activity has dropped off noticeably, and there has been a large increase in the number of listings. Some buyers that had signed contracts for units under construction earlier this year are having trouble getting financing at the contract price now that market values have dropped.

(I actually said 15%, ranging from 10%-20%)

Here’s the map (shades of beige, of course) in WSJ

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It’s The Beige Book…Oh, Snap!

April 18, 2008 | 1:30 am | |

Is it just me? Lately I’ve noticed a lot of (my) kids and a few adults inserting the words oh, snap into their conversations. In fact, even on twitter, it’s being injected into tweets. The phrase represents a pause in the conversation. Some sort of neutral placeholder…like the color beige is. Or could this simply be a wildly creative and inventive way for me to lead into the results of the current Beige Book?

Slowing housing with lower mortgage volume and tougher underwriting.

Oh, snap!

The Federal Reserve just released the Beige Book, which provides anecdotal commentary on the economy nationally and across the regions of its member banks.

I love it as a resource because it (gasp) doesn’t use numbers and gives us a reprieve from all of that. I’ve been interviewed for it for a number of years and find it to be an invaluable resource in understanding the state of the economy.

Here’s real estate and mortgage excerpts from the full report as well as links to the individual regions.

Real Estate and Construction

Housing markets and home construction remained sluggish throughout most of the nation, though there were few signs of any quickening in the pace of deterioration. Ongoing weakness in housing markets, in general, was reported in almost all Districts. Sales activity was generally reported to be declining in the Boston, New York, Philadelphia, Atlanta, St. Louis, Minneapolis, Dallas and San Francisco Districts, while Kansas City and Chicago noted slack demand and excess inventories. On the other hand, the Cleveland District saw some pickup in activity, while Richmond and Atlanta reported some pockets of improvement; Boston, Atlanta, and Chicago cited some recent pickup in traffic or buyer inquiries. New residential construction was reported to have remained at depressed levels, and none of the Districts reported any pickup since the last report.

Declines or downward pressures in selling prices were specifically reported in the Boston, New York, Philadelphia, Richmond, Atlanta, Chicago, Minneapolis, Kansas City, and San Francisco Districts. In particular, New York and San Francisco noted some incipient price declines in areas that had previously shown resilience–respectively, New York City and the Pacific Northwest, as well as Utah. On the other hand, the Cleveland District noted some stabilization in home prices.

Banking and Finance

Banks reported mixed trends in lending activity, with fairly widespread slowing in the consumer segment but some stabilization, at low levels, in residential mortgage activity. Overall lending activity was reported to have increased in the Philadelphia, Richmond and St. Louis Districts, but to have declined in the New York, Chicago, Kansas City and San Francisco Districts. Dallas described lending activity as steady but soft. Lending activity for new home mortgages, though generally characterized as sluggish, was reported to have stabilized in the New York, Cleveland, Chicago, and San Francisco Districts. Consumer loan demand, however, weakened in a number of Districts: New York, Atlanta, Chicago, and Kansas City.

Credit quality was reported to have deteriorated, on balance, since the last report. Increased delinquency rates were noted by New York, Philadelphia, and Cleveland, while Kansas City reported that loan quality remained lower than a year ago. Widespread tightening in credit standards was reported, especially on residential and commercial real estate loans. In general, banks were reported to be tightening credit standards in the New York, Cleveland, Atlanta, Chicago, Kansas City, Dallas and San Francisco Districts.


The Beige Book Goes Stag

March 6, 2008 | 11:04 pm | |

Stagflation that is.

The Beige Book was released today, an anecdotal description of the economies of the 12 member banks of the Federal Reserve. I’ve always liked it as a way to understand what is going on in the region. It is prepared 8x per year in advance of each FOMC meeting, where financial policy is set.

Here’s a summary graphic of each district’s condition in today’s Beige Book. Here’s a good summary article by the NYT’s Floyd Norris.

Residential real estate was reported to remain weak. Here’s an excerpt of all the references to residential real estate:

Residential real estate markets were generally weak over the last couple of months. Sales were low in every District with very few local exceptions. Sales declines were particularly large in the Boston, Minneapolis, Richmond, and St. Louis Districts; at least some respondents in each of these Districts reported drops in home sales of more than 20 percent year-over-year. Contacts in the Chicago, Kansas City, and Philadelphia Districts cited tight credit conditions as a reason for low sales; each of those Districts either reported or expected stabilization of demand for homes in the low and mid-price ranges.

Districts that reported home prices all saw overall declines; one exception was the Manhattan co-op and condo market, where prices increased 5 percent compared with a year ago. Inventories remained high as demand was still fairly low. A few contacts in the Chicago, Cleveland, and Richmond Districts reported an increase in inquiries, although this increase in traffic had not yet translated into increased sales. Residential construction declined or remained at low levels in most Districts.

Even as loan demand for new residential mortgages remained sluggish or declined, lower interest rates prompted increases in refinancing of existing mortgages in a number of Districts, including San Francisco, St. Louis, New York, Richmond, Atlanta, Cleveland, and Chicago. Cleveland cited a small rise in delinquencies, especially for real estate loans, and Atlanta reported an increase in mortgage delinquencies and foreclosures. New York, on the other hand, saw a rise in delinquencies for all loan categories except residential mortgages, which were unchanged. Tight credit standards were reported in the Atlanta, San Francisco, Kansas City, St. Louis, Chicago, Dallas, Richmond, and New York Districts. Kansas City indicated a worsening of overall loan quality, Chicago reported a deterioration of consumer loan quality, and Cleveland also saw a decline in credit quality for business customers and consumers. By contrast, Dallas reported sound credit quality.

There doesn’t seem to be a lot to cheer about, does there?

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[Federal Reserve] Real Estate Not The Only One Getting A Beige Eye

November 28, 2007 | 11:49 pm | |

The Federal Reserve released their Beige Book today, an anecdotal take on the US economy by each of its 12 member banks. Its a good “ground level” overview of the economy performed by their in-house economists. Its a must read because it clearly parses out the different sectors of the economy (not because they interview me).

The Fed Governors have been busy speaking this week, hoping to influence the markets and public sentiment. The Beige Book and Vice Chairman Kohn gave some hope today for those who feel there needs to be a rate cut. (hint: Wall Street)

In a speech in New York, Fed Vice Chairman Donald L. Kohn said the central bank would remain “flexible” and would “act as needed” to prevent the housing crisis and credit crunch from damaging the economy.

The DJIA jumped 2.6% today, the largest increase since 2003.

I have not yet been able to get my arms around the disconnect with understanding the economy without considering the impact of the deteriorating housing market. Some say the Fed is behind the curve.

Retail was spending was down on Black Friday even though Cyber Monday spending was up. The holiday seasons is expected to be off from last year.

American shoppers, lured by longer opening hours and deep discounts, turned out in greater numbers over the post-Thanksgiving weekend than they did last year — but the average amount they spent decreased, according to the National Retail Federation’s 2007 Black Friday Weekend Survey. The number of shoppers went up 4.8% to more than 147 million over the long weekend, but they spent an average $347.44, a 3.5% drop from 2006. Consumer spending is being affected by high food and energy costs as well as the housing slump.

Banking is already taking a big hit, primarily due to mortgages. According the FDIC’s release today:

Industry performance was hurt by asset-quality problems and volatility in financial markets during the third quarter. Almost half of all insured institutions reported year-over-year declines in earnings. Residential mortgage loans were the focal point of asset-quality problems. But delinquency and loss rates were up across all major loan categories,” said FDIC Chairman Sheila Bair. “Because insured financial institutions entered this period of uncertainty with strong earnings and capital, they are in a better position both to absorb the current stresses and to provide much needed credit as other sources withdraw. Going forward, the outlook for the industry depends on the severity of the housing downturn and the extent to which it spills over into the broader economy.

According to the Fed’s Beige Book, housing is spilling.

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, however, 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.

I worry that the Fed won’t take action quick enough though. A 25 basis point cut won’t cut it.

I have been worried about a recession for more than a year now. Since its been six years and many may have forgotten what a recession actually is. There is some argument that we are already in one but don’t yet know it.

UPDATE: As Lenders Tighten Flow of Credit, Growth at Risk [NYT]

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Reserve Judgement: The Econometric Disconnect And The Housing Market Reality

September 12, 2007 | 11:01 am | |

The release of the Beige Book (last week) is always a fun read (yes, I am admittedly, pretty boring) because it allows the Fed to present a regular anecdotal description of the current economy. I’ve provided feedback to the Fed for this publication for a number of years and enjoy the national perspective submitted by each of the member banks. However, one thing I worry about is their ability to forecast with the rapid changes of late in the economy. Bernanke seems to be resigned to relying on the numbers as they come in, which of course, is behind the curve. Its like relying on the upwardly revised 2Q GDP numbers made irrelevant with the credit meltdown under our belt in 3Q.

The financial markets are probably expecting a half point drop at the next FOMC meeting on September 18th, so the impact of a generic 25 basis point adjustment is probably already built in. The Fed seems to be saying they will take action but probably not as aggressive as 50 basis points (1/2 percent) A 25 basis point move probably means no real impact on investor confidence in mortgage paper quality, no impact on rising non-conforming mortgage rates, no change to the housing market. With the full force of the housing downturn not to impact the economy until 2008 when resets peak, anything short of 50 basis points will be invisible.

If we get what we (I) wish for, a 50 basis point drop might actually make everyone even more nervous. In other words, the markets may think the Fed must know something we don’t because thats a bigger drop than we have seen in a long time. Crazy, isn’t it?

Recent distress in financial markets has “deepened” the housing slump, but the overall economy has seen little impact so far, the Federal Reserve said Wednesday in its beige book report. That assessment suggests that while a rate cut in two weeks may still be likely, officials may not see the same need for aggressive easing that financial markets expect.

Whether its a 1/4 point or 1/2 point drop, its not going to make any immediate difference to the housing market. Its a baby step towards investors getting back in the game, even though it doesn’t resolve the main issue: mortgage portfolios are laced with crap (sub-prime tranches) that no one seems to have a handle on.

As far as the perception of a Fed rate cut being a Wall Street bailout, I disagree. Its a moot point. I am more worried about the overall economy. The impact of housing as a drag on the economy hasn’t hit full force yet. I suspect not until mid-2008 or 2009. Mortgage resets are reported to be peaking in 2008 and the impact of a significantly lower number of sales transactions is just now beginning to hammer markets that are already weak.

The housing market is anything but beige.

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Color Housing Any Way You Want, As Long As Its Beige

July 26, 2007 | 11:23 am | |

The Federal Reserve released its Beige Book yesterday, an anecdotal look at the economies in the regions of its 12 member banks. Its a good overview of the economy performed by their in-house economists who interview their contacts in each region to get a “ground level” sense of the major sectors, including: Consumer Spending and Tourism, Business Spending and Hiring, Construction and Real Estate, Manufacturing, Banking and Finance, Prices and Labor Costs, Energy and Natural Resources, Agriculture.

Five regions indicated that retail sales of items related to housing–such as furniture and home repair materials–were weak or declining.

Most Districts said that residential construction and real estate activity continued to decline on balance. Many Districts, however, noted increased activity in some individual market locales or segments. Atlanta, Chicago, St. Louis, and Minneapolis said construction decreased. Boston and Kansas City said housing markets remained “soft” and “weak,” respectively, while San Francisco indicated that residential markets were weak and had slowed further in some areas. New York said markets were mixed but stable. Two notable exceptions were the Cleveland and Richmond regions, which experienced slight increases in sales. Atlanta said home inventories remained high, as did Dallas (even after a slight decline in the recent period). Inventories increased in Kansas City, but they declined in New York, and contacts in Boston and Cleveland described the number of homes for sale as “normal” and “acceptable,” respectively. District reports on home price appreciation were mixed: Boston noted a return to price appreciation and Kansas City indicated slower rates of decline. But Richmond and Chicago reported slower rates of increase or the beginning of declines, and in the Dallas District, some contacts projected a correction in entry-level home prices. Looking ahead, contacts in the Cleveland District were uncertain about how long it would be until the market turned, and analysts in Dallas had revised their housing outlook down. Contacts in Atlanta expected further declines overall, though they anticipated the market in Florida would be flat.

…manufacturers of housing-related products (lumber, stone, glass, cement, appliances, and furniture) typically reported declines.

My take-aways were:

  • Demand for products designed for use in the housing sector is generally weak. No surprise there. Beside employment, this is one of the key influences housing has over the economy.
  • Sales levels and new development are down, which is consistent with national housing stats. I thought it was important to appreciate (no pun intended) that there was disparity between various markets, in terms of their performance, although the general picture was generally negative.

The Beige Book was originally red.


Beige Book Results: Not Black And White

March 8, 2007 | 7:53 am | |

The Federal Reserve released their Beige Book yesterday which is an anecdotal account of the nation’s economy. Each of the 12 regional banks survey the various economic sectors of their regions.

Bond prices increased (yields decreased) on the good news that things were not so great (but not so bad either). Bond traders love bad news.

Here’s an excerpt from the full report:

Almost all Districts reported that housing markets remained weak, but signs of stabilization in the sector were noted in several Districts. Chicago, Minneapolis, Dallas, and San Francisco reported that new residential construction continued to fall, and New York and Philadelphia noted that homebuilders had scaled back their plans. But Cleveland and Atlanta noted that construction had flattened out. Housing contacts in the Atlanta District reported that declines in sales were moderating, except in Florida. San Francisco also noted a slowdown in the deterioration of conditions in California, though activity in hard-hit areas such as Arizona continued to contract. In the New York District, builders in New Jersey reported some stabilization in the market for new homes, and demand for multi-family units in New York City remained strong. Richmond said housing markets in general showed additional signs of firming, while contacts in the Kansas City and Cleveland Districts, where activity was still at low levels, were encouraged by recent increases in buyer inquiries.

Still, further contraction in housing markets was noted in several Districts, and home prices were generally flat or declining. According to the Dallas District, inventories of unsold homes in the Dallas-Fort Worth area rose to new highs due to slowing sales and rising cancellations. Contacts in the Boston District saw no signs that the weakness in housing was nearing an end. Homebuilders in the Philadelphia District were making significant price reductions to move new homes, and real estate agents in that District reported that prices for existing homes had come to a standstill. San Francisco also reported noticeable recent price declines in some areas, while Chicago reported that more than three-fourths of builders in the Chicago area were adding non-price incentives to sell homes.


Which Economic Path To Follow: Lets Agree To Disagree

December 12, 2006 | 3:16 pm | |

Sorry, I am recovering from a bout of the flu so my posts have been a light and behind schedule for the past few days.

A friend of mine who is an economist told me an old joke about economists once. It goes something like this:

If a group of economists are gathered together in a room, not only are they unable to agree on where the economy is headed, they can’t agree on where it came from.

Thus the dilemma of readers trying to figure out what the consensus of the usual economists quoted by the media actually is.

There has been a smattering of silver lining in some of the economic news lately, starting the the Fed’s release of the [Beige Book on November 29th](, an anecdotal description of the nation’s economy. The [outlook for the economy doesn’t appear to be as bad [MW]]( as once thought. That doesn’t mean rosy though.

Even the more pessimistic economists seem to speak in terms of a soft landing without a recession next year. This is exemplified by the usually negative but very credible [UCLA Anderson Forecast [LA Times]](,1,4564562.story?coll=la-mininav-business) which concluded in their recent report that the [housing market weakness won’t cause a recession [CPN]](

Some economists say the [Fed tightened the belt too far (which I agree) [Reuters]](

Of course, [economic pundits have been saying the Fed has it all wrong [SA]]( Somehow I doubt the Fed has it all wrong, even though I agree that they pushed rates 1-2 increases too high as it relates to housing. In my real estate-centric world, I know the Fed has other fish to fry, even though housing is so important to the big economic picture.

On Friday, [a group of all well-known economists/pundits were all gathered in a room [Smartmoney]]( (remember the joke?) and perhaps gave some clue as to what they were thinking. The event was brought together by Senator Paul Sarbanes of Maryland who has a gloomy view of the housing market. Senator Chris Dodd, D-Conn. who will be the next chairman of the powerful Senate Banking Committee said he wanted to crack down on predatory lending. The responses of the panel ranged from soft to hard landing.

  • Christian Weller, senior economist for the Center for American Progress, a left leaning think tank said:

We have to shift away from the housing-boom driven economy to something else,” Weller said. “The only something else we can think of and would hope for is an investment boom, and unfortunately so far that hasn’t really happened.

  • Mark Zandi, chief economist for Moody’s (My favorite) said:

“The housing bubble is correcting in an orderly way,” though home prices are down more in some locations than others, Zandi said. Retail sales ahead of the end-of-year holidays are “solid,” and that suggests “very, very limited” spillover to the larger economy from weaker real estate, he said.

  • Dean Baker, co-director of the Center for Economic and Policy Research who is nearly always pessimistic on the housing market lamented that:

I think the Fed could and should have done something about the housing bubble.

To address housing market bubbles, the Fed and other authorities should first try public communication and tighter lending regulations, but the central bank shouldn’t rule out raising interest rates “if need be,” Baker said.

[The Federal Funds futures market]( seems to generally agree with the semi-optomistic of many economists in seeing no move by the Fed in January and a solid position of more of the same in March. However, its going to get interesting in June 2007. Its anticipated that the Fed will have to cut rates by then as conditions erode. Thats not much of a help to many housing markets because with weaker economies, there will be less interest in real estate as people are concerned about their own job outlook.

However, in local markets with relatively strong economies like New York City and others, it stands to reason that these markets could benefit from rate reductions more than most. The national rate decrease would be prompted by conditions not found in the local economy so it wouldn’t be the double edged sword that some markets find themselves in.


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Housing Notes by Jonathan Miller

Receive Jonathan Miller's 'Housing Notes' and get regular market insights, the market report series for Douglas Elliman Real Estate as well as interviews, columns, blog posts and other content.

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#Housing analyst, #realestate, #appraiser, podcaster/blogger, non-economist, Miller Samuel CEO, family man, maker of snow and lobster fisherman (order varies)
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Joined October 2007