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The Federal Reserve released its Beige Book earlier this week. This is a report published eight times a year based on information gathered from various sources, such as businesses, economists, and market experts. Each district summarizes the information, and an overview on the findings is presented by one of the district banks. The latest Beige Book was released on October 16th, and discusses economic activity from September through early-October. This blog will analyze the pertinent economic views for those interested in the real estate market, specifically New York City.
For sellers, the news remains positive, according to our interpretation. Sales of residential homes continued to be strong in the city. Co-op and condo sales were “exceptionally brisk,” with the third quarter tally the highest since 2007, and the second highest in 24 years. On the flip side, it seems buyers may not have many choices, or negotiating power, since the inventory of available apartments for sale have fallen to new lows. Of course, the city is large and diverse, making it important to look at different markets. Prices in Manhattan rose modestly, but for those seeking to buy an apartment in Brooklyn, prices were up 10% to 15%.
For renters, Manhattan may also offer less sticker shock. Rents in the borough are down slightly from a year ago. Meanwhile, you will be shelling out more to live in Brooklyn, with rents rising at more than 10%.
Although bankers reported weakening demand for consumer loans, especially residential mortgages, it did not break this down further by region. Therefore, it is difficult to get a more detailed view of the mortgage market in New York City. Nonetheless, we can gain some insight by examining the findings. Demand for mortgage refinancing were down, which makes sense given many existing homeowners have already taken advantage of rock-bottom interest rates. There was no change in the spread of residential mortgages over the cost of funds. It might be more difficult for bargain hunters seeking a foreclosed property. Delinquency rates were reportedly down for all loan categories, including residential mortgages.
It is also important to examine findings on economic factors in the region which may affect the city’s real estate market going forward. Economic growth in the district remained was at a moderate pace, with labor showing continued improvement. There has been strong demand for IT workers, but the finance sector remains “gloomy,” in the words of one contact. Retailers reported steady sales in September, but one major retail chain stated sales in its New York City stores continued to outperform the rest of the region.
Tourism, an important economic driver of New York City’s economy, got stronger. In Manhattan, hotel revenue was up 5%-6% from a year ago, accelerating from 3% to 4% in July and August. Occupancy rates were above 90%, and room rates rose about 3%.
Consumer confidence has increased. But, some survey participants expressed concern about the government shutdown. Although this has since been resolved, readers should be aware of the potential affects as we approach the next deadline in a few months.
All-in-all, the Beige Book shows moderate economic growth in the district. But, it might take longer to find a place to buy, with inventory falling. For those seeking a foreclosed property, those will also be more difficult to find. But, on the positive front, mortgage rates remain fairly low, and mortgage standards remain unchanged, meaning it is no more difficult to get a loan for that dream place once you find it.
Bloomberg: U.S. Federal Reserve Beige Book: New York District (Text)
Wall Street Journal: Fed Beige Book: District By District Summary