Western U.S. real estate markets are “robust,” according to the Federal Reserve’s Beige Book analysis of regional economic conditions.
The Fed eight times a year publishes a compilation of local business snapshots from its 12 regional Federal Reserve Banks. We checked into what the Fed’s San Francisco branch – which oversees California, Oregon, Washington, Idaho, Utah, Nevada, Arizona, Alaska and Hawaii – had to say about its real estate markets as 2016 started.
We note the Fed’s change in description of market conditions from “grew at a robust pace” in this month’s report vs. “activity advanced” a year ago vs. “very low levels” in January 2011.
Quoting directly, here’s what was said about Western real estate in 2016’s first Beige Book:
Real estate market activity grew at a robust pace across most of the District. Demand for new residential units remains high, with contacts in many West Coast cities reporting ongoing reductions in vacancy rates.
Residential construction activity grew substantially, with a somewhat stronger market for multifamily units than for single-family units.
Housing prices rose further across the District, and contacts expressed concerns over affordability for low-income buyers.
On the commercial side of the market, lease rates for existing units have increased, pushing sales prices higher across the District. Yet, new commercial construction remains concentrated in a few hot markets, such as the San Francisco Bay Area and Seattle.
Contacts noted continued shortages of labor and materials and construction delays in those areas, with one reporting that commercial contractors had stopped accepting new construction projects in the final months of the year.
Compare that analysis to a year ago …
Real estate activity advanced during the reporting period. The pace of new single-family home construction increased modestly in some areas of the District, with relatively more activity in urban areas than in rural areas.
However, some contacts cited increasing costs of materials and labor and a shortage of available lots in some areas in their projections that the pace of new construction will fall back in 2015. Indeed, these contacts reported that the pace of construction permit issuance has declined.
A few contacts indicated that home sales picked up a bit in December, but some contacts reported that insufficient inventory is damping the pace of sales.
Multifamily residential real estate construction activity was strong in many areas of the District during the reporting period. Retail, office, industrial, or infrastructure projects also were widespread. Most contacts viewed the pace of construction as healthy.
However, one contact reported that some investors are concerned that, given planned construction, there soon will be an excess supply of multifamily units in their area.”
And five years earlier:
Demand in District residential and commercial real estate markets was largely unchanged at very low levels. The pace of home sales remained quite slow throughout the District.
In addition, an abundance of foreclosed properties and short sales kept inventories of available homes elevated in most areas, which put downward pressure on prices and the pace of new home construction.
Demand for rental space grew in some areas, however, with a Seattle contact noting a modest increase in construction of apartment buildings there.
Conditions continued to be weak on balance in commercial real estate markets, as vacancy rates stayed high in many parts of the District; rent reductions and other concessions by landlords remained common.
In a positive sign, however, investor demand for well-leased office buildings continued to boost market values in some of the District’s major commercial markets, such as San Francisco.
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