WASHINGTON (MNI) – The following is the second of two parts of the
text of the Richmond section of the Federal Reserve’s Beige Book report
on current financial conditions released Wednesday:
FIFTH DISTRICT-RICHMOND
Real Estate. Real estate activity weakened over the last four to
six weeks. Several Realtors reported that sales had dropped considerably
in recent months and that their markets were less active than a year
ago. A Realtor in eastern Maryland indicated that home sales as well as
average home prices were down notably from earlier in the year. A West
Virginia Realtor said potential buyers were calling and looking for
bargains, but that there were few actual sales. He mentioned that some
sellers were starting to reduce prices significantly. Similarly, an
agent in central Virginia noted that asking prices continued to fall.
Most Realtors said that the high-end market was suffering, which they
attributed to devalued portfolios of the wealthy, as well as uncertainty
about employment and job stability. In contrast, a Realtor in the D.C.
area reported that properties in the $900 thousand to $1.5 million price
range moved quickly over the last month. He added that low interest
rates and lean inventory, which reached its lowest level since February
2006, should help improve area sales in the fall.
Commercial real estate activity since our last report was mixed
across most segments of the market. Virtually all contacts described
market conditions as remaining weak, in terms of both leasing volumes
and rental rates. While a Realtor in South Carolina reported that
activity had picked up over the last few months, gains were mostly due
to consolidations and renewals that often occurred at reduced lease
rates. A Realtor in North Carolina noted that leasing incentives were
still being offered aggressively in local markets. An agent in the D.C.
area said that renewals often required owners to offer significant
improvement packages. In contrast, a real estate agent in West Virginia
remarked that further softening of lease rates was constrained by the
limited amount of vacant space in the area. Most retail leasing activity
in the District was limited to national chains, according to several
contacts, in part because financing remained an obstacle for small
retailers. Contacts generally noted that greater uncertainty about the
market and the economy had pushed clients to prefer leasing over buying.
One contact stated that sales to leases had recently fallen from a
typical one-to-four ratio to one-to-fifteen.
Labor Markets. Reports on Fifth District labor market activity were
mixed in August. Several employment agencies reported somewhat stronger
demand for temporary help in recent weeks, particularly in the
healthcare and automotive industries. The branch manager of a temp
agency in North Carolina stated that manufacturers had openings for
skilled positions, but they had difficulty finding machine operators
with at least one year of experience. Likewise, a contact from South
Carolina reported that three large manufacturers in the area were trying
to hire, but could not find qualified candidates. In contrast, an
executive from the D.C. area said that a major corporation had initiated
a hiring and advertising freeze. Also, a banker indicated that some of
his clients said that they would rather pay workers overtime than hire
new workers, due in large part to the recent environment of heightened
uncertainty. According to our latest survey, job losses in the service
sector were somewhat more widespread than in our last report; wages in
the retail sector weakened on average, while average wage growth slowed
at services firms. Survey respondents from most manufacturing industries
indicated that hiring inched up over the last month, while the average
workweek declined and wage growth slowed.
Tourism. Tourism generally strengthened over the last month,
although contacts along the Atlantic coast lost significant
end-of-summer business as Hurricane Irene came ashore one week before
Labor Day weekend. Local evacuation orders in areas along the coast of
North Carolina resulted in cancellations and shortened stays for the end
of August. In addition, an hotelier in Virginia Beach reported several
cancellations and early check-outs, as guests left the area ahead of the
storm. Inland, however, hotel managers reported solid bookings, and
several were experiencing a rush of hurricane evacuees. In the weeks
prior to the hurricane, bookings had been strong, although some beach
resorts used incentives to bolster reservations. According to a local
contact, hotels in the D.C. area discounted room rates to boost
reservations over the summer, which increased volume but held down
margins.
Agriculture. Scattered precipitation over the last two months
promoted crop growth in many sections of the District, but more recently
crops along the coast were damaged by Hurricane Irene. Rain in early
August aided late summer peaches in West Virginia and soybean harvests
in Virginia. Virginia growers were also busy cutting hay and preparing
for the corn harvest and the flue-tobacco harvest was in full swing.
Ninety-six percent of the corn crop in South Carolina had matured and
was forty percent harvested up to the hurricane. However, post-hurricane
inspections by state officials in North Carolina revealed widespread
damage to field crops, poultry and other agricultural businesses.
Moreover, agricultural agents in that state reported damage to
greenhouses, grain storage facilities and aquaculture operations.
Fortunately, cotton bolls had not been stripped from their plants by
high winds, and tobacco farmers may have been saved by rushing their
crops to curing barns before the storm stuck, according to the
agricultural agents.
(2 of 2)
** Market News International Washington Bureau: 202-371-2121 **
[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$]