The Federal Reserve Board’s second district, which encompasses New York state and portions of Connecticut, is showing some strengthening in its economy according to the Fed’s Beige Book report released today. But while hiring activity appears to be picking up so far this year, the report says, the housing market in the district has weakened somewhat. “Housing markets appear to have softened in early 2010, after hints of a pickup in late 2009,” the report says. The commercial market was even worse, according to the Fed report, with Manhattan commercial rents down this February an average of around 20 percent from a year earlier. TRD

Residential real estate has been showing signs of mending in both the sales and construction sectors, while commercial real estate continues to worsen, according to the latest Federal Reserve Beige Book report, released today. The Beige Book, published eight times per year, is a summary based on anecdotal information about current economic conditions gathered by all Federal Reserve Banks for their individual districts. Though home price declines in the eastern region of the country have not yet reversed since the last report issued Oct. 21, most areas saw modest sales upticks fueled by the extended and expanded homebuyer tax credit, especially in the lower end of the market, the report says. In New York and Philadelphia, however, overall sales were described as steady or mixed. Sales in New York’s multi-family housing sector, in particular, suffered during the period. New residential construction and commercial real estate both performed poorly, and between rising vacancies, declining rents, and little new development, the commercial market is still worsening, the report says. Financial institutions reported a decline in demand for loans in New York, especially for residential mortgages. Nationwide, residential loans fare better than commercial loans, however, where banks in most districts reported weak demand. In New York, credit standards tightened on commercial loans. In the video below, CNBC delves into what the Beige Book’s results mean for the economy in the coming months. TRD
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The commercial real estate sector has been identified as the weakest part of the economy, according to the Fed’s Beige Book business survey. The survey shows signs of weakness in the national banking and employment sectors as well. “The Beige Book was more pessimistic than what I expected,” said John Silvia, chief economist at Wells Fargo Securities in Charlotte, N.C. The report indicates that commercial real estate loan defaults totaled $110 billion and may rise to $170 billion by the fourth quarter of 2010. “Declining real estate values caused by rising vacancies, falling rental rates and weak sales are contributing to losses,” John Dugan, Comptroller of the Currency, told Congress Oct. 14. However, the problem of rising commercial real estate loan defaults are a manageable problem for the U.S. banking industry and will not require a government solution, said Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, Va. [Bloomberg]