Current economic conditions
Reports from the 12 Federal Reserve Districts indicate that the economy continued to expand across most regions from mid-February through the end of March. Activity in the Richmond, Chicago, Minneapolis, Dallas and San Francisco Districts grew at a moderate pace while New York, Philadelphia, and St. Louis cited modest growth. Boston reported that business activity continues to expand while Cleveland cited a slight pace of growth. Atlanta and Kansas City described economic conditions as steady.
Residential real estate and construction
Residential real estate activity improved in the Cleveland, Richmond, Chicago, Minneapolis, Kansas City, Dallas and San Francisco Districts while remaining steady in all others except New York, which reported softening conditions. Philadelphia, Cleveland, Atlanta and Dallas reported a slowdown in construction activity due in part to harsh weather conditions. Low-to-declining levels of inventory were cited by contacts in Boston, Philadelphia, Cleveland, Atlanta, Chicago and San Francisco. The Chicago District reported that inventories were near historic lows particularly for lower-priced homes.
Most Districts reported a tight supply of residential real estate in most price points of the market. The Philadelphia and Cleveland Districts reported that mid to high-priced homes were selling better while Chicago, Kansas City and Dallas reported that low to mid-ranged homes were outpacing other categories in sales. Cleveland and Philadelphia reported an absence of first-time homebuyers. Contacts across the system uniformly reported that they were optimistic, and many expect a greater than normal upswing in home sales with the coming of spring. The multifamily sector remains strong, with flat to declining vacancy rates reported in multiple Districts. Boston, Cleveland and San Francisco reported a continued shortage of skilled labor, which was cited as a factor driving up wages.
Commercial real estate
Commercial real estate activity remained stable to expanding across many Districts. Boston, New York, Philadelphia, Chicago, Minneapolis, Dallas and San Francisco all saw strong gains in industrial and office building construction. Demand for commercial properties in the city of Boston continues to be fueled by foreign institutional investors, many of which are increasing their allocations to real estate. Contacts in Boston, Richmond, Atlanta, Minneapolis and Dallas noted stable to strong multifamily construction. Chicago reported that leasing of industrial buildings, office and retail space all increased. Cleveland mentioned that successful developers have easier access to credit compared to prior years, and Boston reported a slight uptick in speculative activity for commercial construction.
11th District: Dallas
The 11th District economy grew at a moderate pace over the past six weeks — similar to the prior reporting period. Manufacturers reported mostly steady or increased demand. Retail reports were more mixed, but reports of automobile sales were consistently positive. Demand for nonfinancial services improved or held steady, and real estate activity remained solid. The energy sector continued to decline. Price pressures were muted, and employment held steady or increased. Outlooks remained cautiously optimistic to quite positive except in the energy sector, where outlooks were negative.
Construction and real estate
Housing activity generally remained solid, and outlooks for the remainder of the year were positive. Home sales continued to rise, but reports on the pace of growth were mixed. Contacts in Dallas-Fort Worth reported weather-related weakness in the earlier part of the reporting period but said sales picked up in the latter half. Respondents in Houston noted continued strength in sales at lower price points but noted softening in sales activity at the higher price points. Construction-related manufacturers said they saw a dip in homebuilding, particularly in Houston. Overall apartment demand stayed strong, and rent growth was solid particularly in Dallas-Fort Worth, where occupancy was at a multiyear high. Multifamily construction remained at high levels although contacts said some projects in Houston have been put on hold or canceled.
Commercial real estate activity
Commercial real estate activity generally held steady since the previous report, and outlooks were cautiously optimistic in the near term. Demand for office space remained fairly solid, with the exception of Houston, where contacts noted slower net absorption and an increase in the level of sublease space on the market. Industrial and retail demand remained stable or increased slightly.