WASHINGTON (MNI) – The following is the second and final section of
the latest Beige Book survey of economic conditions in the Federal
Reserve’s First District, published Wednesday:

Concerning commercial investment, demand for prime Boston office
properties remains robust as sales prices appear to be edging up, based
on recent transactions. Bostons apartment market remains very strong
and continues to raise concerns of overheating. While apartment rents
increased significantly yearover- year in the metropolitan areaby 5
percent to 10 percent by one estimatecontacts judge recent property
prices to be too high and warn of a possible excess of planned
construction. Meanwhile, some large office construction projects in
Boston are moving forward, but others in the planning stages are likely
to remain stalled indefinitely.

Residential Real Estate

Throughout the region, residential real estate markets remained
stagnant in May, with most New England states posting significant
year-over-year declines in home and condo sales. The homebuyers tax
credit, which boosted sales in the first half of 2010, contributed
significantly to the year-over-year declines observed in May, but
contacts report activity in the housing market remains slow, with the
buyer pool resting at weak levels. Contacts in some states, however,
note increases in home sales compared with two years ago, which they
interpret as a positive sign. Meanwhile, median home prices remained
roughly steady in May compared to a year earlier, with states
experiencing either modest increases or declines; the median price of
condos also moved in mixed directions across the region. According to
contacts, job insecurity and stricter lending requirements among larger
banks continue to restrict the flow of buyers into the residential real
estate market. At the same time, inventories continue to rise in the
region, although most contacts say current inventory levels are not
troubling because inventories in the region have been low, limiting the
selection for potential buyers.

Contacts anticipate that sales figures in July will show
year-over-year increases as the calendar moves beyond the expiration of
the tax credit in June last year. Most forecast sluggish activity for
the rest of 2011 and do not anticipate a significant increase in buyer
activity until 2012 or later. The median sale price of homes is expected
to move up or down only slightly over the coming months.

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** Market News International Washington Bureau: 202-371-2121 **

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