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:

Real Estate.

Real estate activity edged higher since our last report. Several
Realtors indicated that sales had picked up gradually and that their
markets were more active than a year ago. While most of the gains were
in the low-to-mid price range, activity also inched up for higher-priced
homes in some areas. An agent in the D.C. area, for example, reported
that properties in the mid-to-upper price range sold quickly, with the
best sellers in the $800 thousand to $1.25 million price range. He added
that relatively low inventory should keep market activity fairly strong
in that area. A Realtor in the western part of North Carolina said that
he was “cautiously optimistic,” but added that high unemployment in that
area remained a serious drag on sales activity. Realtors throughout the
District noted an increase in foot traffic, but sale price movements
varied. Real estate agents in the Greensboro, N.C. and Greenville, S.C.
areas stated that prices held steady, while a contact in the D.C. area
cited a slight increase in sales prices.

Commercial Realtors and construction contractors reported little
change from the generally weak conditions that prevailed in our last
assessment, but a few encouraging signs were noted. A recent survey of
contractors in the District revealed that one third of respondents
experienced no change in construction activity over the last three
months, while forty percent reported declining activity (compared to
over fifty percent three months ago). Gains often came from government,
medical, and higher education projects, which have been pockets of
strength. However, several contractors reported a recent decline in
higher education-related construction. On the Realtor side, most
contacts continued to cite weakness in demand from small businesses for
both office and industrial space. However, several Realtors noted a
pickup in leasing to small retailers, especially independent
restaurants. A Realtor in Virginia reported limited gains among car
dealerships and nursing homes, with most of that business coming from
long-standing clients. A Realtor in Raleigh reported some increase in
the number of clients who expressed interest in taking out a lease in
the near future. Finally, most contacts around the District indicated
that rental rates were generally stable, and several Realtors reported a
decrease in the number of requests for rent reductions.

Labor Markets.

Fifth District labor market activity, especially among temporary
employment agencies, improved slightly in recent weeks. Most contacts at
temp agencies characterized demand as at least somewhat better in recent
weeks, although a few agents cited weakness in demand for workers.
However, virtually all agents indicated that demand was still stronger
than a year ago. Several employment agents cited uncertainty about the
economy as the primary factor behind hiring temporary help rather than
full-time employees. For example, a Hagerstown agent said that many of
his clients were still very uncertain about their future orders. As a
result, they were using contingent labor more than they might if they
felt that business volume would continue to increase. Increased demand
for temporary workers was reported for a diverse set of skills,
including light manufacturing assemblers, machine operators, forklift
operators and quality inspectors. Respondents to our latest
manufacturing survey indicated that employment demand, while fairly
robust in June, was little changed in July. Retail hiring rose slightly,
according to our recent survey, and hiring was little changed at
non-retail services providers. A slight majority of both retail and
non-retail respondents indicated that they were increasing wages.

Tourism.

District tourism gained momentum in recent weeks. Contacts along
the Mid-Atlantic coast reported bookings in line with a year
agonotwithstanding last year’s “bump” from vacationers who relocated
their vacations to the East Coast from the Gulf Coast during the oil
spill disruptions. Hoteliers in several locations noted a trend toward
last-minute bookings, although a contact on the coast of North Carolina
cited last year’s relocation crunch as the impetus for more advance
bookings in her region this season. A resort manager in the mountains of
western Virginia said that new summer attractions helped drive 95 to 100
percent occupancy at his site. July has been “fantastic,” according to a
hotel representative in Baltimore, with occupancy pushed up by several
big events and by an increase in the number of family reunions. Contacts
reported mostly small rate increases for the summer. Most hotel and
resort owners expressed optimism about potential business during the
2011 winter holiday season; some were already receiving inquiries.

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

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