WASHINGTON (MNI) – The following is the second and final section of
the Federal Reserve text of the First District assessment of the economy
in the Fed’s Beige Book survey of economic conditions in all 12
Districts, published Wednesday:

Looking forward, a few contacts express renewed concern about
looming commercial mortgage defaults, as operating incomes and
debt-service reserves continue to fall and equity in many properties
remains weak. Defaults are expected to rise over the next 12 months and
possibly beyond. While most contacts expect leasing volume to rise in
the later part of 2010, none expect rents to increase significantly in
the near term and one sees little upside risk to rents for at least five
years, in Boston at least.

Residential Real Estate

Residential real estate markets in New England continued to show
mostly positive signs in February. Home sales increased year-over-year
in most parts of the region, with 14 percent increases in Maine and
Massachusetts. Rhode Island home sales, by contrast, declined slightly
year-over-year. Condo sales also increased significantly in
Massachusetts and New Hampshire compared to February 2009. Prices also
showed signs of stabilization as the median price of homes in February
increased modestly year-over-year in Massachusetts, New Hampshire, and
Rhode Island, and held steady in Maine. The median condo price in
Massachusetts increased 13 percent year-over-year in February.

While Massachusetts contacts are still concerned about low
inventory, the 3 percent year-over-year decline in home listings was
actually the smallest decrease in 23 months. These contacts hope that
sellers will come back to the market as prices rise. Furthermore, the
average number of days on market fell sharply across the region. Real
estate brokers have been kept busy by the strong demand from buyers
encouraged by the tax credit and low prices. Unfortunately, recent
flooding in several areas has been a problem for some deals.

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

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