WASHINGTON (MNI) – The following is the Beige Book section on the
Federal Reserve’s Fifth District, published Wednesday:

Real Estate

Indicators of real estate activity around the District were mixed
during the last month. Most Realtors continued to report limited sales
activity, but several indicated that consumers have started to shop for
homes again. A Realtor in South Carolina stated that an increase in
layoffs in recent weeks contributed to slow home sales. In central
Virginia, a real estate agent reported that, while the number of
contracts was down recently, foot traffic had improved and prices had
stabilizedeven at the upper-price range. A Realtor in the D.C., area
described sales activity as ‘pretty good’ (up markedly from a year ago).
However, a real estate agent in Northern Virginia said that October was
‘a terrible month,’ although sales in early November were showing modest
improvement. Several agents noted that more sellers in the market were
opting instead to rent their properties. A Baltimore area Realtor stated
that military families moving into the area as part of BRAC-related
relocations were often renting rather than buying homes, dampening
anticipated home price increases. A contractor in North Carolina told of
an appraiser who had so much business that he was ‘working seven days a
week with no end in sight.’

Commercial real estate activity was generally weak since our last
report, but property managers were becoming more optimistic about the
near term. A Baltimore developer described commercial property demand as
spotty, but he expected a pickup in demand from local feds, meds, and
eds. A developer of residential complexes reported that his numbers
have improved in recent weeks, but the volume of transactions remained
extremely low. A commercial Realtor in North Carolina noted that rental
rates were flat at low levels, but property owners were able to avoid
making negative cash-flow deals. In contrast, the owner of an elevator
repair service reported that businesses were spending againpartly to
maintain safety standards, but also to modernize in anticipation of a
pickup in business activity. A commercial architect said that he could
now see light at the end of the tunnel and was able to proceed with
several projects that had been on hold for well over a year. A contact
in the D.C., area said that architectural firms were hiring again.
Nonetheless, most contractors continued to report no speculative
building, and a contractor in central Virginia said that his region had
only a few closings for new construction (mostly government projects).

Labor Markets

Hiring activity picked up moderately since our last report, but
employment agencies were uncertain whether the gains would continue into
December. Several sources reported increased hiring of production and
assembly workers. A supplier of ball bearings stated that his company
recently started to hire, after postponing the decision over concern
about the sustainability of improving demand. A machinery equipment
industry spokesman reported that hiring was up, but mostly limited to
filling empty positions. The tourism industry along the Districts east
coast added employees, according to one contact, but mostly for
temporary workers. A major retail chain store representative said that
hiring activity had been ongoing, but most likely would be down in
December when compared to a year ago. Several contacts at employment
firms reported that demand for assembly line workers was somewhat
stronger than a month ago, although the contacts were evenly split about
whether the gains would continue into December. An agency manager in
South Carolina expressed concern about a slowdown in hiring during the
holiday season. Contacts continued to report that skilled workers were
hard to find, but that wage pressures were subdued and little change was
expected over the next few months.

Tourism

Assessments of tourist activity were mostly positive since our last
report. A financial analyst reported that tourism in the Baltimore area
was robust in recent months, and a port official there noted that
Europeans were flying into Baltimore to take advantage of recently added
cruise lines. A Myrtle Beach contact characterized tourist activity as
somewhat stronger, compared to a year ago, which he attributed to
increased weekend traffic. A manager at a mountain resort in Virginia
also described tourist activity as somewhat stronger, which was due to
great weather coupled with beautiful fall foliage. That contact also
mentioned that the resort had attracted a more affluent crowd who
normally spends more on food and recreation. Restaurants did better in
October and November than in the summer months, and golf courses had
more players than usual for the fall season. However, contacts from the
Outer Banks of North Carolina and Virginia Beach reported little change
in bookings in recent weeks. Several added that discretionary retail
spending by tourists was down and vacationers were looking for
exceptional deals at restaurants and recreation venues.

Agriculture

Dry and cool temperatures allowed Fifth District farmers to make
steady progress in harvesting and in small grain plantings, and farm
income projections increased since our last report. Corn harvested for
grain was 100 percent complete in Maryland and was winding down in West
Virginia, according to reports, with farmers in those states reportedly
pleased with yields. The corn harvest in Virginia had neared completion,
with local producers expecting low yields due to extremely dry weather.
In both North and South Carolina, the cotton harvest was ahead of
schedule. In addition, small grains had been planted and were off to a
good start throughout the District. Results of our recent agricultural
credit conditions survey indicated that income projections strengthened
somewhat as a result of continued higher commodity prices and stronger
demand. However, lower yields and crop quality were expected to have an
impact on producers’ financial positions.

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

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