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

Real Estate

Residential real estate activity showed promising signs of recovery
since our last report. Several contacts stated that they were beginning
to see a ray of hope. in the housing sector, and several builders
reported starting construction in areas that had not seen new building
activity for several years. For example, a source from Charlotte said
that real estate was starting to move again in his area, and another
North Carolina contact described multi-family housing activity,
particularly for senior citizens, as being on fire. in recent months.
Lower inventory of both new and existing homes was reported in northern
and central Virginia, with contacts noting that days on market. were
down as well. Moreover, a few contacts noted that housing prices had
stabilized and, in some markets, prices were beginning to trend upward.

Some agents attributed the rise in sales price to greater buyer
traffic as a result of unseasonably warm weather. Several Realtors
reported sales of higher priced homes were faring better than other
price categories. A number of Realtors held a positive outlook for
expected sales.

Commercial real estate leasing and construction activity improved
across most segments of the market since the beginning of the year.
Several commercial Realtors reported solid increases in inquiries about
availability of office and retail space, but only moderate growth in
leasing of those properties. Still, leasing rates were firming,
according to agents, due to the reduction in the number of attractive
properties still on the market. Most contractors cited moderate
increases in private sector construction projects. Unusually warm
weather helped contractors finish projects ahead of schedule, but some
contractors with weak backlogs sought to spread out work in order to
keep their workforce active. In contrast, government sector projects
declined dramatically, according to several contractors, although one
builder noted an increase in demand for secondary education facilities.
Both contractors and Realtors reported that access to financing
continued to be limited, and the required paperwork was inhibiting
completion of loans on a timely basis. Prices of construction-related
goods, especially petroleum-based products, cement and drywall increased
in recent months, according to contacts, with most having only minimal
success passing through any cost increases.

Labor Markets

Fifth District labor markets improved moderately in recent weeks,
with several employment agencies citing strong demand for temporary
workers. The increase in overall demand was attributed to a general
strengthening in the economy and also to the opening of new companies,
coupled with a revival in activity at previously dormant companies.
Several employment agencies indicated that some of their clients
remained uncertain about future demand, however, and preferred hiring
temporary workers. A representative at a North Carolina staffing agency
reported that demand for information technology workers was much higher
than supply and that the gap was worsening. She added that schools did
not have enough graduates to meet the demand in that sector. District
manufacturers increased employment more slowly than a month ago,
according to our latest survey, while wage gains picked up. Growth in
employment and wages in the broad services sector nearly matched our
last report.

Tourism

Unseasonably warm temperatures contributed to strong tourist
activity since our last report. A North Carolina contact from the outer
banks cited exceptional attendance at early spring events. While beach
house rental rates were unchanged in recent weeks, real estate rental
companies were able to remove incentives that had been included since
last autumn. In Washington, D.C., the atypical temperatures resulted in
cherry blossoms peaking at the second-earliest date ever.
Tourist-related businesses were busy and restaurants were full. This
year marks the one-hundred year celebration of the gift of the cherry
trees from Japan, with numerous special events planned, drawing a
significantly higher volume of foreign visitors than normal. A contact
described the crowds as “wall-to-wall humanity.”

(2 of 2)

** MNI Washington Bureau: 202-371-2121 **

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