WASHINGTON (MNI) – The following is the text of the latest Beige
Book survey of economic conditions in the Federal Reserve’s Fifth
District, published Wednesday:

FIFTH DISTRICT – RICHMOND (continued)

Real Estate. Residential real estate activity improved since our
last report. A Realtor in the Richmond area said that closings were up
double digits over last year and prices were rising slightly. Properties
below the $200,000 range, in particular, were selling more quickly.
However, an agent in the D.C. area indicated that housing sales in the
$800,000-plus range were rising relatively quickly, adding that the
lowest inventory for housing in eight years was pushing up prices. A
Realtor in the Fredericksburg area reported that her agency was
extremely busy for this time of year and indicated that sales were up
forty percent over last year; she expected the stronger market to
continue. Moreover, a Maryland contact mentioned that foreclosures in
central Maryland had fallen thirty percent from the previous quarter,
which bolstered housing prices. In contrast, a report described the
housing market in North Carolina as mostly unchanged, with the exception
of an improvement in the Research Triangle. Also, a source stated that
there had been a slowdown in housing in the Hagerstown area.

Commercial real estate and construction activity remained mixed
since our last assessment. A Realtor in North Carolina stated that both
leasing and sales activity had slowed since June, with some tenants
switching to shorter leases. Another agent reported moderate increases
in office leasing, especially in suburban locations. Several contacts in
Virginia and West Virginia noted increased interest from clients but few
closings. A Virginia Realtor said that retail leasing had improved, but
it was “still a bumpy road” and that leases were “taking forever to
close.” Both leasing and construction-related activity in the industrial
sector was sluggish. Several contractors reported that
government-related projects continued to weaken or decline. New private
sector projects also started to decline in recent weeks. A large
contractor in Maryland expected that few new projects would emerge until
after the election. However, a banker noted that small developers were
joining together to buy and renovate low-priced B and C Class
properties, in anticipation of an improved real estate environment next
year.

Labor Markets. We received mixed signals on labor market activity
over the last few weeks. A source from West Virginia reported that the
state experienced several major layoffs related to mine closings and
bankruptcies. A contact in Hagerstown said that the local labor market
continued to recover, but at a slow pace, and that the area would lose a
major manufacturer later this year. Moreover, an auto supplier in
Virginia stated that his firm had frozen hiring and would reduce staff
through attrition. In contrast, several employment agencies cited an
increase in demand for workers, particularly among goods-producing
industries. At a North Carolina staffing agency specializing in finance,
companies were actively hiring staff and senior level accounting and
finance professionals. In the retail sector, an industry representative
mentioned that many small retailers expected to add hours for permanent
employees during the upcoming holidays, rather than hire seasonal
workers. According to our recent surveys, average wages in both the
manufacturing and services sectors were growing at a slightly quicker
pace than a month ago.

Tourism. Hoteliers, restaurateurs, and other tourism contacts
reported stable but solid leisure business going into the autumn season.
In addition, their outlook was upbeat for late fall and early winter. An
hotelier in western Virginia stated that business was solid, with a
trend toward more last-minute leisure bookings. A tourism contact in
Washington, D.C. reported seeing “tour buses galore” and crowds on the
mall. Tourist activity on the outer banks of North Carolina was steady,
and good attendance was expected for upcoming music and food festivals.
Hotel and rental rates were not being discounted, although incentives
were offered for time slots that were difficult to fill. In contrast,
hotels that depend heavily on government-sponsored bookings reported a
significant drop in business.

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

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