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

Real Estate.

Indicators of real estate activity around the District were mixed
since our last report. Several Realtors reported that sales activity had
increased somewhat but housing prices were about the same or down
slightly from a month ago. Brokers in Richmond and Fredericksburg noted
many showings but few resulting contracts. Sales in the low price range
were generally reported as faring much better than sales in the upper
ranges. However, a contact in northern Virginia stated that sales at the
upper end of the price range were doing much better in his area. A
Realtor in the D.C. area said that his inventory and new listings were
down considerably. In addition, a homebuilder in the Carolinas said that
existing home sales continued to fall, but added that new home sales
were up in Charleston, SC, which he attributed to empty nesters
relocating to that area. Also, a custom builder in southern Maryland
described his business as enjoying the biggest improvement in demand
that he had seen in three years.

We received varied reports on commercial real estate and
construction. While construction was generally weak throughout much of
the District, several new manufacturing projects were announced in North
Carolina. Smaller projects were being built faster due to abundant labor
availability. Contractors reported that refurbishing of commercial
properties was up in both Maryland and the Carolinas, but no one was
adding new capacity. A general contractor in the Baltimore area reported
that he was having his “best year ever” after partnering with a larger
firm. However, a builder in the Baltimore area said that his market was
flat. Also, a Virginia contractor noted that commercial and federal work
has dried up in most areas of the state, with D.C. capturing much of
what little work there is. A real estate manager in West Virginia
reported that office demand in that state was down and construction
activity was weak. A developer in North Carolina stated that many
developers were running out of cash and that getting bank financing was
a challenge. Finally, a Maryland developer noted that BRAC-related work
was ending and his company had little backlog.

Labor Markets.

Assessments of labor market conditions were mixed since our last
report. Several employment agencies reported
average-to-somewhat-stronger demand for temporary workers in recent
weeks, particularly in the information technology and manufacturing
sectors. Finding skilled workers continued to be a major concern. A
Virginia contact noted that skill shortages and unwillingness of
candidates to move to his area were becoming an increasing problem for
his firm. Similarly, a manufacturer in North Carolina stated that his
company was “having a tough time hiring good people”. He added that
many workers would not accept a job because their unemployment benefits
were too good. Another agent in North Carolina said mobility issues were
a major concern because potential hires could not sell their homes. A
builder in West Virginia was fearful that his area was losing critically
skilled workers, who will be needed whenever the housing sector
recovers. According to our latest survey, hiring was flat at services
firms, and wage growth on average slowed. Retailers continued to shed
employees, and average retail wages over the last month grew at about
the same pace as in October. Hiring by manufacturers stabilized over the
last month, while the average workweek was unchanged and wage growth
strengthened.

Tourism.

Contacts generally reported slightly higher hotel bookings in
recent weeks. A Myrtle Beach contact stated that higher hotel occupancy
rates pushed up revenues, although the revenue gains remained below
pre-recession highs. A contact in Annapolis, Maryland stated that local
hotel bookings were up, but discounting was prevalent, and while the
Annapolis Boat Show was well attended, sales there were light. A
Virginia resort hotelier remarked that “the phones have been flooded,
but people are still looking for the best deal”. Tourism remained solid
in other areas as well. For example, a hotel manager at a resort in
western Virginia noted that season ski passes were selling at about the
same rate as a year ago. Reservations were already being made for other
local winter recreational events, and the weeks surrounding Christmas
were booked. Contacts at District tourist attractions indicated that
attendance rose since our last report. Most contacts reported no change
in room rates.

Agriculture.

Recent weather conditions allowed farmers to make steady progress
in harvesting and small grain planting throughout most of the District.
The corn harvest was nearing completion in Virginia and was winding down
in Maryland, with farmers in those states saying that yields remained
mostly good. The cotton harvest was getting into full swing in North
Carolina and was ahead of schedule in South Carolina. In addition, the
apple harvest was completed in Maryland and nearly completed in
Virginia. Farmers in the District were harvesting their early soybean
crop, which was reported to be in fair-to-good condition. Small grains
had been planted and were off to a good start in much of the District.

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

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