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

FIFTH DISTRICT-RICHMOND

Real Estate.

Residential real estate activity improved slightly since our last
report. A Realtor in the Charlotte area said that homes in the mid-price
range were selling quickly in her area and that prices were rising. An
agent in the D.C. area indicated that properties in the $800,000-plus
range were selling somewhat more quickly, and added that continuing low
inventory and low interest rates should contribute to strong sales
throughout the summer. Moreover, a Maryland contact noted that trends in
the housing sector were generally showing some improvement, with sales
and prices rising and active inventory declining. However, a South
Carolina Realtor reported that housing in coastal areas was not doing
well, which he attributed, in part, to an inventory overhang that was
placing downward pressure on prices. A North Carolina housing agent
mentioned that the state had proposed a cut in unemployment benefits,
which threatened to put more stress on the slowing housing market.

Commercial construction and real estate activity softened in recent
months. While most construction contacts reported little change in
private sector activity, a solid majority noted a decline in government
demand. A Virginia developer described the industry as sliding into a
trough over the last few months and expected demand to remain weak
through the summer and fall. Several contacts said that retailers who
were new to the area were most often opting to renovate existing sites
rather than to build new stores. A contractor in the D.C. area noted
that both large and small chains were expanding and, in some cases,
building new stores. Several District Realtors noted that medical office
buildings were an exception to the overall weakness in their markets. A
West Virginia Realtor noted a sharp increase in interest in commercial
buildings, but so far has had little success closing any deals.
Contractors reported that the cost of materials had increased, but they
were able to pass through most of the increases.

Labor Markets.

Fifth District labor market activity was slightly weaker since our
last report. Several contacts at employment agencies characterized
demand as somewhat slower, compared to a year ago, with one agent noting
that the hiring surge earlier in the year had slowed. Other employment
agents cited strong demand for workers with high-end IT and
manufacturing skills. For example, a Hagerstown agent said that, while
overall demand for entry-level workers had tapered off, clients were
still looking for middle-management, supervisors and highly skilled
workers. Similarly, a furniture manufacturer reported difficulty finding
skilled employees through temp agencies, which he attributed to
potential workers dropping out of the work force or signing up for
unemployment. However, a contact for an employment agency in North
Carolina noted some improvement in hiring activity, with an increase in
temp-to-permanent status. According to our latest survey, wage gains in
both the manufacturing and service sectors were a bit more widespread
than a month ago.

Tourism.

Hoteliers reported solid summer bookings since our last report. A
contact on the outer banks of North Carolina said tourist activity
remained strong following an early “jump-start” to the vacation season.
She noted that restaurants in that location were busy, but that tips
were a bit lower than usual as families tried to vacation on a smaller
budget. Hotel managers said vacationers continued to seek bargains, and
corporate and military travel had softened in part because of pending
government actions affecting spending decisions. A Virginia hotel
contact reported a massive increase in bookings following severe storms
at the end of June, which caused local power outages that lasted past
the July 4th holiday.

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

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