U.S. Federal Reserve Beige Book: Atlanta District

Real Estate and Construction. Residential brokers indicated that sales softened somewhat in September compared with the previous month and were flat to slightly up compared with very weak levels from last year. Florida brokers reported that home sales growth slowed. Outside of Florida, Southeast brokers noted a modest pickup in sales growth. Cash purchases by investors, second home buyers, international buyers, and retirees accounted for much of the sales activity across most of the Southeast, according to contacts. Existing home prices remained below year earlier levels. District brokers anticipate only modest sales growth over the next several months.

Reports from District builders indicated that new home sales and construction activity were largely unchanged in September and were slightly ahead of weak levels from a year ago. Home builders continued to report that new home prices were largely flat compared with the previous month and a year ago. Overall, construction and new home sales growth are expected to be similar to weak year-ago levels over the next several months.

Half of District commercial contractors polled reported that construction activity in September exceeded the first half of the year, while just under one-third signaled that activity was weaker. Backlogs reportedly increased modestly as well. The outlook among contractors remained weak as most anticipated commercial development to be flat or down on a year-over-year basis for the remainder of 2011 and into 2012. Commercial brokers remarked that market dynamics continued to largely favor tenants in the District, particularly in the retail sector. However, some reports indicated that available office space had declined, and with little new office development underway, this could result in an increase in rental rates. An opposing view shared by some contacts was that smaller blocks of office space remained abundant on a sublease basis from tenants that have downsized, but are still paying for unused space. Corporate expansion and relocation interest has picked up in some markets, which could have a positive impact on inventory and construction.

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