Tag Archives: Federal Reserve Board

CR: Fed’s Beige Book: Economic activity expanded at “moderate” pace

Fed’s Beige Book: Economic activity expanded at “moderate” pace

by Bill McBride on 4/17/2013  

Fed’s Beige Book “Prepared at the Federal Reserve Bank of Dallas based on information collected on or before April 5, 2013.”

Reports from the twelve Federal Reserve Districts suggest overall economic activity expanded at a moderate pace during the reporting period from late February to early April. …

Most Districts noted increases in manufacturing activity since the previous report. Particular strength was seen in industries tied to residential construction and automobiles, while several Districts reported uncertainty or weakness in defense-related sectors. Consumer spending grew modestly, and firms in some Districts cited higher gasoline prices, expiration of the payroll tax cut, and winter weather as factors restraining sales growth. Retailers in several Districts expect continued sales growth in the near term.

And on real estate:

Residential real estate activity continued to improve in most Districts, and some Districts, including Cleveland, Richmond, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco, noted increased momentum since the last report. The New York District, in particular, noted especially strong improvement in residential real estate—both in for-sale housing and apartment markets.

Home sales continued to rise in most Districts. Although homebuyer demand was high in the Boston District, low home inventories were restraining sales, keeping growth modest. Home sales were reportedly strong in both the Atlanta and Dallas Districts. The Richmond District noted low inventories were pushing up contracts to well above listing prices, and the Boston and New York Districts said multiple bids on properties have become more common. Tight inventories and strong sales led to rising home prices in many Districts, including Atlanta, Minneapolis, Kansas City, Dallas, and San Francisco. Within the New York District, condo sales volumes strengthened and low inventories have begun to drive up selling prices in New York City and surrounding areas, while New Jersey home prices were rising modestly and inventories were shrinking with a marked reduction in the number of distressed properties. Contacts in the Boston District also noted a decline in the stock of distressed properties.

New home construction continued to pick up in most Districts, although the Richmond District said that a low supply of residential building materials had stalled construction. …

Commercial real estate and construction activity improved in most Districts. Office vacancy rates declined in the Boston District and contacts said the construction of mixed-use projects was picking up. The New York District reported that office vacancy rates continued to decline and rents rose in Manhattan.

Residential real estate “continued to improve” and this was the most positive comment on commercial real estate in some time (but any “improvement” for commercial is from a very low level). This suggests moderate growth overall …

Read more at http://www.calculatedriskblog.com/2013/04/feds-beige-book-economic-activity.html#poKSKhlkLQ0VPuj3.99

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As Baby Boomers Age in Place, They Will Increase Their Influence in the Home Improvement Market

As Baby Boomers Age in Place, They Will Increase Their Influence in the Home Improvement Market

by Kermit Baker
Director, Remodeling
Futures Program

Over the coming decade, the home improvement market will increasingly rely on older homeowners to generate growth. A previous post pointed out that baby boomers will continue to control a large segment of the housing stock nationally, that they have low mobility rates, and that they have continued to improve their homes as they prepare to age in place. Going forward, baby boomers have significant motivation to spend on home improvements.They also have the financial resources to do so. By staying in the workforce longer, baby boomers often have sufficient incomes to undertake these improvements. Moreover, because older households were able to benefit from the run-up in stock prices and home values more than younger households, they typically have seen greater gains in wealth. The net result is that home improvement expenditures by older owners have grown faster than for younger ones.

As their longevity has increased, coupled with their uncertainty over future economic conditions, seniors have been more inclined than comparable groups in prior decades to remain in the labor force. The labor force participation rate (the share of the population that is working or actively looking for work) for the age 55 plus population increased from 30.1% in 1990 to 40.2% in 2010 according to the U.S. Department of Labor. They project that it will continue to inch up for this group in coming years.

While incomes for older workers have held up better than those of their younger counterparts, the biggest difference has been in the wealth positions of these households. Older families, who were able to benefit from both the run-up in stock prices and home values, are generally in a much better financial position now than their younger counterparts. Between 1995 – when both the stock market and housing market began to accelerate – and 2010, median family net worth increased by almost 34%. However, it increased significantly more for older households, with families age 75 and older having a net worth 133% greater than their counterparts in 1995.

Federal Reserve Board, Survey of Consumer Finances

Source: Federal Reserve Board, Survey of Consumer Finances

Not only was the upside greater for older families over this period, but the recent downturn has been significantly milder. While median family net worth declined over 35% from 2007 – when both stock prices and home values were near their market peak – to 2010, it declined less than 30% for those aged 55 to 64, and even increased modestly for families aged 75+.

Though families aged 55 to 64, the leading edge of the baby boom generation and therefore a key demographic to watch, haven’t done as well as older families in recent years in holding onto their net worth, their situation still looks promising. Typically more highly leveraged during the growth years, this leverage often worked against the leading edge baby boomers during the downturn. Still, by 2010, the median net worth of this group had increased more than 55% from 1995 levels, compared to 34% for all families. Coupled with incomes that have held up better than their younger counterparts since 1995, this leading edge of the baby boom generation is entering its retirement years in a generally comfortable financial position.

Greater longevity and lower mobility have given older households the incentive to improve and modify their homes so that they are able to comfortably and safely age in place. Higher incomes and greater wealth have given them the ability to do so. Average spending by homeowners on home improvement projects has increased about 30% over the past decade. However, while gains have been more modest for owners under age 55, they have increased by over 50% for those over age 55.

JCHS Tabulations of the 2001 and 2011 American Housing Surveys

Source: JCHS Tabulations of the 2001 and 2011 American Housing Surveys

The combination of greater numbers of baby boomers aging in place and greater per owner spending on home improvement projects has dramatically shifted the composition of the home improvement market. In 2001, owners age 55 or older accounted for less than 32% of home improvement spending in the owner-occupied residential market. By 2011, this had grown to 45%. So, while the influence of baby boomers on the new residential construction market may be waning, they are a growing force in home improvement activity.

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