Economy Now

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Is the Fed getting bullish on housing?

June 6, 2012: 4:39 PM ET
Happy days are here again?

Happy days are here again?

In a report on its 12 regional districts known as the "Beige Book," the Federal Reserve said that "overall economic activity expanded at a moderate pace." That's not particularly great news. The "moderate pace" thing is the same line we've been hearing for months now.

"Moderate" is actually one of the better scenarios in recent Fed parlance. Economic improvements have been a mixed bag of "moderates," "modests," and "steadys" for some time. Actually, you could take the current report to be slightly gloomier than the last one in April, since the Philadelphia district reported a slowing economy this time around.

Not much else has changed since the last Beige Book. Manufacturing is still expanding, tourism is still increasing, retail spending and hiring are still positive and inflation is still in check.

But if you can get past the boiler plate first paragraph, there is one real bright spot buried in the report: real estate.

The sector has been a major drag on the entire economy for years. Even after the recession receded and things began slowly turning around in other areas, the housing market was still the elephant in the room.

But recent data is starting to show that things could finally be turning around. Since the start of the year, the Fed's language on the subject has been slowly improving. In January the Fed said housing "held steady at very low levels." A month later housing had "increased modestly."

Here's a snapshot of how the housing market was doing the last time we checked in with the Fed districts back in April:

"Residential real estate activity improved in most Districts, though Cleveland and San Francisco noted that activity remained lackluster or at low levels ... Non-residential construction activity improved in the Philadelphia, Cleveland, Richmond, Atlanta, Chicago, and St. Louis Districts, though many of these contacts characterized the improvement as slow. Boston, New York, and San Francisco characterized non-residential real estate activity as unchanged or steady."

Though there were already some positive signs in real estate then, the improvement wasn't consistent across all the regions.

But behold some of the uncharacteristically upbeat language appearing in today's report:

"The New York, Cleveland, and Richmond Districts noted a pickup in the pace of distressed sales. Residential brokers and some builders in the Philadelphia, Atlanta, and Dallas Districts said home sales were exceeding expectations. Contacts in the Richmond District said homes were being snapped up as investors become more confident in the housing recovery, and the Atlanta report noted stronger sales to cash buyers and investors in Florida. Chicago said more sales had multiple offers."

"Exceeding expectations!" "Snapped up!" "Multiple offers!" Those of us who pay close attention to such reports aren't used to seeing such emphatically positive terms. Especially not when it comes to the housing market, or for that matter, the Federal Reserve.

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