Business activity in the First District showed year-over-year improvements in August, according to the latest incarnation of the Federal Reserve’s Beige Book.
In the First District, which includes all of New England except for Connecticut’s Fairfield County, a greater fraction of retail and manufacturing contacts cite year-over-year sales or revenue increases than in the last couple of rounds and outlooks are positive. Software and IT services and staffing firms also report strong or increasing activity. While some contacts told the Fed they had difficulty filling skilled positions, most responding firms are neither adding to nor subtracting from headcounts to any substantial degree. With the exception of staffing firms, respondents say wages are steady. Prices, too, are reported to be steady with very few exceptions.
Commercial and residential real estate markets were largely unchanged since the last report, the Fed said.
In Boston, market conditions are largely unchanged since the previous report in July. Downtown leasing activity held steady, and office leasing demand appears to be strengthening along the Route 128 corridor. However, despite rising profits, most existing firms are not expanding their space needs and some recent lease renewals resulted in reduced footprints. Contacts told the Fed they were impressed by the amount of capital pouring into commercial real estate, as well as into multifamily properties, in the greater Boston area, with prices that reflect highly optimistic expectations. Also in Boston, construction activity remains strong in the hospitality and multifamily sectors, and speculative office construction remains limited.
Closed sales of single-family homes in June were mixed across the First District compared with June 2013. Sales declined in Massachusetts, though the median sales price increased.
For Massachusetts, this is the fifth consecutive month of year-over-year declines in sales of single family homes and for Greater Boston it is the sixth consecutive month of year-over-year declines. Contacts in Massachusetts say the ongoing decline in sales and rise in sales price are driven primarily by a shortage of inventory, with little change in consumer demand. Respondents in all five states express concern over student debt levels, believing they will continue to weigh on housing markets for the foreseeable future.
According to the Beige Book, sentiment in the First District is generally positive, with expectations of continuing improvement. However, multiple contacts say expectations need to realign to a "new market norm." These contacts say that both buyers and sellers in New England housing markets must adjust to price increases that are well below previous high rates and begin to look at a house as shelter rather than as "a piggy bank."
