Severe winter weather depressed recent economic activity throughout the First District, but business contacts throughout New England generally reported modest increases in revenues and sales, the Federal Reserve said in its latest Beige Book report.
Commercial real estate activity was mixed across the First District, which includes Massachusetts, Connecticut, Maine, New Hampshire, Rhode Island and Vermont, according to the Beige Book. Office demand was said to be uneven throughout Boston, and severe weather tamped down office leasing inquiries in Boston and Hartford. However, contacts also told the Fed that demand for commercial real estate is strong throughout New England, particularly in Boston, and that the bank lending environment for commercial real estate is highly competitive.
Despite that optimism, commercial real estate contacts also expressed concern that economic uncertainty stemming from recent, weaker-than-expected employment reports, as well as fallout from political unrest abroad, could hamper growth.
Residential real estate contacts reported no change in single-family and condo sales in Massachusetts, but saw year-over-year sales increases in Connecticut. According to the Beige Book, scarce inventory is said to be the most significant constraint on sales growth, and uncertainty around new qualified mortgage rules and flood insurance reforms may also be causing buyers to proceed with caution.
Connecticut contacts told the Fed that weak consumer confidence and a shortage of stable job opportunities are affecting sales. Median sale prices increased year-over-year in four of the six New England states, declining only in Connecticut and Vermont. In Massachusetts, particularly in the greater Boston area, price appreciation driven by low inventory levels has become a concern as realtors caution that high prices could keep first-time homebuyers out of the market.
While pending sales suggest the market for single-family homes and condos is off to a good start so far this year, contacts also told the Fed they expect the harsh winter to depress sales in the near term.
Nine out of 13 manufacturing contacts told the Fed they had experienced higher sales than the same period a year ago. Two firms reported flat sales for apparently idiosyncratic reasons, and two other firms reported falling sales, which they attributed to the harsh winter, the Fed said.
Retail contacts reported modest year-over-year sales increases, ranging from 3 percent to the mid-single digits. Boston-area hotels saw strong occupancy rates and revenues closing out 2013, but other tourism businesses – like restaurants and museums – saw declining revenues, again due largely to Old Man Winter.
