Federal Reserve branches in New York, Philadelphia, Kansas City, and San Francisco reported weakening conditions for commercial and industrial space. Many districts also reported high vacancies and falling rents for commercial properties. Both residential and nonresidential construction remained low while prices remained flat or dipped.
Residential sales were up toward the end of last year, the report noted. However, sales of lower-priced and entry level homes did the best. Almost all districts partly attributed the increase to the tax credit extended to first time home owners. The tax credit first expired in November but was then extended to April of this year. One real-estate agent in the Richmond district said the tax credit was keeping people in the game. Several districts reported that the increased sales in November then led to lower sales in December.
Some districts reported deteriorating credit conditions in the real estate market. New York reported increased delinquencies in all loan categories and Boston reported increased commercial real estate loan delinquencies. Both residential and commercial contractors in Cleveland reported difficulties obtaining financing.