We use cookies on our website to give you the best online experience. Please know that if you continue to browse on our site, you agree to this use. You can always block or disable cookies using your browser settings. To find out more, please review our privacy policy.

Economy Matters logo

About


The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.

The blog's authors include staff from the Atlanta Fed's Regional Economic Information Network and Public Affairs Department.

Postings are weekly.


December 23, 2013

Southeast Commercial Construction Update: Activity, Costs Up

Last week, I reported on the latest results from the Atlanta Fed’s monthly housing market business contact poll. The Atlanta Fed also conducts a poll of commercial construction business contacts that tracks construction trends and developments in commercial real estate. (This category includes office, retail, industrial/warehouse/distribution, hotel, and multifamily properties).

I wanted to present a few highlights from the third-quarter 2013 poll:

  • The overwhelming majority of contacts indicated that the pace of construction activity for nonresidential structures had increased from year-earlier levels. On a quarter-over-quarter basis, most contacts indicated that the pace of construction was flat to up slightly.
  • Just over half of all respondents indicated that the level of backlog in the third quarter was similar to the level one year earlier. The rest indicated that the level of backlog in the third quarter was greater than the year-earlier level.
  • Most contacts indicated that material costs were slightly up from year-earlier levels.
  • The majority of contacts indicated increases in labor costs of from 1 percent to 4 percent from year-earlier levels. On a quarter-over-quarter basis, half of all contacts indicated no change in labor costs; the remaining noted labor cost increases of varying degrees.
  • Most contacts expected to modestly increase the number of employees at their firms in the fourth quarter of 2013. Just under half of business contacts indicated that it was more difficult to fill positions than a year earlier.
  • When asked about the availability of commercial construction and development finance in their market, more than half of contacts perceived the amount of available credit as sufficient to meet demand.

Note: Third-quarter 2013 poll results were collected October 7–16, 2013 and are based on responses from 17 commercial construction firms with footprints across the Southeast.

If you are a commercial contractor and would like to participate in this poll, please let us know by sending a note to RealEstateCenter@atl.frb.org.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department


December 19, 2013

Southeast Housing Update: Sales Growth Slows

In an effort to stay on top of changing housing market conditions, the Atlanta Fed conducts a monthly poll of home builder and residential broker business contacts. The poll dates back to December 2005. It opens on the first Monday of each month, closes a week and a half later, and reflects activity from the previous month. Since the most current housing data often come with several months’ lag, we like to keep a close eye on this poll for any early signals that the housing landscape is changing.

According to the latest poll results, the majority of builders and brokers reported that sales on a year-over-year basis continued to be flat to slightly up. On a month-over-month basis, contacts indicated that sales continued to be flat to slightly down (see the chart).

November 2013 Southeast Home Sales vs. a Year Earlier

Nearly half the brokers indicated that buyer traffic was down on a year-over-year basis. More builders have also started to indicate that buyer traffic is declining (see the chart). Many of the comments we received from contacts suggested that seasonal factors are driving the decline in buyer traffic.

November 2013 Southeast Buyer Traffic vs. a Year Earlier

The majority of brokers and builders continued to report that home inventory levels were down from a year earlier (see the chart). Several contacts commented that they expect to see slight increases in inventory levels over the next few months as more homeowners regain equity in their homes.

November 2013 Southeast Home Inventory vs. a Year Earlier

The majority of builders and brokers continued to indicate home price appreciation in November (see the chart).

November 2013 Home Price vs. a Year-ago

Over the past two months, more builders have begun to indicate that they are having a difficult time filling positions compared with a year earlier (see the chart).

November 2013 Southeast Homebuilder Survey: Difficulty Filling Positions vs. a Year Earlier

When asked how labor costs compare with a year ago, more than 30 percent of builders indicated that they are experiencing increases of 3 percent or more (compared with 20 percent of builders one year earlier and 10 percent of builders two years earlier; see the chart).

Southeast Builder Labor Costs vs. Year Ago

More broker and builder contacts expect to see home sales growth over the next few months relative to last month’s report, although expectations for home sales growth are slightly weaker than a year earlier (see the charts).

Southeast Builder Home Sales Expectations Next 3 Months, Year-over-Year

Southeast Broker Home Sales Expectations Next 3 Months, Year-over-Year

Fewer builders expect construction activity to increase over the next three months compared with a year ago, although expectations for activity have increased from recent reports (see the chart).

Southeast Builder Construction Expectations Next 3 Months, Year-over-Year

Note: November poll results are based on responses from 43 residential brokers and 21 homebuilders and were collected December 2–11, 2013. The housing poll's diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. Positive values in the index indicate increased activity, and negative values indicate decreased activity.

If you are a real estate broker or homebuilder and would like to participate in this poll, please let us know by sending a note to RealEstateCenter@atl.frb.org.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department


December 11, 2013

Beige Book: Southeast Growing at a Moderate Pace

Eight times a year, the 12 Reserve Banks gather anecdotal information on current economic conditions in their districts through reports from Bank and branch directors as well as interviews with key business contacts, economists, market experts, and other sources. Then, approximately two weeks prior to each Federal Open Market Committee meeting, results are published in the Beige Book on the Federal Reserve Board of Governors' website.

Because the lead sentence—of the national summary and each district's section—often gives a broad view of economic conditions in that region, that first sentence often gets much attention. Here is a roundup of the first sentences of these sections:

  • National: Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest to moderate pace from early October through mid-November.
  • Boston: Economic activity continues to expand in the First District.
  • New York: Economic growth in the Second District has continued at a moderate pace since the last report.
  • Philadelphia: Aggregate business activity in the Third District continued to rise at a modest pace during this current Beige Book period (beginning with the first partial week of October).
  • Cleveland: Business activity in the Fourth District expanded at a moderate pace since our last report. On balance, demand for manufactured products grew at a moderate rate.
  • Richmond: The District economy expanded moderately in recent weeks.
  • Atlanta: Businesses across the Sixth District described economic activity as moderately increasing from October to mid-November.
  • Chicago: The rate of growth in economic activity in the Seventh District continued to be modest but slowed a bit in October and early November.
  • St. Louis: Business activity in the Eighth District has expanded at a moderate pace since the previous report.
  • Minneapolis: The Ninth District economy grew at a moderate pace since the last report.
  • Kansas City: The Tenth District economy continued to grow modestly in November.
  • Dallas: The Eleventh District economy expanded at a moderate pace over the past six weeks.
  • San Francisco: Economic activity in the Twelfth District expanded at a modest pace during the reporting period of early October through late November.

As you can tell, all 12 districts experienced similar levels of activity. Here are some notable highlights from the Atlanta Fed's portion of the Beige Book:

Employment
On balance, contacts across the private sector reported that the partial federal government shutdown had little to no direct impact on employment, but it has negatively affected business confidence, which could translate into delayed hiring decisions now or in the near term. Contacts continued to express concern about shortages of qualified labor. Their concern is that companies seeking to hire and expand their business could be impeded by an inability to find qualified workers. Overall, firms experiencing any growth in demand for their products expressed no plans to hire in the near term.

Prices
Contacts continued to report stable pricing, with no major concerns about inflation. Isolated reports of cost increases (for example in fast food, grocery stores, and construction) were generally passed through successfully to customers. Year-ahead unit cost expectations were unchanged at 1.9 percent in November, according to the Atlanta Fed's Business Inflation Expectations survey (see the chart). Overall, profit margins were tight across most industries. Aside from scattered reports of upward pressure on wages for high-skilled workers, increases remained stable (mostly in the range of 2 percent to 3 percent) across most industries.

Year-Ahead Unit Cost Expectations

Consumer spending and tourism
District retail contacts indicated that economic uncertainty was having an impact on consumer confidence and behavior. Although merchants reported plans to offer robust discounting, beginning even earlier than the traditional Black Friday, retailers' expectations for the upcoming holiday season are only mildly optimistic. Sales of light vehicles were steady. Hospitality firms continued to cite expanding levels of activity in both leisure and business travel.

Real estate and construction
District brokers indicated that growth of existing home sales have slowed notably in recent months. By most accounts, inventory levels continued to decline on a year-over-year basis. Home prices remained ahead of the year-earlier level, but price gains seemed to be slowing. The majority of builders noted that new home sales and construction were ahead of the year-earlier level. Reports on unsold inventory were mixed, while contacts continued to note modest home price appreciation. District commercial brokers noted that demand for space continued to improve modestly. Construction activity slightly increased as well from earlier in the year.

Manufacturing
District manufacturers reported gains in new orders, production, and employment in October compared with the previous month. An increasing number of contacts cited higher-than-desired finished inventory levels and remarked that commodity prices continued to rise, albeit at a modest rate. Manufacturers also noted a mild decrease in supplier delivery times.

Banking and finance
Banking contacts reported better overall lending activity relative to our previous report, although loan demand in rural areas remained low. Commercial real estate lending increased as property values rose; commercial and industrial and auto lending was strong. Mortgage lending and refinancing activity slowed as mortgage interest rates increased. Deposit levels were high at most institutions, and banks remained competitive in seeking quality loan customers. Some banks loosened underwriting standards and reduced margins to attract new loan business.

The next Beige Book will be published January 15.

Photo of Shalini PatelBy Shalini Patel, an economic policy analysis specialist in the Atlanta Fed's research department

 

October 31, 2013

Acadiana Spotlight: Optimistic about Local Real Estate Conditions

You may recall that my Atlanta Fed colleague Rebekah Durham and I reported on housing conditions in southeast Louisiana in our July 22 SouthPoint post. I recently returned from another trip to Louisiana; this time, my colleagues from the Regional Economic Information Network at the New Orleans Branch of the Atlanta Fed invited me to join them as they touched base with real estate contacts in the Acadiana region, which encompasses the city of Lafayette and the surrounding parishes. I’m happy to report that our real estate business contacts were quite optimistic on both the residential and commercial real estate fronts.

Contacts indicated that the Lafayette area has experienced tremendous growth over the past year, thanks in large part to the energy sector. However, they were quick to point out that growth in the energy sector only serves as “four of the cylinders in an eight-cylinder engine,” as they described growth in medical, fiber, technology, and petrochemical fields as other drivers of growth. Business contacts mentioned that several companies are in the process of relocating high-paying executive positions as well as management positions to the Lafayette metropolitan statistical area. This growth has had quite a positive impact on the local real estate markets.

On the commercial real estate side, contacts reported that a fair amount of construction activity is taking place in the industrial and retail sectors, with considerable construction of medical office space also under way. Contacts indicated that this increased construction activity has been steady during the past year and a half and encompassed both existing firms wanting to expand their space and firms new to the area undertaking construction. Commercial real estate brokers expressed little to no difficulty in leasing existing space.

On the residential real estate side, business contacts reported that home sales are up more than 13 percent from a year earlier. Contacts indicated that the jump in mortgage rates seems to have raised demand more than it deterred potential buyers. Though new listings are up more than 17 percent year over year, contacts noted that the months’ supply of homes for sale dropped from 6.5 months to 5.3 months. Moreover, home prices have increased almost 2 percent from a year earlier, according to the Federal Housing Finance Agency’s quarterly house price index.

All said, contacts expect 2014 and 2015 to be even better than 2013 was. They pointed out that these large infrastructure investments by area businesses send a strong signal that the energy sector will not be leaving the area any time soon. As the nearby port expansions wrap up, more rigs come online, and manufacturing and petrochemical plants open their doors, business contacts are confident that an increase in real estate demand will follow.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed’s research department


December 23, 2013

Southeast Commercial Construction Update: Activity, Costs Up

Last week, I reported on the latest results from the Atlanta Fed’s monthly housing market business contact poll. The Atlanta Fed also conducts a poll of commercial construction business contacts that tracks construction trends and developments in commercial real estate. (This category includes office, retail, industrial/warehouse/distribution, hotel, and multifamily properties).

I wanted to present a few highlights from the third-quarter 2013 poll:

  • The overwhelming majority of contacts indicated that the pace of construction activity for nonresidential structures had increased from year-earlier levels. On a quarter-over-quarter basis, most contacts indicated that the pace of construction was flat to up slightly.
  • Just over half of all respondents indicated that the level of backlog in the third quarter was similar to the level one year earlier. The rest indicated that the level of backlog in the third quarter was greater than the year-earlier level.
  • Most contacts indicated that material costs were slightly up from year-earlier levels.
  • The majority of contacts indicated increases in labor costs of from 1 percent to 4 percent from year-earlier levels. On a quarter-over-quarter basis, half of all contacts indicated no change in labor costs; the remaining noted labor cost increases of varying degrees.
  • Most contacts expected to modestly increase the number of employees at their firms in the fourth quarter of 2013. Just under half of business contacts indicated that it was more difficult to fill positions than a year earlier.
  • When asked about the availability of commercial construction and development finance in their market, more than half of contacts perceived the amount of available credit as sufficient to meet demand.

Note: Third-quarter 2013 poll results were collected October 7–16, 2013 and are based on responses from 17 commercial construction firms with footprints across the Southeast.

If you are a commercial contractor and would like to participate in this poll, please let us know by sending a note to RealEstateCenter@atl.frb.org.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department


December 19, 2013

Southeast Housing Update: Sales Growth Slows

In an effort to stay on top of changing housing market conditions, the Atlanta Fed conducts a monthly poll of home builder and residential broker business contacts. The poll dates back to December 2005. It opens on the first Monday of each month, closes a week and a half later, and reflects activity from the previous month. Since the most current housing data often come with several months’ lag, we like to keep a close eye on this poll for any early signals that the housing landscape is changing.

According to the latest poll results, the majority of builders and brokers reported that sales on a year-over-year basis continued to be flat to slightly up. On a month-over-month basis, contacts indicated that sales continued to be flat to slightly down (see the chart).

November 2013 Southeast Home Sales vs. a Year Earlier

Nearly half the brokers indicated that buyer traffic was down on a year-over-year basis. More builders have also started to indicate that buyer traffic is declining (see the chart). Many of the comments we received from contacts suggested that seasonal factors are driving the decline in buyer traffic.

November 2013 Southeast Buyer Traffic vs. a Year Earlier

The majority of brokers and builders continued to report that home inventory levels were down from a year earlier (see the chart). Several contacts commented that they expect to see slight increases in inventory levels over the next few months as more homeowners regain equity in their homes.

November 2013 Southeast Home Inventory vs. a Year Earlier

The majority of builders and brokers continued to indicate home price appreciation in November (see the chart).

November 2013 Home Price vs. a Year-ago

Over the past two months, more builders have begun to indicate that they are having a difficult time filling positions compared with a year earlier (see the chart).

November 2013 Southeast Homebuilder Survey: Difficulty Filling Positions vs. a Year Earlier

When asked how labor costs compare with a year ago, more than 30 percent of builders indicated that they are experiencing increases of 3 percent or more (compared with 20 percent of builders one year earlier and 10 percent of builders two years earlier; see the chart).

Southeast Builder Labor Costs vs. Year Ago

More broker and builder contacts expect to see home sales growth over the next few months relative to last month’s report, although expectations for home sales growth are slightly weaker than a year earlier (see the charts).

Southeast Builder Home Sales Expectations Next 3 Months, Year-over-Year

Southeast Broker Home Sales Expectations Next 3 Months, Year-over-Year

Fewer builders expect construction activity to increase over the next three months compared with a year ago, although expectations for activity have increased from recent reports (see the chart).

Southeast Builder Construction Expectations Next 3 Months, Year-over-Year

Note: November poll results are based on responses from 43 residential brokers and 21 homebuilders and were collected December 2–11, 2013. The housing poll's diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. Positive values in the index indicate increased activity, and negative values indicate decreased activity.

If you are a real estate broker or homebuilder and would like to participate in this poll, please let us know by sending a note to RealEstateCenter@atl.frb.org.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department


December 11, 2013

Beige Book: Southeast Growing at a Moderate Pace

Eight times a year, the 12 Reserve Banks gather anecdotal information on current economic conditions in their districts through reports from Bank and branch directors as well as interviews with key business contacts, economists, market experts, and other sources. Then, approximately two weeks prior to each Federal Open Market Committee meeting, results are published in the Beige Book on the Federal Reserve Board of Governors' website.

Because the lead sentence—of the national summary and each district's section—often gives a broad view of economic conditions in that region, that first sentence often gets much attention. Here is a roundup of the first sentences of these sections:

  • National: Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest to moderate pace from early October through mid-November.
  • Boston: Economic activity continues to expand in the First District.
  • New York: Economic growth in the Second District has continued at a moderate pace since the last report.
  • Philadelphia: Aggregate business activity in the Third District continued to rise at a modest pace during this current Beige Book period (beginning with the first partial week of October).
  • Cleveland: Business activity in the Fourth District expanded at a moderate pace since our last report. On balance, demand for manufactured products grew at a moderate rate.
  • Richmond: The District economy expanded moderately in recent weeks.
  • Atlanta: Businesses across the Sixth District described economic activity as moderately increasing from October to mid-November.
  • Chicago: The rate of growth in economic activity in the Seventh District continued to be modest but slowed a bit in October and early November.
  • St. Louis: Business activity in the Eighth District has expanded at a moderate pace since the previous report.
  • Minneapolis: The Ninth District economy grew at a moderate pace since the last report.
  • Kansas City: The Tenth District economy continued to grow modestly in November.
  • Dallas: The Eleventh District economy expanded at a moderate pace over the past six weeks.
  • San Francisco: Economic activity in the Twelfth District expanded at a modest pace during the reporting period of early October through late November.

As you can tell, all 12 districts experienced similar levels of activity. Here are some notable highlights from the Atlanta Fed's portion of the Beige Book:

Employment
On balance, contacts across the private sector reported that the partial federal government shutdown had little to no direct impact on employment, but it has negatively affected business confidence, which could translate into delayed hiring decisions now or in the near term. Contacts continued to express concern about shortages of qualified labor. Their concern is that companies seeking to hire and expand their business could be impeded by an inability to find qualified workers. Overall, firms experiencing any growth in demand for their products expressed no plans to hire in the near term.

Prices
Contacts continued to report stable pricing, with no major concerns about inflation. Isolated reports of cost increases (for example in fast food, grocery stores, and construction) were generally passed through successfully to customers. Year-ahead unit cost expectations were unchanged at 1.9 percent in November, according to the Atlanta Fed's Business Inflation Expectations survey (see the chart). Overall, profit margins were tight across most industries. Aside from scattered reports of upward pressure on wages for high-skilled workers, increases remained stable (mostly in the range of 2 percent to 3 percent) across most industries.

Year-Ahead Unit Cost Expectations

Consumer spending and tourism
District retail contacts indicated that economic uncertainty was having an impact on consumer confidence and behavior. Although merchants reported plans to offer robust discounting, beginning even earlier than the traditional Black Friday, retailers' expectations for the upcoming holiday season are only mildly optimistic. Sales of light vehicles were steady. Hospitality firms continued to cite expanding levels of activity in both leisure and business travel.

Real estate and construction
District brokers indicated that growth of existing home sales have slowed notably in recent months. By most accounts, inventory levels continued to decline on a year-over-year basis. Home prices remained ahead of the year-earlier level, but price gains seemed to be slowing. The majority of builders noted that new home sales and construction were ahead of the year-earlier level. Reports on unsold inventory were mixed, while contacts continued to note modest home price appreciation. District commercial brokers noted that demand for space continued to improve modestly. Construction activity slightly increased as well from earlier in the year.

Manufacturing
District manufacturers reported gains in new orders, production, and employment in October compared with the previous month. An increasing number of contacts cited higher-than-desired finished inventory levels and remarked that commodity prices continued to rise, albeit at a modest rate. Manufacturers also noted a mild decrease in supplier delivery times.

Banking and finance
Banking contacts reported better overall lending activity relative to our previous report, although loan demand in rural areas remained low. Commercial real estate lending increased as property values rose; commercial and industrial and auto lending was strong. Mortgage lending and refinancing activity slowed as mortgage interest rates increased. Deposit levels were high at most institutions, and banks remained competitive in seeking quality loan customers. Some banks loosened underwriting standards and reduced margins to attract new loan business.

The next Beige Book will be published January 15.

Photo of Shalini PatelBy Shalini Patel, an economic policy analysis specialist in the Atlanta Fed's research department

 

October 31, 2013

Acadiana Spotlight: Optimistic about Local Real Estate Conditions

You may recall that my Atlanta Fed colleague Rebekah Durham and I reported on housing conditions in southeast Louisiana in our July 22 SouthPoint post. I recently returned from another trip to Louisiana; this time, my colleagues from the Regional Economic Information Network at the New Orleans Branch of the Atlanta Fed invited me to join them as they touched base with real estate contacts in the Acadiana region, which encompasses the city of Lafayette and the surrounding parishes. I’m happy to report that our real estate business contacts were quite optimistic on both the residential and commercial real estate fronts.

Contacts indicated that the Lafayette area has experienced tremendous growth over the past year, thanks in large part to the energy sector. However, they were quick to point out that growth in the energy sector only serves as “four of the cylinders in an eight-cylinder engine,” as they described growth in medical, fiber, technology, and petrochemical fields as other drivers of growth. Business contacts mentioned that several companies are in the process of relocating high-paying executive positions as well as management positions to the Lafayette metropolitan statistical area. This growth has had quite a positive impact on the local real estate markets.

On the commercial real estate side, contacts reported that a fair amount of construction activity is taking place in the industrial and retail sectors, with considerable construction of medical office space also under way. Contacts indicated that this increased construction activity has been steady during the past year and a half and encompassed both existing firms wanting to expand their space and firms new to the area undertaking construction. Commercial real estate brokers expressed little to no difficulty in leasing existing space.

On the residential real estate side, business contacts reported that home sales are up more than 13 percent from a year earlier. Contacts indicated that the jump in mortgage rates seems to have raised demand more than it deterred potential buyers. Though new listings are up more than 17 percent year over year, contacts noted that the months’ supply of homes for sale dropped from 6.5 months to 5.3 months. Moreover, home prices have increased almost 2 percent from a year earlier, according to the Federal Housing Finance Agency’s quarterly house price index.

All said, contacts expect 2014 and 2015 to be even better than 2013 was. They pointed out that these large infrastructure investments by area businesses send a strong signal that the energy sector will not be leaving the area any time soon. As the nearby port expansions wrap up, more rigs come online, and manufacturing and petrochemical plants open their doors, business contacts are confident that an increase in real estate demand will follow.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed’s research department