Southeast Housing Update
The Federal Reserve of Atlanta's monthly survey of regional residential real estate brokers and homebuilders saw home sales weaken notably again in July. Reports indicated that sales in July fell below the year-earlier level (see chart 1). Sales also weakened on a month-to-month basis. More than half of contacts reported that sales declined from June to July.
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Reports from Southeastern sources confirm slowing home sales growth in July. The Orlando Regional Realtors Association reported that existing home sales in July exceeded the year-earlier level, up 3.8 percent, but sales were notably weaker than the June gain of 37.8 percent. The Northeast Florida Association of Realtors reported that home sales growth turned negative on a year-over-year basis in July, down 12.8 percent, following a gain of 29.3 percent the prior month. According to the Greater Nashville Association of Realtors, July home sales weakened as well on a year-over-year basis, down 21 percent, following a 16 percent gain in June. According to data from the Knoxville Area Association of Realtors, July home sales declined 26 percent compared with a year earlier following a 10 percent gain the prior month.
Reports from Southeastern home builders indicated that new home sales continued to weaken as well in July, falling further below last year's level (see chart 2). More than half of builders reported a sales decline from June to July as well.
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Buyer traffic continued to soften in July on a year-over-year basis (see chart 3).
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Southeast brokers indicated that home listing inventories continued to rise, while builders reported that new home inventories declined on a year-over-year basis (see chart 4).
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Southeastern brokers and home builders indicated that home prices weakened in July (see chart 5).
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Author's note: June survey results are based on responses from 90 residential brokers and 50 homebuilders and were collected August 2–11. The housing survey'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 while negative values indicate decreased activity.
By Whitney Mancuso, a senior analyst in the Atlanta Fed's research department
Capital spending plans
In July, the Atlanta Fed conducted an informal poll of its Regional Economic Information Network (REIN) business contacts, asking them questions regarding their near-term capital spending plans. Overall, there were a total of 505 responses.
Chart 1 shows the industry breakdown of the entire District versus the sample:
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The participants were initially asked if they anticipated any changes in spending (on new plants and equipment) over the next six to 12 months relative to what they spent over the last six to 12 months.
Overall, 31 percent of firms noted that they did plan to increase spending, while 18 percent indicated that they had plans to decrease the amount of capital expenditure (see chart 2).
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The businesses that expected to increase their capital spending in the near term were then asked the reason for the increased spending.
Results showed that expected sales growth and the need to replace information-technology equipment were the two most common factors driving their plans. Improvement in the cost or availability of external financing was the least selected factor. Participants were also given the option of selecting "other factors" but were asked to specify them. Of those that selected "other factors," many cited business start-up and expansions as reasons for increasing spending (see chart 3).
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Participants that said they do not plan to increase spending in the near term were also asked to explain their decision. Firms indicated low expected sales growth, followed by increased or high economic/financial uncertainty as the two major factors behind not increasing capital spending (see chart 4).
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Finally, for the firms planning to increase spending, we wanted to know how much of the increase reflected investment that had been postponed because of the recession. Seventy-two percent said that either some or a considerable fraction of that outlay had been postponed because of the recession (see chart 5).
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By Shalini Patel, an analyst in the Atlanta Fed's research department