The Federal Reserve recently released its April Beige Book, which summarizes anecdotal information on the economy obtained from its 12 District banks. The Beige Book is released 8 times a year and the April edition is the third Book of this year. According to this month’s Beige Book, while results varied among the different Districts, economic activity has generally increased since March’s report across the country. Indeed, 10 of the 12 Districts reported increased economic growth; including Boston, Philadelphia, Richmond, Atlanta, Minneapolis, Kansas City, Dallas, San Francisco, New York, and Chicago. Cleveland and St. Louis both reported a decrease in economic activity. The Beige Book not only gives economists and policy makers additional information with which to analyze the economy but it also gives the Federal Reserve additional information that is helpful in its deliberations on monetary policy. Senior housing participants should stay abreast of overall findings from the Book as it contains valuable information on consumer spending, real estate, construction, and financial services activity that all have an impact on the senior housing industry.
Consumer Spending
Consumer spending increased in a majority of districts since the last Beige Book was released. This is a very positive sign for the economy because consumer spending makes up roughly two-thirds of the nation’s gross domestic product. Increases in consumer spending indicate increased confidence in the economy and this will benefit senior housing as more people feel comfortable purchasing goods and services, including those offered by senior housing communities. Unfortunately, cold weather did continue to dampen consumer spending in the Cleveland region, but there was good news in St. Louis as that region reported multiple new store openings and plans for future openings as well. In the retail sector, retailers reported increases in sales from the start of the year and attributed this in part to better weather conditions in most Districts.
Residential Real Estate and Commercial Construction
Activity in the residential housing market was mixed across the different districts. Home sales rose in the Kansas City, Dallas, and Richmond districts, but were mixed in New York, San Francisco and Atlanta. Meanwhile, home sales actually decreased in the Chicago, St. Louis, and Minneapolis districts. In most districts inventory levels remained limited and residential home prices rose slightly.
There was good news in the commercial construction industry as activity increased in various degrees in Kansas City, Dallas, Philadelphia, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, and San Francisco. However, Cleveland reported a slight decrease in construction activity; which may have been due to continuing cold weather conditions there.
Banking and Financial Services
In the banking and financial services sector, loan demand increased across the districts since the last Beige Book was released in March. Of the 12 districts, only St. Louis reported a decrease in loan volumes while the rest reported slight to modest gains. Most of the districts reported mixed or declining borrowing for residential mortgages which coincides with the housing activity they reported. The weather continued to play a role in some districts as New York, Philadelphia, Cleveland, and Richmond all cited poor weather as one of the factors that reduced homes sales and mortgage borrowing. Finally, commercial loan volumes increased in all of the districts except St. Louis, which reported a slight decrease in that category.
Overall, April’s Beige Book showed good, but not stellar increases in economic activity across the districts. However, as the weather continues to improve economists are optimistic that economic activity will pick up further as people get out more often, start visiting malls and shopping centers to purchase more goods and services, and start attending more open houses and buying more homes as well. The next Beige Book will be released in June and we’ll know what kind of impact the start of the spring season had on the economy then. In the meantime, as the economy continues to slowly but steadily improve and interest rates remain low, senior housing participants and others who are interested in obtaining financing for growth, acquisitions, or other reasons, should continue to look to Cambridge Realty Capital and the many different financing options it offers for assistance with their capital needs.
