Reports from the nation’s 12 Federal Reserve banks show continuing weakness in residential real estate and construction, with most districts characterizing housing markets as soft or weak, and no districts reporting an increase in new home construction.
The residential real estate market in the Kansas City district continued to work off inventories, and commercial real estate activity strengthened further. The district includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico and the western third of Missouri.
Though still below year-ago levels, residential sales followed seasonal trends with increased sales in most of the district’s states. Low- to mid-priced homes sold well, while the market for higher-priced homes and condominiums remained weak.
Strong housing demand was reported in cities with high concentrations of energy-related activity. Median sales prices were flat or fell slightly. Stronger sales coupled with flat new-home construction led to a reduction in inventory levels from the last survey.
Bankers reported that both loans and deposits were unchanged since the last survey. Strong demand for commercial real estate and consumer installment loans and steady residential real estate loan demand offset easing of commercial and industrial loan demand. Credit standards were mostly unchanged, although a few contacts reported tightening lending standards to reduce risk exposure in a softer local economic environment.
District labor markets continued to add jobs and wage pressures eased slightly in late April and May. Hiring announcements outpaced planned layoffs with most job gains projected in service industries. Demand for skilled workers remained strong, most notably for engineers. Contacts in the leisure and hospitality industry reported difficulty retaining entry level staff.
Business contacts reported that labor shortages were limiting expansion plans and some companies had partnered with vocational schools to offer industry specific training programs. Wage pressures softened after intensifying in the last survey, but were expected to remain elevated compared to a year ago.