Fed's Beige Book Delivers a Weak CRE Reading

Commercial real estate markets "weakened broadly," according to the Beige Book, which noted that many Federal Reserve district banks reported falling rents and rising vacancy rates. "Leasing activity was down in almost all districts," the Beige Book says. Vacancy rates rose in the Boston, New York, Richmond, Chicago, and Kansas City districts while rents fell in the Boston, New York and Kansas City districts. Meanwhile, CRE and residential lending contracted. Home sales were down in most districts. The only bright spot in the Beige Book is that some district banks reported "relatively stronger demand" for starter homes. In a recent speech, Federal Reserve Board chairman Ben Bernanke noted that the housing correction still has a way to go. "Housing markets remain weak, with low demand and the increased number of distressed properties on the market contributing to further declines in house prices," the Fed chairman said.