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The following is excerpted from the Beige Book, a publication of the Federal Reserve Bank Of Boston. This edition was released on September 3, 2003. Many economists and business leaders look to the Beige Book for guidance on the state of the economy. This section gives an overview of the construction and real estate sectors:

"Residential real estate activity remained strong in most districts in July through mid-August, with some contacts reporting all-time sales highs. Respondents in the Chicago, Cleveland, Kansas City, Minneapolis, Philadelphia, Richmond, St. Louis, and San Francisco districts report that overall sales were strong in recent weeks. Dallas indicates that real estate markets "improved" in July and early August, but that the industry "remains very competitive, restraining price increases." In contrast to most districts, real estate contacts in Atlanta report a "slight weakening in overall sales growth, especially at the higher end;" some of this weakness they attribute to unusually wet weather over the summer months. Contacts in the Chicago, Dallas, Kansas City, New York, Philadelphia, Richmond, and San Francisco districts say that the recent upturn in mortgage interest rates prompted a rush to complete sales of both new and existing homes in August."

http://www.federalreserve.gov/FOMC/BeigeBook/2003/20030903/default.htm

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The following perspective is excerpted from a speech given by Federal Reserve Governor Donald L. Kohn at a conference on Finance and Macroeconomics sponsored by the Federal Reserve Bank of San Francisco and the Stanford Institute For Economic Policy Research in San Francisco on February 28, 2003. Governor Kohn discusses the housing market in relation to currently low interest rates:

…[H]ousehold investment has stayed unusually strong throughout the recession and early in the recovery, buoyed, no doubt, by low interest rates. As a consequence, it is to be expected that stocks of interest-sensitive investment goods--in the present circumstances, especially cars and houses--are greater than they would otherwise be. And with demand for housing strong, it is perhaps not surprising that house prices are probably higher than they otherwise would be. But judging from the steep upward slope of the yield curve, few see interest rates as holding at current levels indefinitely. When, at some point, interest rates rise to more typical levels, desired stocks of these goods likely would fall, holding other factors equal, restraining this interest-sensitive spending. But it is important to remember that such an increase in interest rates would not occur in a vacuum; it would occur because the economy looked to be growing more vigorously. Most economists expect that a more pronounced step-up in the pace of activity will be brought about by a recovery in business investment from its current subdued levels. In that case, the need for high levels of spending on housing will be reduced. And higher interest rates will be instrumental in bringing about the adjustment in housing expenditures required to keep economic activity from overshooting its potential. In principle, a housing or durables boom induced by monetary policy need not entail a bust that would be painful to the economy. Of course, it is not likely to occur as smoothly as that. Among other things, markets could get it wrong--for example, they could anticipate greater strength in underlying demand than is actually occurring. Then, higher interest rates would tend to damp spending unduly.

http://www.federalreserve.gov/boarddocs/speeches/2003/20030228/default.htm

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The quote below is from the Rhode Island Builder's Association Internet site. In it they discuss the economic impact of new home construction:

"Using surveys from the U.S. Bureau of Labor Statistics, the National Association of Home Builders estimated that the construction of 1,000 single-family homes generates the equivalent of 2,448 full-time jobs in construction and other industries. Approximately 1,125 of these employees work in construction, and 1,323 work in other industries (such as manufacturing, transportation, services and mining). The construction of 1,000 multifamily homes creates 1,030 jobs in construction and other industries. Together, workers involved in the construction of single-family and multifamily housing units collect roughly $79.4 million in wages and generate more than $42.5 million in federal, state and local tax revenues and fees each year."

http://www.ribuilders.org/Public_Info/Housings__Economic_Impact/housings__economic_impact.html

 

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