The latest Beige Book published earlier this week continues to paint a positive picture of economic conditions across the country, including a generally well-performing commercial real estate market. The Fed's commentary – which is based on reports from bank and branch directors and interviews with key business contacts, economists, market experts, and other sources – shows that national economic activity continued to expand in October and November and that employment gains were widespread, though overall price and wage inflation remained subdued. Construction and real estate activity are reported to have expanded overall, although the pace varied by sector, and lending typically held steady or increased. With most districts noting that contacts remained optimistic about the outlook for future economic activity, it is likely the next Beige Book publication will show similarly positive signs.

The full report includes information on manufacturing, mining, energy, retail and other market segments and can be found here. Since we're all pressed for time, I've summarized the key points pertinent to the CRE industry below:

REAL ESTATE

Residential 

Residential results were mixed, with most Districts reporting flattening or declining markets. Declining markets included:

• Atlanta - home sales has slowed since the previous report. A growing share of contacts reported that home sales fell short of their plan in October, and most contacts noted that home sales were flat or down slightly compared with a month ago.
• Boston - Residential real estate contacts say they are generally content. Many contacts are optimistic about the new Qualified Residential Mortgage rule, expecting it to ease down payment and credit score requirements and thereby help qualified consumers afford and purchase a house.
• Dallas - housing sector softened slightly during the reporting period. Slower growth in home sales was partly attributable to seasonal demand changes, although some of the weakening was attributed to higher home prices as well. Two contacts said that builders were not purchasing lots as readily as they have in the past. Outlooks were mostly optimistic, but a few contacts noted concerns about price affordability and the potential impact of an increase in mortgage rates on housing demand
• Philadelphia - homebuilders have reported lower traffic and declining numbers of contract signings
• St. Louis - Home sales decreased in the Eighth District on a year-over-year basis

Results were mixed in:

• Cleveland - Sales of new and existing single-family homes varied across geographic markets during the past six weeks. 
• Kansas City - Residential home sales decreased slightly, reflecting typical seasonal sales patterns, with sales of low- and medium-priced homes continuing to outpace sales of higher-priced homes. Home prices increased modestly, and inventories decreased slightly since the previous survey period
• San Francisco - Real estate activity advanced during the reporting period, albeit less consistently across the District for residential properties than for commercial properties. Contacts from some urban areas reported that home prices continued to increase rapidly; in other urban areas, however, prices stalled. In rural areas of the District, home prices generally increased at a moderate pace. Some contacts reported that, despite active construction and ample inventories, new homes have been selling at notably higher prices than comparable existing homes.

And little to no change was reported in:

• New York - housing markets have taken on a somewhat softer tone in recent weeks. New York City's residential rental market has shown signs of softening: Rents in Manhattan and Brooklyn are reported to be steady to down slightly from a year ago

Improvements were reported in the following Districts:

• Chicago - Residential construction rose in both the single- and multi-family markets
• Minneapolis - Residential real estate market activity also increased since the previous report. In the Sioux Falls area, October home sales were up 5 percent, inventory increased 4 percent, and the median sales price increased 8 percent relative to a year earlier. October home sales in western Wisconsin were up 20 percent from last year; the median sales price was up 3 percent. Home sales were up in Montana in the third quarter compared with last year. Minnesota home sales were up 4 percent from the same period a year ago in October, the inventory of homes for sale increased 8 percent, and the median sales price rose 2 percent
• Richmond - District housing market activity increased modestly on balance.

Multifamily 

The Multifamily sector was reported to be strong in all Districts that reported on this topic.

• Atlanta - Commercial contractors noted continued strength in apartment construction and indicated that the level of nonresidential construction activity continued to increase modestly
• Boston - Investor demand for office and multifamily properties in Greater Boston remains very robust.
• Chicago - Residential construction rose in both the single- and multi-family markets
• Cleveland - Multifamily development remains strong
• Dallas - Apartment demand remained strong, keeping occupancy rates high and rent growth solid in most major
• Minneapolis - October building permits increased significantly; however, multifamily housing vacancy rates increased slightly from the second quarter to the third quarter in the Minneapolis-St. Paul area. 
• New York - New single-family construction activity has been sluggish, while multi-family construction has been robust
• Richmond - Multifamily leasing was strong in Charlotte and Baltimore.
• St. Louis - Contacts in Little Rock noted that multifamily developers continue to look for new sites to build apartment complexes

Remaining districts did not provide specific comment on this sector.

Commercial

Commercial real estate was reported to be improving in most Districts.

• Atlanta - District commercial real estate brokers continued to report improving demand, though they cautioned that the rate of improvement varied by metropolitan area, submarket, and property type.
• Chicago - Commercial real estate activity increased broadly, as vacancies ticked down and rents rose
• Cleveland - Nonresidential builders reported continued strong pipeline activity, and most indicated that the level of activity has increased relative to a year ago. On the downside, we heard a few reports about private capital being readily available so construction could proceed, but owners are reluctant to move projects into the construction phase because of uncertainty about the economy
• Kansas City - Commercial real estate activity continued to increase at a moderate pace with lower vacancy rates and stronger sales, prices, and construction activity. The commercial real estate market was expected to continue to expand moderately over the next few months.
• Minneapolis - Activity in commercial real estate markets increased since the previous report. A real estate analytics firm noted strength in several market segments. For example, in the Minneapolis-St. Paul area, the industrial vacancy rate dropped by 30 basis points in the third quarter from the same period last year, the office vacancy rate dropped 90 basis points, and the retail vacancy rate was fla
• Philadelphia - Construction and leasing reported by nonresidential real estate contacts have picked up to a modest pace of growth
• Richmond - Commercial real estate activity increased moderately in recent weeks. Brokers reported that commercial sale prices increased slightly, and that sales activity was strong in Richmond, Baltimore, and Charlotte

Mixed results were reported in St Louis:

• St. Louis - Louisville reported strong leasing activity for industrial and commercial space. Contacts in Little Rock noted that prospective tenants are being pickier about commercial real estate space in northwest Arkansas. Contacts in St. Louis noted a strong industrial market in southwest Illinois.

And no significant change was reported in the following Districts:

• Boston - The outlook remains largely optimistic for the Boston and Portland commercial real estate markets. For Rhode Island, a modestly optimistic outlook for commercial real estate demand was qualified by contacts citing risks to the state's overall economic fortunes, including a looming state budget deficit.
• Dallas - Office and industrial leasing activity was mostly unchanged from the previous report. Investor interest in commercial properties, including foreign capital investment, stayed solid. Outlooks were generally optimistic, although there was some concern about the potential effect of declining oil prices.
• New York - Commercial real estate markets have generally remained steady thus far in the fourth quarter. In Manhattan, office availability rates edged down to a six-year low, while asking rents leveled off and are up about 2 percent since the beginning of the year.

CONSTRUCTION

Construction reports were positive overall, with no Districts reporting a decline in commercial construction activity.

• Atlanta - Commercial contractors noted continued strength in apartment construction and indicated that the level of nonresidential construction activity continued to increase modestly.
• Chicago - Nonresidential construction expanded at a moderate pace, led by demand for industrial and office buildings.
• Cleveland - General contractors are not overly concerned with rising prices for building materials, but they did note large price increases for concrete and drywall and smaller price increases for steel products. Transportation costs are rising, reflecting capacity constraints among trucking and rail carriers. A majority of general contractors reported that they expect to increase their payrolls in future months in response to rising demand and to expand capacity. Subcontractors are pushing through rate increases at a faster pace than general contractors had anticipated; these increases are needed to cover rising costs, including for labor and to widen margins. As a result, general contractors, who remain under pressure to keep their rates down, are facing additional margin compression.
• Kansas City - Housing starts increased at a modest pace, and construction supply sales were flat. Residential construction activity was expected to increase modestly as contacts anticipated higher sales, starts, and traffic of potential buyers
• Minneapolis - Commercial construction activity increased from a year ago and is expected to grow further in 2015. According to preliminary results from the Minneapolis Fed's 2015 business outlook poll, construction-sector respondents are optimistic for the coming year and expect sales volumes and capital investment to increase at their firms.
• Richmond - Multiple Virginia contacts reported an increase in retail construction. Brokers in Baltimore and Richmond said medical construction increased recently.
• San Francisco - Commercial real estate construction activity was solid during the reporting period, and vacancy rates decreased in most areas.

Mixed results were reported in New York and St. Louis:

• New York - New single-family construction activity has been sluggish, while multi-family construction has been robust.
• St. Louis - Commercial and industrial construction has been mixed throughout the District. Contacts in Little Rock noted that multifamily developers continue to look for new sites to build apartment complexes. A contact in Memphis reported two new developments planned for the downtown area that will include a mix of office space, apartments, and restaurants. A contact in St. Louis reported that although the office market is tightening, developers are reluctant to begin construction unless they have found their first tenant.

Commercial Loans and Mortgages  

No significant decline in commercial lending was reported:

• Cleveland - Bankers reported that demand for business credit was showing modest to moderate growth during the past six weeks. While demand was described as broad based, it was strongest for commercial real estate development, multifamily housing, and mergers and acquisitions
• Dallas - Overall loan demand expanded slightly during the last six weeks. Real estate lending increased, with strength noted in demand for construction loans for single-family and multifamily building activity
• Richmond - Lending conditions have improved somewhat since our previous report.
• San Francisco - Overall loan demand increased moderately since the previous reporting period. Contacts cited stronger demand for auto loans, credit card loans, and small business refinance loans.
• St. Louis - overall lending activity during the past three months was modestly improved compared with the same period last year

While unchanged or mixed results were reported in the following Districts:

• Atlanta - Regulatory requirements continued to be a concern for community bankers competing with larger banks for loans. Competition for qualified borrowers was characterized as "fierce," as low pricing and relaxed terms were being offered by some institutions to attract clients.
• Kansas City - steady overall loan demand, stable loan quality, and slightly higher deposit levels
• New York - increased demand for commercial mortgages but steady demand for other categories of loans

Credit Quality 

There were no reports of deterioration in credit quality. Credit standards generally remained unchanged, but several Districts reported heated competition for creditworthy loan prospects, which is sometimes a precursor of easing of credit standards.

• Cleveland - No changes to credit standards or credit quality were reported.
• Kansas City - Credit standards remained largely unchanged in all major loan categories.
• Philadelphia - Contacts reported ongoing credit quality improvements and intense price competition for creditworthy loan prospects.
• Richmond - In Maryland and West Virginia, contacts reported that increased competition had led to aggressive mortgage terms and lower loan yields for banks. 
• San Francisco - Vigorous competition among lenders engendered very favorable loan terms for the highest-quality borrowers. Net interest margins remained narrow, and shrank further for some banks. Some contacts reported that, in their area as a whole, the profitability of community banks declined during the reporting period.
• St. Louis - For commercial and industrial loans, credit standards eased somewhat, creditworthiness of applicants improved, demand was moderately stronger, and delinquencies were slightly lower.