WASHINGTON (MNI) – The following is the text of the Federal
Reserve’s Beige Book survey Eleventh District summary, published
Wednesday:

ELEVENTH DISTRICT-DALLAS

Continued:

Construction and Real Estate

Housing contacts noted more favorable conditions. Builders said
sales in the first three months of the year were relatively strong,
especially at the low end. Sales of higher priced homes are happening
but they are not as widespread. Given the severe cutback in construction
in the first quarter of 2009, builders have been pro-active in adding
spec homes in hopes of sales and closings before the expiration of the
current tax credit. Realtors were encouraged that prices were up
slightly and noted the housing market was in the beginnings of a modest
rebound. Overall, housing contacts were more positive in their outlooks.

Apartment demand in most Texas markets was “meaningfully positive,”
according to contacts. New product was leasing well and there were fewer
move-outs in older units, consistent with an improving job market. Lower
rents were “doing their job” and generating positive demand. The
exception was Houston, where overall leasing was weaker.

Reports from commercial real estate contacts were mixed, but
overall they suggest the sector may be nearing bottom. Declining rental
rates have spurred leasing activity in the office and industrial
markets. One industrial contact noted that landlords have “taken a
realistic look” at conditions and are offering drastic reduction in
rental rates on renewals. Respondents noted that while absorption had
improved, there would be no construction any time soon. Commercial
property sales activity picked up from very low levels. Contacts said
while the good deals being offered were minimal; there were many
interested buyers and lenders. Outlooks for the commercial real estate
sector were mixed, with some contacts expecting continued improvement
and others anticipating a longer, rocky road ahead.

Financial Services

Loan demand remains soft but appears to be stabilizing. Contacts
are seeing more commercial and industrial loan activity in the pipeline
as well as some improvement in credit card volumes and consumer loan
demand, albeit with more aggressive pricing. Real estate lending is
still restricted. Deposit growth has been relatively flat, and lending
standards remain tight. Credit quality appears to have turned a corner,
and is either stabilizing or improving. Despite a shift towards
stabilization and slight optimism, much uncertainty remains around
impending regulatory changes, particularly for community banks. Overall,
most contacts expect growth in revenues and loan demand to be slightly
positive this year.

Energy

The rig count rose further over the past six weeks. Oil-directed
drilling continued to be boosted by rising oil prices. Contacts say the
increase in gas-directed drilling is not justifiable at current low
prices, but firms are drilling based on futures prices locked in
earlier, to hold leases and to learn the shale technology. There is
concern that gas-directed drilling will decline in the second half of
the year. Demand for oil and gas services and equipment continues to
grow with the rig count.

Agriculture

Wet weather continues to boost pasture growth. It has, however,
delayed spring planting in some areas, which may lead producers to shift
away from corn in favor of crops with shorter planting seasons such as
cotton and grain sorghum. Net farm income is expected to be higher in
2010 compared with last year but below the ten-year average.

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** Market News International Washington Bureau: 202-371-2121 **

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