WASHINGTON (MNI) – The following is the second part of the latest
Beige Book survey of economic conditions in the Federal Reserve’s Fifth
District, published Wednesday:

Real Estate

Residential real estate activity continued to be depressed. Several
brokers reported that sales in their area had dropped and that housing
prices continued to decline. A contact in Charlotte described the local
real estate market as worsening, while a source from Richmond stated
that new building permits were down. According to a contact in
Baltimore, the housing market remained slow and short sales were getting
harder to close due to tighter regulatory standards. A Realtor from
Northern Virginia said that there were fewer foreclosure sales in the
market, but added that short sales were still about 50 percent of her
companys sales. Another Realtor in the D.C. area expected fewer sales
for the upcoming season because inventory was shrinking, but said that
low interest rates should keep the market active. He added that a
moderate trend of sales at or above full price should continue for
properties in good condition. Finally, a market analyst from the eastern
Virginia area noted a modest improvement in sales activity, particularly
in more urban areas. He also noted that new construction had shifted
towards smaller, more energy-efficient homes.

Commercial real estate and construction activity was little changed
from weak levels that have persisted throughout much of this year. Many
commercial Realtors described the market as spotty, with gains one
week being offset by declines the next. Warehouse leasing activity fell,
due to soft manufacturing sales and production. A Realtor in Virginia
cited modest improvements in leasing by small industrial clients who
were expanding, but added that he had to offer lower rents to retain
several office tenants. An agent covering the Carolinas noted that
leases were getting done, but problems obtaining financing were
holding back many deals. A South Carolina Realtor described the office
market as mixed, but noted that gains were limited to the high end of
the market. On the construction side, several contractors also described
business as slow-paced. A contractor in Maryland stated that a slight
increase in building renovations during June and July ended in August.
Several contractors reported an uptick in government-related projects,
while private work continued to decline.

Labor Markets

Although reports on labor market activity were varied in September,
on balance their tone was more negative than in our last report.
Employment agencies reported somewhat stronger demand for temporary help
in recent weeks, particularly in the manufacturing sector, but indicated
that finding qualified workers was becoming an increasing concern. A
Virginia contact noted that one-in-five businesses were having problems
finding workers with the desired skills, particularly in the
manufacturing and professional business services industries. A manager
of a temp agency in North Carolina stated that companies were hiring
workers on a more permanent basis, but companies were taking longer to
do so than in the past. A temp agency executive from the Charlotte area
reported that, despite a backlog of work and employees working a lot of
overtime, a manufacturer was still unwilling to hire at this time due to
concerns about future demand. According to our latest survey, service
sector hiring was flat over the last month. Retail sector wages were
weak, while wages at service firms edged up. Hiring by manufacturers
strengthened over the last month, while the average workweek eased and
wage growth inched higher.

Tourism

Following Hurricane Irene in late August, hotels and related
businesses on the Outer Banks of North Carolina quickly re-opened to
serve late-season travelers. The southern portion of the Outer Banks
suffered extensive damage, including destruction of buildings and
roadways, particularly along the Hatteras side. These tourist
destinations are now closed, and many may not re-open until next spring.
However, tourism remained vibrant in other areas. A hotel manager in
western North Carolina reported strong bookings, both for groups and for
pleasure stays. He noted that leaf peepers were booked for October and
into November, and local holiday attractions were expected to keep
bookings up through the end of the year. Hospitality contacts in
Richmond and Baltimore also reported solid business. Finally, a contact
said that recent international media attention on the earthquake-damaged
Washington Monument has been overwhelming. He added that the new Martin
Luther King Memorial was drawing huge crowds.

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

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