WASHINGTON - Real estate market conditions improved this summer for the first time in a year, according to a survey released this week by the Federal Deposit Insurance Corp.
The outlook brightened thanks to a strong housing market, which compensated for a slight ebb in the performance of commercial properties.
"Housing markets, which have been sluggish recently, are showing renewed strength," noted FDIC Chairman Ricki Helfer. "Five months of falling mortgage rates appear to be spurring homebuying and encouraging construction, which is good news for the economy."
Every quarter, the FDIC analyzes real estate conditions by polling about 400 examiners and liquidators at the four federal bank and thrift regulatory agencies.
The opinions are compiled into indexes for residential and commercial real estate, as well as a composite covering both markets. July's composite index climbed to 64, up three points from April's survey, but still well below the record high of 78 registered in April 1994.
From May to July, the residential index jumped seven points to 64, reversing the market's continuous slide since April 1994 when it peaked at 82.
Commercial real estate dropped to 65 in July, down from 68 in April. A score above 50 indicates that more respondents saw an upswing in conditions than a downturn. So, even though the overall commercial real estate index fell in July, the market was still improving; it simply improved at a slower rate than in April.
In all three categories, the Midwest and South turned in higher scores than the Northeast and West.
For instance, the highest score recorded in July, 72, showed that commercial real estate conditions were best in the South. The Midwest followed with a score of 70, the West was third with 60, and the Northeast last at 53.
The Midwest led the housing index with 69, though the South scored a 68 and the Northeast a 65. Revealing a huge gap with the rest of the country - and providing the only score below 50 - the housing index in the West was a meager 48.
The latest FDIC survey found that only 13% of respondents noticed weakening housing market conditions, down significantly from an all-time high of 18% reported in April.
While 76% of the respondents said new home construction was at average or above average levels, 48% of the regulators surveyed in the West observed below-average homebuilding activity.
The national residential index was dampened by worsening conditions in the West, where just 20% of respondents observed an improving housing market. That's the lowest proportion since the first survey was begun in April 1991.
While fewer respondents saw improvements in the commercial market in July, a survey high of 29% reported increased commercial real estate prices in their markets. And the lowest percentage to date, 46%, noticed excess supply in commercial real estate markets.
"The steady whittling down of excess commercial space, combined with increasing sales prices, are positive signs for owners of commercial properties and for lenders," Ms. Helfer said.
