Realty Markets Post Strongest Showing in More than Two Years

Led by a vibrant residential sector, real estate markets showed the strongest performance in more than two years, government analysts said Wednesday.

According to a nationwide survey in April of 326 examiners and liquidators at the four bank and thrift agencies, real estate markets improved in all regions of the country.

The survey is conducted quarterly by the Federal Deposit Insurance Corp.

The composite index for the period ended in April spiked to 67 from 60 in January. The index now stands at it highest point since April 1994, when it was measured at 78. Residential real estate climbed to 68 in April from 57 in January, while the commercial real estate tally rose to 66 from 63.

Scores above 50 indicate that a majority of regulators thought conditions in their markets were improving.

"This is the most positive report in two years, only 9% of those surveyed said housing conditions in their local markets were worsening," said James L. Freund, the FDIC economist who compiled the report.

Mr. Freund attributed the strong gains to favorable interest rates and continuing economic growth.

In the residential sector, more than 80% of the surveys reported home building at average or above-average levels, while one-third reported above-average sales volume.

Home sales prices were holding steady or increasing, according to 92% of those surveyed.

Commercial real estate inventories across the nation were sharply reduced. Excess supply stood at 35% in April, down from 53% a year ago.

The South continued its reign as the strongest region, turning in a composite score of 71, up 8 points. In the survey's biggest surprise, the composite score in the West rose 15 points to 70, surpassing the Midwest where the composite score climbed 6 points to 68.

California, long a trouble spot, reported impressive upswings in the outlook for both residential and commercial real estate. In residential markets, Mr. Freund said, 49% of those surveyed said they believed the conditions were improving, versus 11% last July. In commercial real estate, he said, 37% reported improving conditions, versus 7% in July.

Still, California has not shaken its lingering real estate problems, according to Mr. Freund. "These are strong numbers, but they don't imply things are in great shape in California because it's starting from a lower base," he said.

The weakest performance was in the Northeast, where the composite score rose only 2 points to 56. Commercial real estate trends in Connecticut and New York were reported to be weakening.

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