Recovery in Real Estate Markets Loses Momentum, FDIC Reports

WASHINGTON - The recovery in real estate markets slowed between July and October, the Federal Deposit Insurance Corp. reported Thursday.

While the real estate rebound continued, soft residential markets caused a loss of momentum from gains recorded earlier in the year, the agency said in its latest report on banking's biggest credit headache.

Snail's Pace

The FDIC tracks the realty trends by polling more than 450 bank and thrift examiners and liquidators across the country, four times a year.

The supervisors were asked in October if real estate markets in their areas had improved, were static, or deteriorated since the previous survey in July. The FDIC assigns values to the answers. A score of 50 represents an unchanging market; the higher the score above 50, the stronger the recovery.

The October survey, the third this year, produced a 57 for the overall real estate market, down from 64 in July and 61 in April. Thus the market is still in recovery - above 50 - but noticeably below the July level.

The residential score plunged to 63 in October from 73 in July, while commercial real estate dipped to 48 from 51.

"Why the increase slowed is anybody's guess, but there is speculation about consumer confidence," said James L. Fruend, the FDIC researcher who performed the survey.

Drop for Home Prices

Through follow-up questions, the research found that 32% of the examiners and liquidators saw home prices decline in October while just 26% reported lower sales prices in July.

The West's composite figure was 56, down from 69 in July. Residential real estate plummeted to 59 in October from 76 in July, while commercial fell to 48 from 53.

In the Northeast, the overall figure was 49, down from 52 in July. Commercial real estate dropped one point to 37 while residential real estate fell five points to 58.

The South was the most robust region with an overall market rating of 63, but that was still down from 68 in July.

Residential real estate in the South scored a 67, down from 72 in July, and commercial real estate dropped to 53 from 58.

Almost 60% of the examiners reported that real estate lending by banks remained stable, although 40% of the examiners in the West said construction lending had slowed.

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