The nation's commercial real estate markets showed their
strongest gains in more than two years during the early fall,
according to the FDIC's latest quarterly poll of experts from the
federal bank and thrift regulatory agencies. The results suggest that
the ongoing recovery in commercial real estate is spreading to more
markets, especially in the West.
"The increasingly positive reports of commercial real estate
market conditions during 1996 suggest that the recovery in this
sector is gaining momentum," said FDIC Chairman Ricki Helfer. Opinions
of residential market trends also remained quite positive, although
they were somewhat less favorable than in the previous FDIC survey
taken in July.
"The recovery in housing markets still appears to be solid,"
Chairman Helfer said. "With mortgage interest rates easing recently
and the economy remaining strong, underlying conditions remain
favorable for the residential sector in the near future."
The poll was based on responses from 310 senior examiners
and asset managers nationwide from the FDIC, the Federal Reserve
System, the Office of the Comptroller of the Currency and the
Office of Thrift Supervision. It was conducted by the FDIC in late
October and covered developments in local real estate markets
during the prior three months.
Assessments of commercial markets were decidedly more
upbeat in October than in July. Almost half of the respondents (46
percent) noted improvements in their local markets, the highest
proportion since July 1994 (also 46 percent) and second only to the
48 percent in April of 1994.
The experts polled continued to cite steady reductions in
excess supply of commercial space. The 29 percent who reported
an oversupply in their market area was the lowest since the
survey began in April of 1991. Also, a record 84 percent reported
above-average or average commercial property sales. While this
level is only slightly above the previous high of 83 percent in July
1996, it is more than double the 41 percent reported when the
Regarding residential markets, 35 percent said conditions
were on the upswing during the prior three months, compared to 45
percent in July and April. Respondents in October described
changes in home sales and resale prices somewhat less positively
than in recent surveys. In contrast, residential construction showed
further improvement. A survey high of 88 percent noted above-average
or average new home construction, while 72 percent found apartment and
condo construction activity to be above-average or average.
The index used by the FDIC to summarize both commercial
and residential real estate markets showed conditions in October
remained high -- at 67 in October compared to 68 in July. Under
the FDIC's system, scores above 50 indicate that more respondents
thought conditions were improving than declining, while readings
below 50 mean the opposite. The more the reading goes above or
below 50, the greater the proportion of positive or negative
Regionally, the big news in the October survey was the
favorable assessments in the West, led by increasingly positive
responses from California. In little over a year, observations of
improving market conditions in California have increased
dramatically. Sixty-four percent of the respondents saw better
commercial markets, up from 39 percent in July. Seventy percent
reported stronger housing markets.
Congress created the Federal Deposit Insurance Corporation in 1933
to restore public confidence in the nation's banking system. The FDIC
insures deposits at the nation's 11,670 banks and savings associations
and it promotes the safety and soundness of these institutions by
identifying, monitoring and addressing risks to which they are exposed.
Copies of the Survey of Real Estate Trends are available on the Internet
(at http://www.fdic.gov/bank/analytical/survey/index.html), by fax (dial 804-642-0003) on your fax machine and
follow the voice prompts to request Document No. 231), or by mail or
messenger (contact the FDIC's Public Information Center at 800-276-6003
or (703) 562-2200).