First District–Boston on the economy:

Business activity continues to expand overall in the First District, but individual firms’ gains show some choppiness. Most contacted manufacturers and advertising and consulting firms saw revenues rise in the most recent quarter on a year-over-year basis, while retail results were more mixed in May and June. Residential real estate markets continue to show positive effects of the homebuyer tax credits, but activity slowed after the April deadline. Respondents in commercial real estate were mostly downbeat based on office job forecasts, but building sales are picking up, in some cases at distress prices. A few firms with rising sales are increasing their headcounts, but most are holding employment steady. Input costs for some metals, oil- and food-related products have risen, but sales prices are mostly stable.

Boston Residential Real Estate Market:

Residential real estate markets in New England continue to experience large year-over-year sales increases in May and into June. Median home prices also increased modestly year-over-year in May, although median condo prices were somewhat mixed. While April 30 was the deadline to sign a “binding sales contract” in order to be eligible for the homebuyer tax credits, buyers are allowed to close these deals as late as September 30 (extended from June 30). The strong sales numbers of May and June thus reflect closings on pre-April 30 contracts spurred by the tax credits. Respondents report that activity has slowed considerably since the expiration of the tax credit. Sales numbers will soften over the next couple of months as a result of this slowdown, although respondents are uncertain whether sales will show year-over-year declines. Pending sales of homes and condos in Massachusetts dropped 16 percent and 21 percent year-over-year in June, respectively.

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