"Demand for residential real estate remained quite depressed, with only a few tentative and scattered signs of stabilization amidst the ongoing slowdown," the central bank's Beige Book of anecdotal descriptions about the economy said."Contacts generally do not expect a significant pickup in homebuilding until well into next year at the earliest," the Fed said.
The report, which depended on information gathered through November 16, and is prepared ahead of the Fed's December 11 policy meeting, showed the prolonged housing slump and credit market turmoil were casting a pall on the economy.
The economy grew at an annual rate of 3.9 percent in the July-September period, and analysts expect it to grow more slowly in the last three months of the year and early 2008.
The Beige Book said news about retail spending was "downbeat" in general. However, some districts pointed to solid growth in sales for consumer electronics and luxury goods, the report said. "Looking ahead, the reports were slightly pessimistic for the holiday retail season," the Beige Book said.
Meanwhile, higher energy costs were creating upward pressure on prices. Elevated oil prices pushed up transportation costs and manufactured items that use petroleum-related materials, the report said. Food prices "continued their upward march," and imported goods' prices rose because the dollar's value fell.
Many producers responded by increasing final sales prices, but some were forced to absorb price increases in profit margins, the Fed said.
In recent weeks, credit market conditions have deteriorated anew as banks have hoarded cash as a contingency against credit-related losses. Fed Vice Chairman Donald Kohn signaled on Wednesday that elevated turbulence could open the door for the Fed to cut rates further as credit becomes scarce for households and businesses.
Lending to businesses was slower in October and early November, but remained at high levels, the Beige Book said. However, mortgage lending "continued its downward slide," and mortgage delinquencies increased "significantly" in many areas of the country, the report said.