Manufacturing also expanded while consumer spending growth was "slight to moderate" and auto sales also rose at a "moderate" level.
Investors watch the Fed's economic outlook for clues on the central bank's policies after some members expressed belief that asset purchases should be curtailed soon.
The release came on a brutal day for the market, with major averages losing more than 1 percent.
The outlook offered some nuggets of hope in addition to the increase in real estate activity: Bank lending increased as did credit quality and deposits, tourism grew and "a wide variety of business services expanded."
While growth was spotty around the country, the Dallas district said it was seeing growth at a "strong" level.
Hiring prospects improved in the New York district, while Boston said there was little labor force expansion and Minneapolis reported tightening conditions.
There were some references to the sequestration budget cuts in Washington affecting conditions, particularly in the defense industry.
"The defense industry experienced weakening activity in the Cleveland District, and a producer of defense equipment in the Richmond District cited government sequestration and orders being canceled or delayed," the report said.
—By CNBC's Jeff Cox. Follow him on Twitter