U.S. economic activity expanded further in June and early July, the Federal Reserve said Wednesday, as slower housing markets were offset by gains in manufacturing and commercial real estate.
In the Fed's Beige Book summary of anecdotal economic conditions, seven Fed districts reported the pace of growth as "moderate" or "modest", while others said conditions were "moderating," "decelerating," "mixed" or "varied."
Only the Philadelphia district noted that economic conditions had improved.
The observations come on the heels of a trade group report that showed sales of existing homes fell for a fourth straight month in June as all sections of the country showed weakness.
The National Association of Realtors reported that sales of existing homes dropped by 3.8% in June to a seasonally adjusted annual rate of 5.75 million units, the slowest sales pace in 4 1/2 years.
In the Beige Book, the Fed said districts overall reported ongoing input cost pressures, particularly for petroleum-related items, but retail prices were increasing at a moderate rate.
Wage gains were described as either moderate or similar to the previous reporting period, but "significant upward pressure" was reported for wages and salaries for in-demand, highly skilled workers.
The Fed districts reported that businesses were having mixed success in passing on higher costs to their customers.
Most districts said residential construction and real estate activity continued to decline through mid-July, with some describing conditions as "soft" and "weak."
Separately, the NAR said the median price of a new home edged up slightly to $230,300 in June, a small 0.1% increase from the sales price a year ago. That was the first year-over-year price increase in 11 months, but analysts cautioned that it would take more months to determine whether the downward trend in prices has finally stabilized.
"The net increase in prices is very misleading," said Mark Zandi, chief economist at Moody's Economy.com, in a CNBC interview.
"[The increase] is related to the mix of homes that are transacting. The low end of the market is getting pummelled by the implosion in subprime, but it's being biased upward because the share of homes in the high end is greater now."
Zandi expects "the bottom for the housing market is not late '07 or early '08 -- but probably late '08."