From the Federal Reserve:

Summary of Commentary on Current Economic Conditions (Beige Book) - December 2009

Second District–New York

The Second District’s economy has shown further signs of improvement since the last report, though the labor market remains soft. There are no indications of any significant price pressures. Manufacturing sector contacts report steady to increasing activity and continued improvement in general business conditions, and a large majority remain optimistic about the near-term outlook. Auto dealers report a rebound in sales in recent weeks. General merchandise retailers also say that sales have improved since the last report. There are signs of a pickup in tourism activity in New York City.

Commercial real estate markets–in both the office and industrial categories–have been steady to moderately weaker since the last report. Residential real estate markets have been mixed since the last report, but generally weaker, especially at the high end of the market; New York City’s sales and rental markets have been particularly weak. Finally, bankers report rising delinquency rates–articularly on mortgages, both residential and commercial; they also note continued tightening in credit standards, and weaker loan demand.
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Commercial real estate markets in the District were again steady to softer since the last report. Manhattan’s office vacancy rate climbed again in October, while asking rents continued to fall and are running 25 percent below comparable 2008 levels; effective rents are reported to have fallen even more steeply–especially when concessions are factored in. Northern New Jersey’s market has been particularly slack, though office markets in Long Island and the northern suburbs appear to be somewhat firmer: in all these markets around New York City, vacancy rates have been relatively steady, while asking rents are running 4-5 percent lower than a year earlier. Office rental markets in upstate New York are mixed: vacancy and rent data suggest that metropolitan Rochester’s market has softened somewhat, while Buffalo’s market has been steady to slightly stronger. On the other hand, a commercial real estate firm in western New York State maintains that demand for both office and retail space is weak and that there is virtually no new development activity.

Housing markets have been mixed but, on balance, a bit softer since the last report. Home sales and prices have reportedly weakened moderately in the Buffalo area, in part due to the impending expiration of the [now extended] homebuyer tax credit. Contacts in northern New Jersey report that resale transactions remain low but have picked up a bit, and that selling prices appear to have stabilized at low levels. However, builders have reportedly stepped back on new development as they remain skittish about having excess inventory. New York City’s housing market has continued to weaken: while sales activity for existing apartments has rebounded from depressed levels, sales of new units remain very sluggish. Selling prices for existing units are reported to be down roughly 25 percent from a year earlier, with even steeper declines at the high end of the market; weakness at the high end is also evident in northern New Jersey. Developers looking to unload large inventories have begun to auction off condo units with steep discounts–primarily in Brooklyn, but also in the Bronx. New York City’s rental market also continues to weaken, with contract rents in Manhattan falling roughly 10 percent over the past 12 months; moreover, when concessions are factored in, the decline in effective rents has been a good deal steeper. On the supply side, one industry expert estimates that nearly 3,000 new rental units have been completed in Manhattan thus far in 2009–roughly double the figure for all of 2008.