“Sales of existing homes in the U.S. fell more than forecast in December, capping the biggest yearly slump in more than a generation.
Purchases fell 2.2 percent to an annual rate of 4.89 million, the National Association of Realtors said today in Washington. For all of last year, sales of single-family homes declined 13 percent, the most since 1982, and prices dropped for the first time in at least four decades [and likely since the Great Depression].
Falling property values and tougher borrowing rules may lead to more foreclosures and depress housing for most of this year. The worsening real-estate recession is at the core of the economic slowdown and will probably prompt the Federal Reserve to lower interest rates next week and in future meetings, economists said.”
∙ U.S. Existing Home Sales Fell More Than Forecast [Bloomberg]
What goes up, must come down.
“…..will probably prompt the Federal Reserve to lower interest rates next week and in future meetings, economists said.”
Since 1971, the lowest the Fed has ever taken Fed Funds was to 1.25% in 2003 (well, they took it to 1.0% briefly). Since they began cutting recently, the average cut has been around 50 bps. We’re at 3.5% today. Realizing we haven’t even seen the peak of foreclosures or home price drops yet….how many arrows are left in their quiver….4, maybe 5? And at what level do we have a dollar confidence problem?