Housing Dips, Economists Trip

Although December rates of housing sales were 5.1% lower than the previous month, 2003?EUR??,,????'???s total of 1,085,000 homes sold was the highest sales rate on record. With the federal funds rate remaining at a 45-year low during the past year, sales picked up 11.5% from 2002, when 973,000 homes were whisked off the market.

However, December?EUR??,,????'???s seasonally-adjusted rate of 1,060,000 homes sold disappointed economists. If there is any indicator from the sales rate falling from November?EUR??,,????'???s rate of 1,117,000,it may be seen in current state reports. For example, the California Budget Project released on January 28, 2004, described an affordable housing crisis that is trapping potential buyers into the rental market as housing prices rise faster than income levels. With the average home sales price at $261,100, an economy where 2.3 million people lost jobs since 2000 leaves little room for many people to buy homes.

A minor jolt to the economy came on January 28, 2004, when the Federal Reserve changed a promise that the federal funds rate, the interest that banks charge on overnight loans, would stay at the 45-year-low of 1%. The central bank?EUR??,,????'???s wording in the last four policy statements decreed that because of low inflation and a slack use of resources, the low rates would remain in place ?EUR??,,????'??for a considerable time.?EUR??,,????'?? But the latest policy statement reads that, with the low inflation and use of resources, ?EUR??,,????'??it can be patient?EUR??,,????'?? in choosing to raise rates. Although this change in wording was subtle, the Dow Jones dropped 140 points after the announcement.

Mortgage rates tend to reflect the pricing of treasury notes, which in turn are affected by the federal funds rate.

(Percentages may not add up to 100 due to rounding)

Sources: www.census.gov; www.ajc.com; www.forbes.com