Last Week in the News (December 1, 2008)

On Monday, November 24, the National Association of Realtors said existing home sales declined 3.1% to a seasonally adjusted annual rate of 4.98 million units in October from a downwardly revised pace of 5.14 million in September.

On Tuesday, the Standard & Poor’s/Case-Shiller home price index showed that home prices declined a record 16.6% during the third quarter from the same period a year ago. That eclipsed the previous record of 15.1%, set during the second quarter.

In an effort to loosen credit and get more loans flowing, the Federal Reserve rolled out two new programs that would provide up to $800 billion. The allocated funds will be broken out as follows: $200 billion to buy credit card loans, auto loans, student loans and loans to small businesses; $500 billion to buy mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac; and another $100 billion to directly purchase mortgages held by Fannie, Freddie and the Federal Home Loan Banks.

The Commerce Department reported Wednesday that new home sales fell 5.3% in October to a seasonally adjusted annual rate of 433,000, the lowest level since January 1991. The drop was larger than had been expected. In September, new home sales gained 0.7%.

Also on Wednesday, the Commerce Department reported that consumer spending fell by 1% in October, after declining 0.3% in September. It was the biggest decline since September 2001.

Orders for durable goods decreased 6.2% to $193 billion in October, more than double the decline economists expected. It was the biggest decrease since October 2006, when orders fell 8.3%. Orders for durable goods have now fallen for three straight months.

Upcoming on the economic calendar are reports on construction spending on December 1 and factory orders on December 4.