Housing's Influence Gets a Test

[NVMojo]

Published: September 24, 2006

THE Federal Reserve has held interest rates steady again, while reiterating its belief that inflation pressures persist in the economy. This week, a couple of reports may confirm that the housing market is no longer a source of those pressures.



Sales of existing homes are predicted in a Bloomberg News poll of economists to show a decline on Monday, to an annual rate of 6.20 million units in August from 6.33 million in July. Two days later, a decline is also anticipated for sales of new homes, to an annual rate of 1.04 million units in August from 1.072 million.

Bill Cheney, chief economist at John Hancock Financial Services, called the housing market “the big wild card now” in the economy. The report on Monday is the one he will follow most closely this week.

“Existing-home sales is probably the biggest single thing in terms of new news and calibrating the seriousness of the weakness in the housing market,” he said.

Speaking of calibration, Mr. Cheney lauds the Fed for keeping the various influences on economic growth and prices in balance. He says he thinks that the central bank is finished with this credit tightening cycle and has managed to avert a recession.

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http://www.nytimes.com/2006/09/24/business/yourmoney/24mark.html?_r=1&oref=slogin