Existing Home Sales Drop in January; Fed Releases FOMC Transcripts from ’08; G20 Aims for More Growth Globally

Existing U.S. home sales dropped 5.1 percent in January compared to December. The Federal Reserve released transcripts of some of the internal discussions at the Federal Open Market Committee during the critical year 2008. The meeting of Group of 20 finance ministers and central bank chiefs in Sydney issued a final communique stating that the goal of the group is to create more than $2 trillion in additional output over the next five years.

According to the National Association of Realtors on Friday, existing U.S. home sales dropped in January compared to December. The annualized sales rate during the first month of 2014 was 4.62 million units, down 5.1 percent from the month before. The pace of sales was also down 5.1 percent from January 2013, and in fact was at its lowest level since the summer of 2012.

Total housing inventory at the end of January rose 2.2 percent to 1.9 million existing homes available for sale, which represents a 4.9-month supply at the current sales pace, up from 4.6 months in December. Unsold inventory is 7.3 percent above a year ago, when there was a 4.4-month supply.

NAR chief economist Lawrence Yun put some of the blame for the January sluggishness on the hard winter, but not all of it. “Disruptive and prolonged winter weather patterns across the country are impacting a wide range of economic activity, and housing is no exception,” he said in a statement. “Some housing activity will be delayed until spring. At the same time, we can’t ignore the ongoing headwinds of tight credit, limited inventory, higher prices and higher mortgage interest rates.”

Fed Releases FOMC Transcripts From ’08 

Late last week the Federal Reserve released transcripts of some of the internal discussions at the Federal Open Market Committee during the critical year 2008. The overall sense of the time was that the central bankers expected a serious shock to the economy – except when they didn’t. For instance, Janet Yellen (then president of the San Francisco Fed) accurately said in January 2008: “The severe and prolonged housing downturn and financial shock have put the economy at, if not beyond, the brink of recession.”

By contrast, Dallas Fed president Richard Fisher asserted at the same time that “none of the 30 CEOs to whom I talked, outside of housing, see the economy trending into negative territory. They see slower growth. Some of them see much slower growth. None of them at this juncture… see us going into recession.”

In August, St Louis Fed president James Bullard said that, “My sense is that the level of systemic risk associated with financial turmoil has fallen dramatically.”

Also, central bankers occasionally have a sense of humor: board member Frederic Mishkin expressed skepticism about household surveys “because they tend to react very much to current conditions. Also, if you ask people what TV shows they are watching, they will tell you that they are watching PBS and something classy, but you know they are watching ‘Desperate Housewives.’ ”

To which Ben Bernanke said, “What is wrong with ‘Desperate Housewives’?”

G20 Aims for More Growth Globally

Over the weekend, the meeting of Group of 20 finance ministers and central bank chiefs in Sydney issued a final communique that asserted that the goal of the group, which is made up of the wealthiest nations in the world — about 85 percent of the world’s economy among them — is to create more than $2 trillion in additional output over the next five years. The G20 also stated it wants its member nations to pursue policies that create tens of millions of new jobs.

The communique was a little short on specifics on how the G20 nations would achieve this worthwhile result, however. According to the International Monetary Fund, which prepared a report for the Sydney meeting, “structural reforms” in the various countries would generate an extra 0.5 percent in growth per year, but it’s up to those countries to create plans that specify what that means as a practical matter.

Wall Street was up for most of the day on Friday, but toward the end of the trading session, took a small dive. The Dow Jones Industrial Average lost 29.93 points, or 0.19 percent, while the S&P 500 likewise was down 0.19 percent. The Nasdaq dropped 0.1 percent.