By Anthony Feld and Carlos Torres March 2 (Bloomberg) -- A possible relapse in home prices that had Fed policy makers concerned late last year may now be coming to pass, underscoring forecasts by economists such as Jan Hatzius that an interest-rate increase is a long way off. The CHART OF THE DAY graphs median home prices for existing and new houses. At $163,600 in January, the median cost of an... [more]
By Anthony Feld and Carlos Torres
March 2 (Bloomberg) -- A possible relapse in home prices
that had Fed policy makers concerned late last year may now be
coming to pass, underscoring forecasts by economists such as Jan
Hatzius that an interest-rate increase is a long way off.
The CHART OF THE DAY graphs median home prices for existing
and new houses. At $163,600 in January, the median cost of an
existing single-family home was the lowest since May 2002,
figures from the National Association of Realtors showed last
week. For new houses, the $203,500 median price was at a six-
year low, according to data from the Commerce Department.
“We are likely to see some downward pressure on home
prices in 2010,” said Hatzius, chief U.S. economist at Goldman
Sachs Group Inc. in New York. Hastening the decline, he said,
will be the June 30 expiration of a government tax credit for
homebuyers and the lapse later this month of the Fed’s mortgage-
debt purchase plan aimed at keeping a lid on borrowing costs.
Hatzius is among economists anticipating the Fed will keep
its benchmark interest rate near zero at least for the rest of
the year.
The minutes of the Fed’s Dec. 16 meeting said “some
participants still viewed the improved outlook as quite
tentative and again pointed to potential sources of softness,
including the termination next year of the temporary tax credits
for homebuyers and the downward pressure that further increases
in foreclosures could put on house prices.”
While median prices for existing and new homes are
volatile, more stable measures such as the LoanPerformance home-
price index from First American CoreLogic, which tracks the same
house over time, also showed values declined in the last four
months of 2009, Hatzius said.
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