Signs demonstrate the economy is continuing to improve and move in the
direction of recovery. However, job losses are holding back consumer spending
to some degree. Financial markets have not experienced recent, significant
changes. The pace of stabilization is slow and steady, but efforts to stimulate
the economy are picking up. Here are some specifics on recent economic activity
and developments:
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The target for the federal funds rate will remain between zero percent and 0.25
percent. Fed policymakers reported that tight credit continues to hold down the
economy and they plan to keep their benchmark interest rate near zero for an
extended period.
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The First-time homebuyer tax credit was extended and expanded to qualified,
existing homebuyers. It includes new provisions that make the credit available
to more people. This action will help create more opportunities for homebuyers
and homeowners and stimulate economic activity.
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The National Association of Realtors reported a 6.1 percent gain in its Pending
Home Sales Index in September, marking the highest level in nearly three years.
On a year-over-year basis, pending home sales are up 21.2, and this rise marks
eight consecutive monthly gains, the longest streak since measurement began in
2001.
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The Fed reported that U.S. banks saw an increase in demand for prime
residential mortgages in the third quarter, compared with the April through
June period. The stronger demand occurred as fewer banks tightened their
lending standards for consumers. Homeowners who refinanced during the third
quarter lowered their interest rates by an average of 1.1 percentage points.
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The unemployment rate is slightly above 10%. This is the highest level since
the early 1980’s. More people are now looking for work, and to account for both
lost jobs and population growth, more jobs need to be created than what have
been lost to date. The good news is that the pace of job losses is slowing
down.
Keeping rates low and extending and expanding the homebuyer tax credit are
crucial steps in keeping up the momentum as we begin to see stabilization in
the housing and mortgage markets.
