Existing-home sales rose unexpectedly while inventory declined due to a surge of sales in the West.  Existing-home sales (including single-family, town homes, condominiums and co-ops) jumped 6.5 percent to a seasonally adjusted annual rate1 of 4.74 million units in December from a downwardly revised pace of 4.45 million units in November.  For all of 2008 there were 4,912,000 existing-home sales, which was 13.1 percent below the 5,652,000 transactions recorded in 2007. This is the lowest volume since 1997 when there were 4,371,000 sales.  It appear some buyers are taking advantage of much lower home prices.   The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal balanced conditions. Buyers will continue to have an edge over sellers for the foreseeable future.  With historically low mortgage interest rates, flexible sellers, a large inventory, and homes that are selling for less than replacement construction costs in much of the country, buyers who have been on the fence should take a closer look at today’s market.

Geithner Says “Range of Options” Considered for Bank: 

U.S. Treasury Secretary Timothy Geithner said the department is considering a range of options for its financial rescue plan, with the goal of preserving the private banking system. “We are putting together what we hope will be a comprehensive plan for helping repair the financial system and bring recovery as a critical component to the president’s commitment to get growth going again and bring the economy back on track,” Geithner said.  Under pressure from lawmakers and taxpayers, upset that the rescue plan shows few signs of lifting the economy, the Obama administration plans to overhaul the effort.  In its rescue efforts so far, the Treasury has taken ownership stakes in more than 300 banks as a condition of receiving aid.  Today Geithner said the Treasury will post contracts with TARP participants on the department’s Web site within days after deals are done. “That will give the American public a chance to see those, to look at the detailed terms and conditions, in a relatively short time period after they’re concluded,” Geithner said.

Fed Leaves Rate near Zero:

The Federal Reserve kept its key interest rate near 0% Wednesday, and said it is prepared to take additional steps to try to fix the troubled U.S. economy and credit markets.  The Fed said it stands ready to purchase longer-term Treasury’s if it determines that such a move will help get credit flowing once again. This may help lower the yield on the government bonds and further lower the rates on various types of loans tied to Treasury.  While the Fed said there had been improvement in some financial markets, it is concerned that credit remains tight.  The Fed also warned of a decline in prices that could further slow economic activity, a condition that is generally known as deflation.  Deflation often prompts businesses to further cut production and consumers to delay purchases because they anticipate lower prices to come. Economists warn that deflation can have a more destructive impact on the economy than inflation.  The deflationary threat is really the bottom line, and the Fed wants to do everything they can to minimize the risk.