Federal Reserve: U.S. housing market is still weak

BY LILY LEUNG

WEDNESDAY, JANUARY 5, 2011 AT 1:10 P.M.

The U.S. residential market likely will weaken further as home sales, prices and demand remain low, said members of a Federal Reservecommittee in meeting minutes released this week.

The Federal Open Market Committee, which decides the country's interest rates and money policies, also evaluates economic factors, such as home building, unemployment and gross domestic product. The minutes are from the committee's last gathering, on Dec. 14 in Washington, D.C.

On housing, committee members agreed the market "was still quite depressed," according to fall figures. Starts of new single-family homes, demand for housing and home prices are still weak. In October, sales of new home sdipped to its lowest level in 48 years.

This year's residential outlook is worsened by homeowners' concerns of unemployment, tighter borrowing guidelines and an "overhang of foreclosed homes." Those concerns likely will affect consumer spending, and in turn, hurt the overall economy.

Other factors that could stymie the country's economic growth are companies' reluctance to hire, and the trend of companies and businesses delevering, which means immediately paying off debt on balance sheets.

The troubled financial states of municipalities also will block the country from economic recovery.

San Diego city officials must close a $73 million budget deficit by July 1, the start of the fiscal year, while California lawmakers are facing a deficit that's estimated between $25 billion to $29 billion.

The committee will meet again Jan. 25-26.