Transcripts

Existing Home Sales Slide & Recession Worries Rise

SUSIE GHARIB: More sobering news today about the nation's economy. The National Association of Realtors said sales of existing homes fell 0.4 percent in January to their lowest level in almost a decade. That's one reason why according to a new survey, an increasing number of economists are expecting the U.S. to slide into recession. The latest predictions come during a busy week for economic data and lots of talk about the economy by Federal Reserve officials. Suzanne Pratt reports.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Sales of existing homes in the U.S. were better than expected last month. But many economists still believe conditions in the housing market will get worse before they get better. Standard & Poor's economist David Wyss doesn't think re-sales or housing starts will bottom until mid-year and he blames two factors.

DAVID WYSS, CHIEF ECONOMIST, STANDARD & POOR'S: Problem number one is we built too many houses at too high a price. And the only way to fix that is to stop building for a while and to let the prices drop, which is going on. Problem number two is the mortgage markets, which have locked up.

PRATT: Given the state of housing, it's no wonder more economists are now predicting a recession this year. According to a new survey by the National Association of Business Economics, 45 percent of those polled expect a recession in 2008. S&P's Wyss is one of the economists surveyed and he thinks the recession has already started.

WYSS: I think the economy probably peaked in November when they get done dating this and it's going to hit bottom somewhere about midyear, about the time people grab their rebate check and head out to the shopping mall.

PRATT: While this is a busy week for economic reports, experts say there are few data points likely to alter views about recession. Nevertheless, economists say they'll be watching for revisions to fourth quarter GDP due out on Thursday, in particular for alterations to inventory measures. Others say they'll pay close attention to January's gauge of personal income and spending when it's released Friday for fresh clues about the health of the consumer. Still, others describe Federal Reserve Chairman Ben Bernanke's testimony to Congress on Wednesday and Thursday as a highlight. Morgan Stanley economist David Greenlaw does not expect Bernanke to telegraph the next move on interest rates. But Greenlaw wants to hear the chairman's assessment of financial market conditions.

DAVID GREENLAW, CHIEF U.S. FIXED INCOME ECONOMIST, MORGAN STANLEY: The sense of risks that the Fed sees going forward, the indication of some tightening of - some further tightening of credit conditions in the last couple of weeks. We'll be looking for his reaction to those sorts of developments.

PRATT: Tomorrow, watch for NIGHTLY BUSINESS REPORT's exclusive interview with Dallas Fed Bank President Richard Fisher. This year, Fisher serves as a voting member of the Fed's open market committee. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.