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Friday, October 26, 2007

No end in sight for housing slump

By Ron Scherer Fri Oct 26, 4:00 AM ET

New York - Home prices are now at 2005 levels.

And, even with the falling prices, the number of unsold homes is the highest since 1999 – as far back as the data goes – suggesting to economists that more price- cutting is ahead.

One of the major implications of the continuing slide in housing is the drag on the total economy. With home sales now lower than many of the most pessimistic forecast, some economists worry that the economy could be closing the year in a weakened state.

In fact, Wall Street is now convinced that the Federal Reserve will reduce interest rates a second time this fall when the central bank convenes next week.

"Housing is clearly the big factor for the Fed," says Jeff Kleintop, chief investment strategist at LPL Financial Advisors in Boston. "The Fed will clearly be looking at that drag [housing] on the economy and the financial consequences of the pullback."


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