Federal Reserve officials expect residential sales will "remain weak" now that the homebuyer tax credit has expired, according to just-released minutes of the June 22-23 Federal Open Market Committee (FOMC) meeting.
The housing sector appeared "strong" through mid-spring due to the temporary effects of the tax credit, the FOMC minutes said.
"With lower demand and a continuing supply of foreclosed houses coming to the market, [FOMC] participants judged that house prices were likely to remain flat or decline somewhat further in the near term," the Fed minutes noted.
The monetary policy officials believe the economic recovery is continuing, but lowered their forecast for Gross Domestic Product slightly to a range of 3% to 3.5% for 2010 and 3.5% to 4.2% for 2011. They don't expect the unemployment rate to drop below 8% until 2012 — which does not bode well for the housing sector.
FOMC members "expressed concern about the extended duration of unemployment spells for a large number of workers."