Sales of new homes recorded an unexpected increase in September as median home prices dropped to the lowest level in four years. The Commerce Department reported that sales of new single-family homes rose by 2.7 per cent last month to a seasonally adjusted annual rate of 464,000 homes. Economists had expected sales would drop from the August level. The median price of a new home sold in September declined by 9.1 per cent from a year ago to $218,400, the lowest price level since September 2004, a period when home prices were rising rapidly as the country experienced a five-year housing boom.
The Warren Group, a Boston-based publisher of real estate data, reported that sales increased 8.5 per cent in September compared with the same month a year ago. Average home prices dropped 15.6 per cent to below $300,000 for the first time since April 2003. Warren Group CEO Timothy Warren said the decline — from $340,750 to $287,500 — and the increase in sales show homeowners are becoming more realistic about pricing. The industry organization also said condominium sales were down 9.6 per cent when compared with September 2007.
The U.S. government starts doling out $125 billion to nine major banks this week to get credit flowing again. Assistant Treasury Secretary David Bason says the deals with the nine banks were signed Sunday, and the government will make the stock purchases this week. The deals are designed to bolster the banks' balance sheets so they will begin more normal lending. The action will mark the first deployment of resources from the government's $700 billion financial rescue package passed by Congress on October 3rd. The bailout package has undergone a major change in emphasis since it was passed by Congress. Treasury Secretary Henry Paulson decided to use $250 billion of the $700 billion to make direct purchases of bank stock, partially nationalizing the country's banking system, as a way to get money into the financial system more quickly. The plan is also aimed at clearing banks' balance sheets of bad assets. That effort has yet to begin although the administration expects to use $100 billion to purchase bad assets in coming months. Treasury is also starting to give approval to major regional banks with the goal of getting another $125 billion in stock purchases made by the end of this year.
New government statistics show gasoline prices continue to tumble, falling more than 25 cents in the past week to a national average of $2.65 a gallon. They've now fallen nearly 50 cents in the past two weeks and are down almost 22 cents from a year ago. A report released by the Energy Information Administration showed the Gulf Coast had the cheapest prices with an average of $2.46 a gallon — down 27.4 cents in the past week. The Midwest was next lowest at $2.497, followed by the East Coast ($2.68), the Rocky Mountain region ($2.76) and the West Coast ($3.05). Nationally, the average selling price for diesel fuel was $3.28 — down 19.4 cents in the past week, the EIA reported.
Iran's OPEC governor says the organization may consider another cut in oil production due to a glut in the market. Speaking in a live television interview Sunday, Mohammad Ali Khatibi said a reduction in production "will be considered" at the next meeting in Algiers in December — a meeting that might be held early if necessary. Khatibi said if the decision Friday by the Organization of Petroleum Exporting Countries to cut 1.5 million barrels of production per day does not halt the drop in prices, more would need to be done. Crude prices have dropped below $65 per barrel, yet Iran needs prices of around $90 to balance its budget, according to International Monetary Fund estimates.
Newspapers are seeing a sharper drop in circulation. The Audit Bureau of Circulations says average daily circulation is down 4.6 per cent in the April-September period, compared with last year. Last year's drop was only 2.6 per cent among the papers reporting comparable circulation totals. Declines are expected given the ongoing migration of readers to the Internet. Despite the drops, newspapers are more worried about even steeper reductions in advertising revenue because of the weak economy. The nation's top two papers, USA Today and the Wall Street Journal, report flat circulation, while the New York Times says circulation declined 3.6 per cent.
The circulation of the Houston Chronicle has declined 11.7 per cent daily and 15.7 per cent on Sundays. Publisher Jack Sweeney attributes the drop to discontinued circulation outside a 90-mile radius of downtown Houston, an increase in the daily paper price and the elimination of advertiser-sponsored distribution.
The Port Commission of the Port of Houston Authority is considering $5.5 million in additional payments to Direct Energy for additional electrical usage beyond the original contract. The commission had originally awarded a 36-month fixed-price contract to Direct Energy for electricity, but additional increased business activities and electric dredging have contributed to increased usage over the original contract amount. Direct Energy has offered to sell additional energy at the original fixed price.
The Federal Reserve says it is currently asking a rate of 1.88 per cent to buy unsecured commercial paper. For asset-backed commercial paper, the Fed is asking a rate of 3.88 per cent. The Fed said earlier this month it would start buying commercial paper Monday to bolster the market. Commercial paper is the short-term debt that companies sell to finance day-to-day operations such as supplies or payrolls. Sometimes it is unsecured; other times, it is backed by assets such as mortgages. Demand for the paper dried up after Lehman Brothers Holdings' bankruptcy and other troubles in the global banking system.
European Central Bank President Jean-Claude Trichet says a cut in interest rates next month is "a possibility.'' Trichet says such a cut is an option for the central bank because of a decline in inflationary pressure, due among other things to lower prices for commodities such as oil. The ECB has already joined the U.S. Fed and other central banks in cutting its key rate a half-point to combat the world financial crisis. Trichet says an interest-rate cut in November from the current 3.75 per cent "is not a certainty. It is a possibility." Trichet spoke at a luncheon in Madrid for business leaders.
If you've squeezed a large carry-on bag aboard a Continental flight — you might want to measure it before your next trip. Houston-based Continental, as of November 1st, will reduce the maximum size allowed for carry-ons to 45 linear inches--the sum of the bag's length, width and height. That's down from 51 inches. Spokeswoman Julie King says the change is being made to align policies of Continental with those of its alliance partners — Delta, Northwest and Air France-KLM. King says there's no link between the change in carry-on policy and Continental's recent decision to charge customers $15 for checking a first bag. Besides Continental's partners, many other so-called legacy airlines have a 45-inch limit on carry-ons — including Fort Worth-based American Airlines. Dallas-based Southwest sets the limit at 50 inches.
Airline passengers are using their iPhones and Blackberries as their boarding pass at nine airports around the country. The federal pilot program started at Cleveland's Hopkins International airport on Thursday. Instead of a paper ticket, passengers can download their boarding passes to their cell phone from their airline's Web site. The electronic pass includes a bar code with encrypted flight information and passenger identification. Security and airline officials then scan the pass at the airport. Continental, Northwest, Delta and Alaska Airlines are taking part in the program. Transportation Security Administration spokesman Jon Allen says officials hope to add more airports within the next year.
Pilgrim's Pride said that it's reached a deal to temporarily extend its credit through the end of November. The nation's largest chicken producer's previous credit waiver extension was set to expire tomorrow. The Pittsburg, Texas-based company had been given an extension in late September after it said it wouldn't meet debt obligations for its current loans. The newest extension gives Pilgrim's Pride until November 26th to meet its debt obligation to stave off default. The company, like many food makers, has been hampered by high costs for key ingredients like corn and oil. It hedged some of its purchases, but as prices moderated it lost money on those hedges. The company said in late September it would post a "significant loss" in the fourth quarter, largely on those bad hedges.