Greenbook/Tealbook

Prefatory Note

The attached document represents the most complete and accurate version available based on original files from the FOMC Secretariat at the Board of Governors of the Federal Reserve System. Please note that some material may have been redacted from this document if that material was received on a confidential basis. Redacted material is indicated by occasional gaps in the text or by gray boxes around non-text content. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act.

Content last modified 03/07/2014.

Confidential (FR) Class III FOMC

October 24, 2008

CURRENT ECONOMIC AND FINANCIAL CONDITIONS Supplemental Notes

Prepared for the Federal Open Market Committee by the staff of the Board of Governors of the Federal Reserve System

Contents The Domestic Nonfinancial Economy ......................................................1 Home Sales and Prices.................................................................................1 Tables and Charts Private Housing Activity..............................................................................2 Indicators of Single-Family Housing...........................................................3 Tables Commercial Bank Credit .............................................................................4 Selected Financial Market Quotations .........................................................5

ii

Supplemental Notes The Domestic Nonfinancial Economy Home Sales and Prices Sales of existing single-family homes increased 6.2 percent in September to 4.62 million units, up slightly from the level of a year ago. The flattening out of existing home sales over the past year contrasts with continued declines in sales of new homes and likely reflects the influence of increasing foreclosures, which tend to boost the supply of attractively priced existing homes for sale. Sales increases in September occurred in most regions but were especially apparent in the West, where price declines have been the largest. The months’ supply of single-family homes for sale fell to 9.2 months in September, down from a peak of 10.7 months in January. The average price of existing single-family homes sold fell 8.7 percent in the 12 months ending in September, about the same pace as in recent months. The monthly version of the purchase-only repeat-sales index calculated by the Federal Housing Finance Agency (formerly, the Office of Federal Housing Enterprise Oversight) declined 0.6 percent in August, leaving it 5.9 percent below its year-earlier level. This index is down 6.5 percent from its April 2007 peak and stands approximately at its September 2005 value.

The Domestic Financial Economy

-1-

-2-

-3-

Indicators of Single-Family Housing New Single-Family Home Sales 1.7 1.5

Millions of units (annual rate)

Existing Single-Family Home Sales

Millions of units (annual rate)

All homebuilders (left scale) Medium and large homebuilders (right scale)

0.55 0.45 0.35

1.1

0.30

0.9

0.25 0.20 Sept.

0.5

Aug. 2000 2002 2004 2006 2008 Source: For medium and large homebuilders, National Association of Home Builders; for all homebuilders, Census Bureau.

5.5

Months Aug.

4.0

Aug.

Months’ supply (right scale)

250

2008

Percent

9 8

70

9 8

7

6

4 3

7

30-year conforming FRM Oct.

6

Oct.

5 4

1-year conforming ARM

6 5 4

2 2000

2002

2004

2006

2008

1

3

Note: Months’ supply is calculated using the 3-month moving average of sales. Source: Census Bureau.

Monthly OFHEO purchase-only index S&P/Case-Shiller 20-city composite price index

35 25

15

15

5

5

-5 -15

2000

2002

2004

2006

2002

2004

2006

2008

3

Price of New Homes

Percent change from year earlier

35

2000

Note: The October reading is a monthly average of data available through Oct. 22, 2008. Source: Federal Home Loan Mortgage Corporation.

Prices of Existing Homes

-25

2000 2002 2004 2006 Source: National Association of Realtors.

5

300

90 80

7

Inventories of new homes (left scale)

350

25

Sept.

4.5

10

8

450

200

11

9

500

400

Aug.

Mortgage Rates

Thousands of units

550

100

5.0

Inventories of New Homes and Months’ Supply 600

110

0.05 0.00

130 120

Pending home sales (right scale)

0.15 0.10

140

6.0

0.40

0.7

Index (2001=100) Existing home sales (left scale)

0.50

1.3

0.3

6.5

Millions of units (annual rate)

Aug.

-5

July

-15

2008

Source: For purchase-only index, Office of Federal Housing Enterprise Oversight; for S&P/Case-Shiller, Standard & Poor’s.

-25

12 9

Percent change from year earlier Constant-quality index

12 9

6

6

3

3

0

0

-3

Q2

-3

-6

-6

-9

-9

-12

2000 2002 2004 Source: Census Bureau.

2006

2008

-12

-4-

Commercial Bank Credit (Percent change, annual rate, except as noted; seasonally adjusted) Type of credit

Total

Level1 Oct. 2008e

2006

2007

H1 2008

Q3 2008

Sept. 2008

Oct. 2008e

10.3

11.2

4.7

3.6

14.0

12.4

9,582

Loans2 Total To businesses Commercial and industrial Commercial real estate

12.0

12.1

6.5

2.3

11.6

8.7

7,235

14.3 13.6

19.1 10.4

13.7 10.2

5.9 1.3

20.2 -.6

32.1 2.7

1,578 1,717

To households Residential real estate Revolving home equity Other Consumer Originated3 Other4

9.9 3.1 12.3 2.9 3.9 21.1

8.4 7.1 8.8 7.9 7.1 17.6

2.5 13.7 -1.2 7.3 7.5 -2.5

-4.9 12.0 -10.8 8.4 5.7 8.8

-5.8 16.7 -14.0 6.3 7.4 64.1

-3.6 20.9 -12.8 9.9 12.1 8.0

2,078 577 1,501 870 1,297 993

5.4 2.0 10.7

8.4 -5.8 29.1

-.9 -1.0 -.8

7.7 24.6 -10.2

21.5 30.5 10.8

23.7 21.3 26.6

2,348 1,275 1,073

Securities Total Treasury and agency Other5

Note. Yearly annual rates are Q4 to Q4; quarterly and monthly annual rates use corresponding average levels. Data have been adjusted to remove the effects of mark-to-market accounting rules (FIN 39 and FAS 115), the initial consolidation of certain variable interest entities (FIN 46), the initial adoption of fair value accounting (FAS 159), and the effects of sizable thrift-to-bank and bank-to-thrift structure activity in October 2006, March 2007, October 2007, and September 2008. Data also account for breaks caused by reclassifications. 1. Billions of dollars. Pro rata averages of weekly (Wednesday) levels. 2. Excludes interbank loans. 3. Includes an estimate of outstanding loans securitized by commercial banks. 4. Includes security loans and loans to farmers, state and local governments, and all others not elsewhere classified. Also includes lease financing receivables. 5. Includes private mortgage-backed securities; securities of corporations, state and local governments, and foreign governments; and any trading account assets that are not Treasury or agency securities. e Estimated. Source: Federal Reserve.

C&I Loan Rate Spreads

Return on Assets at Commercial Banks Basis points

Percent

240

Quarterly

220

2.0

Quarterly, s.a.a.r. 25 largest banks All other banks 1.5

Weighted average

Q3

200 1.0

180 Q2

160

Weighted average adjusted*

0.5

Q3

140 0.0

1998

2000

2002

2004

2006

2008

Note. Spreads over market interest rate on an instrument of comparable maturity on loans less than $25 million (2006$). *Adjusted for changes in nonprice loan characteristics. Source. Survey of Terms of Business Lending.

1992

1996

Source. Call Report.

2000

2004

2008

-5-

III-T-1

Selected Financial Market Quotations (One-day quotes in percent except as noted) 2007

Change to Oct. 23 from selected dates (percentage points)

2008

Instrument Aug. 6

Aug. 4

Sept. 15

Oct. 23

2007 Aug. 6

2008 Aug. 4

2008 Sept. 15

5.25

2.00

2.00

1.50

-3.75

-.50

-.50

4.74 4.72

1.72 1.93

1.03 1.52

.96 1.48

-3.78 -3.24

-.76 -.45

-.07 -.04

Commercial paper (A1/P1 rates)2 1-month 3-month

5.26 5.29

2.41 2.72

2.47 2.73

2.38 3.48

-2.88 -1.81

-.03 .76

-.09 .75

Large negotiable CDs1 3-month 6-month

5.34 5.27

2.80 3.10

3.45 3.85

3.88 3.88

-1.46 -1.39

1.08 .78

.43 .03

Eurodollar deposits3 1-month 3-month

5.33 5.35

2.60 3.00

2.70 3.00

3.75 4.50

-1.58 -.85

1.15 1.50

1.05 1.50

Bank prime rate

8.25

5.00

5.00

4.50

-3.75

-.50

-.50

Intermediate- and long-term U.S. Treasury4 2-year 5-year 10-year

4.49 4.52 4.82

2.49 3.25 4.15

1.78 2.60 3.68

1.42 2.60 4.18

-3.07 -1.92 -.64

-1.07 -.65 .03

-.36 .00 .50

U.S. Treasury indexed notes5 5-year 10-year

2.43 2.48

1.15 1.71

1.25 1.70

2.73 2.80

.30 .32

1.58 1.09

1.48 1.10

Municipal general obligations (Bond Buyer)6

4.51

4.74

4.54

5.32

.81

.58

.78

Private instruments 10-year swap 10-year FNMA7 10-year AA8 10-year BBB8 10-year high yield8

5.44 5.34 6.12 6.57 9.21

4.66 4.82 6.62 7.17 10.57

4.24 4.19 6.63 7.11 10.86

4.06 4.66 7.93 9.40 15.32

-1.38 -.68 1.81 2.83 6.11

-.60 -.16 1.31 2.23 4.75

-.18 .47 1.30 2.29 4.46

Home mortgages (FHLMC survey rate) 30-year fixed 1-year adjustable

6.59 5.65

6.52 5.22

5.78 5.03

6.04 5.23

-.55 -.42

-.48 .01

.26 .20

Short-term FOMC intended federal funds rate Treasury bills1 3-month 6-month

Record high

Change to Oct. 23 from selected dates (percent)

2008

Stock exchange index Dow Jones Industrial S&P 500 Composite Nasdaq Russell 2000 Wilshire 5000

Level

Date

Aug. 4

Sept. 15

Oct. 23

Record high

2008 Aug. 4

2008 Sept. 15

14,165 1,565 5,049 856 15,807

10-9-07 10-9-07 3-10-00 7-13-07 10-9-07

11,284 1,249 2,286 704 12,738

10,918 1,193 2,180 690 12,184

8,691 908 1,604 490 9,111

-38.64 -41.98 -68.23 -42.75 -42.36

-22.98 -27.29 -29.82 -30.42 -28.47

-20.39 -23.86 -26.42 -28.97 -25.22

1. Secondary market. 2. Financial commercial paper. 3. Bid rates for Eurodollar deposits collected around 9:30 a.m. eastern time. 4. Derived from a smoothed Treasury yield curve estimated using off-the-run securities. 5. Derived from a smoothed Treasury yield curve estimated using all outstanding securities and adjusted for the carry effect. 6. Most recent Thursday quote. 7. Constant-maturity yields estimated from Fannie Mae domestic noncallable coupon securities. 8. Derived from smoothed corporate yield curves estimated using Merrill Lynch bond data. _______________________________________________________________________ NOTES: August 6, 2007, is the day before the August 2007 FOMC meeting. August 4, 2008, is the day before the August 2008 FOMC monetary policy announcement. September 15, 2008, is the day before the most recent FOMC monetary policy announcement. _______________________________________________________________________