Federal Reserve officials were becoming warier about the downturn in housing and the possible spillover effects on consumer spending as of mid-December, "especially if house prices were to decline significantly."The minutes of the Dec. 12 Federal Open Market Committee note that there is "considerable uncertainty regarding the ultimate extent of the housing market correction." House price appreciation slowed in the third quarter and "some price measures showed outright declines," according to the FOMC minutes. Meanwhile, the issuance of new housing permits is at a 10-year low and the FOMC members indicated that they expect the ongoing adjustment in the homebuilding industry to continue in the near term. "Even if home purchases had begun to level off, residential investment was likely to fall further in coming quarters as homebuilders … reduce their backlogs of unsold homes," the minutes say. The Fed can be found online at http://www.federalreserve.gov.

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