Previously owned U.S. home sales fell 7.2% in January to a seven-month low, reflecting a lack of employment growth to some extent offestting government incentives to improve the housing market.

January’s numbers actually mark an 11% improvement from resales of 4.5 million units one year earlier. Tax breaks for home buyers may have shifted the time line of closing dates due to a push to close on properties before the credit originally expired on Nov. 30, 2009. Congress has extended the deadline to April 30.

The numbers did not meet the markets expectation as a result the market traded flat.

While the numbers this week were not impressive they are not so weak that they point to a double-dip, in fact they are reflecting a slowly expanding economy.

A “tremendous amount” of unused capacity in the economy will prompt Federal Reserve policy makers to keep interest rates low for “an extended period,” Former Fed Governor Frederic S. Mishkin said today.

“We’re not going to get through that slack in the near term,” Mishkin, a professor of economics at Columbia University in New York, said in an interview on Bloomberg Radio. “Monetary policy needs to be accommodative.”

Investors Reaction

U.S. equities traded with little gains or losses after other data released today showed consumer sentiment dropped at the same time a measure of business activity expanded in February at the fastest pace since 2005. The Standard & Poor’s 500 Index was little changed at S&P 500 1,104.49 +1.56 .

The Institute for Supply Management-Chicago Inc. data showed its business barometer climbed to 62.6 this month from 61.5 in January. Readings greater than 50 signal expansion.

The Reuters/University of Michigan final index of consumer sentiment for February dropped to 73.6 from 74.4 in January.

The economy expanded at a 5.9 percent annual rate in the fourth quarter, the best performance in six years, the Commerce Department said in its first revision of the figures. Inventories added 3.88 percentage points to gross domestic product, and investment in software and equipment grew at the strongest pace in almost a decade.

Economists forecast existing home sales would rise to a 5.5 million rate in January, according to the median of 70 projections in a Bloomberg News survey. Estimates ranged from 5.04 million to 6 million.

Shayne Heffernan www.livetradingnews.com

Posted by Shayne Heffernan on Feb 26th, 2010and filed underEquities, Latest News, USA.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site