Fannie and Freddie lower home loan limits

People looking to buy more expensive homes next year will have fewer options to find financing because Fannie Mae and Freddie Mac will have lower limits on the size of loans they can buy. The changes, effective Jan. 1, will lower the limit in high-priced real estate markets to $625,500, down from $729,950. Loan limits vary by metro area and are based on the local median house price. The Federal Housing Finance Agency, which regulates Fannie and Freddie, kept the limit for lower-cost metro areas at $417,000. Lawmakers had temporarily raised the loan limits for Fannie and Freddie in an economic stimulus bill passed in February and revised them in a housing bill passed over the summer.

Consumer borrowing surged in September

Consumers boosted their borrowing in September, defying expectations of a cutback. The Federal Reserve's report, released Friday, says consumer credit increased at a 3.2 percent annual pace in September. That was up from a 2.9 percent rate of decline in August and marked the biggest increase since July. Economists had expected that consumers would trim their borrowing at a 0.5 percent pace in September. Consumer debt rose by $6.9 billion in September from the previous month to a total of $2.59 trillion.

Home sales drop is worse than expected

Pending U.S. home sales fell more than expected in September, after posting a big jump in the previous month. The National Association of Realtors' seasonally adjusted index of pending sales for existing homes fell 4.6 percent Friday to a reading of 89.2. That's down from an upwardly revised August reading of 93.5. Economists surveyed by Thomson Reuters had expected a September reading of 90.6.

Another domino, as inventories fall

The Commerce Department said wholesale inventories held by distributors fell by 0.1 percent in September, as companies cut stockpiles in the face of the economic slowdown. Analysts had expected them to grow by 0.3 percent, according to Thomson Reuters.

Greenspan says it out loud: a bad recession

Former Federal Reserve Chairman Alan Greenspan said Friday there is no doubt the world economy is in a very severe recession and that U.S. gross domestic product will decline significantly in the last three months of the year. At a business lunch in Toronto, Greenspan said the economy is not quite in a free-fall but something close to it. "That we are in a recession, very severe, there's no question," Greenspan said.