A look at housing and spending

There are several important economic events that will occur this week, including the Federal Reserve's two-day meeting, housing data, and consumer spending.

Because of the importance of the Fed's meeting, I've already put together a separate summary of the key points and will focus here on housing starts, existing home sales, and the consumer spending report.

Existing home sales (Tuesday) make up roughly 90% of the housing market and sales have held at steady, albeit at low levels over the past six months. Analysts anticipate a modest increase in May as the Pending Home Sales Index has shown signs of life recently.

Lower mortgage rates and the $8,000 tax credit for first-time home buyers have also contributed to the improved outlook. House prices, however, have yet to show signs of bottoming.

New home sales (Wednesday) have struggled a bit more because of the tough competition from foreclosures. But housing starts jumped in May and building permits suggest further improvement.

Although the Housing Market Index signaled that sentiment among homebuilders receded slightly in the latest month, the survey also shows sentiment is well off extremely low levels and a 3.6% rise in new home sales is forecast per Bloomberg.

Consumer spending out of Friday is expected to increase by 0.4% in May. Consumer spending accounts for 70% of total economic activity, and consumers have been bulking up on savings since economic activity crumbled late last year. An improvement is critical if the economy is to stabilize.