New government figures released Wednesday show that home sales rose 3.4 percent in November after a 3.8 percent drop in October, reports the New York Times. The more important figure is that it's still a big drop-off from the late 2005 figures. Sales in the West fell 9 percent but that's not such good news because it's an average of a strong market in mountain states where homes are still relatively cheap and a drop off in hotter markets in the Southwest - Phoenix and Las Vegas as well as Southern California.

“Although the rebound in sales is consistent with the housing slowdown bottoming out, it seems too early to rejoice,” ING Economist Dimitry Fleming tells the paper. "Supply is still high.” It's down in Las Vegas from the record inventory of a few months back but that doesn't show a recovery so much as a new sense of realism.

The big issue as the Times reported Tuesday is the "economy of extremes." It's the opposite of  "Goldilocks" which is not too hot and not too cold. This economy has a housing recession while other parts of the economy are booming: Commercial construction is roaring ahead and consumer spending remains relatively strong (with the caveat that Christmas spending seems a little below expectations but that might just be that expectations were too high).

And so the Fed has to decide whether inflation might get out of control if rates stay low or the housing sector might suffer a mortal blow if they're not kept low or lower. And economists are taking sides on whether the total growth numbers will be flat (so cut rates) or stronger than this year (so push them up a bit). Traders are banking on a cut because consumer spending which used to ride the home equity boom has got to flatten out.

That could soften demand for some of Las Vegas luxuries but so far there's only a few vague hints that tourist numbers are even soft. Stay tuned - the Fed will decide.