Bernanke: Housing Still Weighs on Economy
Federal Reserve Chair Ben Bernanke said that the economy continues to recover at a very modest pace, but real estate continues to lag.
Many households have little confidence in the durability of the economic recovery and about their income prospects, Bernanke said in delivering his semiannual monetary policy testimony to the House Financial Services Committee on Wednesday.
Residential construction activity remains extremely low, Bernanke said.
“The demand for homes has been depressed by many of the same factors that have held down consumer spending more generally, including the slowness of the recovery in jobs and income as well as poor consumer sentiment,” Bernanke said. “Mortgage interest rates are near record lows, but access to mortgage credit continues to be constrained.
“Also, many potential home buyers remain concerned about buying into a falling market, as weak demand for homes, the substantial backlog of vacant properties for sale, and the high proportion of distressed sales are keeping downward pressure on house prices.”
However, Bernanke added that household debt burdens are declining. “Delinquency rates on credit card and auto loans are down significantly, and the number of home owners missing a mortgage payment for the first time is decreasing,” Bernanke said. “The anticipated pickups in economic activity and job creation, together with the expected easing of price pressures, should bolster real household income, confidence, and spending in the medium run.“
Source: “Fed’s Bernanke Monetary Policy Testimony to House Financial Services Committee,” Market News International (July 13, 2011)