The Federal Reserve says it will complete its purchases of $600 billion in Treasury securities by the end of this month as planned – a program that Fed Chairman Ben Bernanke says has succeeded in keeping mortgage interest rates low.
These low interest rates combined with the reduction in home prices endured over the last several years have made housing extremely affordable, Bernanke told reporters at a press conference following the Fed’s policy meeting Wednesday, yet the housing sector continues to be depressed and weigh heavily on the overall economy.
Bernanke says tightened credit has become “an important problem” for prospective homebuyers, but uncertainty about employment and economic recovery are affecting people’s decision to buy a house.
“I would like to see further efforts to modify loans where appropriate, and where not appropriate, to speed the process of foreclosure and disposition to clear the market and get these homes out of the pipeline,” Bernanke said.
He believes addressing the distress in the housing market will serve to boost both home prices and consumer confidence.
Bernanke points to the fact that the decline in home prices is most pronounced among distressed properties. He says data show that if you take the distress factor out, price declines are significantly narrower, and in some markets actually increasing.
“If we can reduce the current number of distressed sales, that would do a lot to stabilize the market and give people confidence that…they are not buying into a falling market,” Bernanke said.
Through the first part of this year, distressed properties had been grabbing more than a third of the market share…
Read more of DSNews.com’s article here: “Fed Chairman Points to Distress as Holding Housing Sector Back.”