- Blame Bush: 5 years later, that’s still the mantra, pollsters find
- John McCain to Harry Reid: I’ll ‘kick the crap’ out of you
- Dogs that talk: Researchers seek $10K for ‘No More Woof’ technology
- 1,000 firefighters called to battle stubborn Big Sur wildfire
- Black Friday brouhaha: Millions of Target shoppers hit by credit card theft
- Britain orders airplane to rescue citizens from violent South Sudan
- Mega Millions winner emerges as Georgia mom, in ‘disbelief’
- ‘Duck Dynasty’ Phil Robertson suspended ‘indefinitely’ for gay quip
- John Podesta eats crow: ‘I apologize to Speaker Boehner’
- U.S., China race to finish line on ‘invisibility cloak’
Bernanke: Weak housing has hurt consumer spending
Question of the Day
WASHINGTON — Ben Bernanke says declines in home prices have forced many Americans to cut back sharply on spending and warns that the trend could continue to weigh on the economy for years.
The Federal Reserve chairman drew the connection between home values and consumer spending, which fuels 70 percent of economic activity, on Friday during a speech to the National Association of Home Builders in Orlando.
Bernanke says the broader economy won’t fully recover until the depressed housing market turns around. People are spending less because they are stuck in “underwater” homes, which are worth less than what is owed on the mortgage. And home values are falling because of foreclosures and tight credit — even in areas with lower unemployment.
“Recent declines in housing wealth may be reducing consumer spending between $200 billion and $375 billion per year. That reduction corresponds to lower living standards for many Americans,” Bernanke said.
The Fed chairman said there’s no “silver bullet” to rescue the housing market. Renting out foreclosed homes and reducing or modifying mortgages are among steps that could help.
“Low or negative equity creates additional problems for households,” Bernanke said. “It reduces financial flexibility: Homeowners who are underwater on their mortgages cannot tap home equity to pay for emergency health expenses or their children’s college educations.
There have been modest signs of improvement in recent months. Sales of previously occupied homes rose in the last three months. Homebuilders are more optimistic after seeing more people express interest in buying this year. And home construction picked up in the final quarter of last year, which helped housing contribute to broader economic growth.
Still, last year was the weakest for new-home sales on records dating back to 1963. Sales of previously occupied homes have also been at depressed levels. And home prices continue to fall.
The Fed issued a white paper last month that included a number of proposals to boost home sales. The paper sparked some criticism. Rep. Scott Garrett, R-N.J., told Bernanke last week during a congressional appearance that he was taken aback that the Fed would offer unsolicited advice to Congress, putting forward proposals which Garrett said mirrored in many ways ideas being pushed by the Obama administration.
The central bank has tried to help by keeping its benchmark interest rate at a record low near zero. And the Fed recently signaled that it doesn’t plan to raise the rate before late 2014. The Fed’s action has led to lower mortgage rates, which normally would encourage more buying and refinancing
Still, the damage from the housing crisis has been so widespread that even the cheapest mortgage rates in history haven’t been enough to lift home sales.
Bernanke’s speech came a day after the government announced it had reached a landmark $25 billion deal with the nation’s biggest mortgage lenders over foreclosure abuses that had occurred after the nation’s housing bubble burst in the middle of the last decade.
That deal will require five of the largest banks to reduce loans for about 1 million households at risk of foreclosure. The lenders will also send checks of $2,000 to about 750,000 American who were improperly foreclosed on.
By Andrew P. Napolitano
Fourth Amendment says Obama is not at liberty to collect metadata
- Duck Dynasty Phil Robertson suspended indefinitely for gay quip
- Half of America strips religion from Christmas
- Bill Gates: The Secret Santa disguised as a 'friendly fellow' on Reddit
- Gov't wasted $30 billion on 'pillownauts,' crystal goblets -- buying human urine!
- U.S. Army mulls wiping out memory of Robert E. Lee, 'Stonewall' Jackson
- Armed response, not restrictive gun laws, brought swift end to school shooting
- NAPOLITANO: NSA spies pick up interference from the Constitution
- BOLTON: Nero in the White House
- 'Duck Dynasty' star Phil Robertson: Gays 'wont inherit the kingdom of God'
- John McCain to Harry Reid: Ill kick the crap out of you
Independent voices from the The Washington Times Communities
The cold hard truth about politics in America today and the state of this once great nation.
Nobody likes to talk about dying. But we can help.
A libertarian look at breaking news and political trends by author Tom Mullen.
Does it take over 25 years in public service to really know what goes on in Washington?
Top 10 handguns in the U.S.
Extraordinary day at Redskins Park
White House pets gone wild!
Let it snow