Politicians Overlook Role of Housing

 

Many potential homebuyers 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.

Ben Bernanke, Chairman of the Federal Reserve told Congress in his Semiannual Monetary Policy Review, “Households report that they have little confidence in the durability of the recovery and about their own income prospects. Moreover, the ongoing weakness in home values is holding down household wealth and weighing on consumer sentiment.”

This is not encouraging news for a rapid recovery in America. Bernanke went on to share what Federal Reserve views as looming threats toward positive progress in the broader economic recovery: “Among the headwinds facing the economy are the slow growth in consumer spending, even after accounting for the effects of higher food and energy prices; the continuing depressed condition of the housing sector; still-limited access to credit for some households and small businesses; and fiscal tightening at all levels of government.”

The Chairman elaborated on housing and 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. Mortgage interest rates are near record lows, but access to mortgage credit continues to be constrained.”

This sort of commentary isn't surprising to housing finance professionals. The mortgage industry has been forced to endure all sorts of cart before the horse type regulatory reforms over the past two years which have led to conflicting interpretations of regulatory policies and an over-tightening of loan underwriting guidelines.

These measures have put banks on the defensive and all but cut off funding lines to less than perfect borrowers, deepening the hole that has become the housing market and further reducing private investor confidence.

– Courtesy of Mortgage News Daily, Adam Quinones