(Corrects to Thursday from Friday in 8th paragraph)
By Karen Jacobs
ATLANTA Nov 15 The improving U.S. housing
market is "far from being out of the woods," Federal Reserve
Chairman Ben Bernanke said on Thursday, arguing that overly
tight lending standards are part of the problem.
The Fed, which has focused on mortgage bonds in its latest
round of asset purchases, will continue to do what it can to
support the housing market, Bernanke said in a speech that
avoided policy specifics.
A bubble in the U.S. housing market was at the core of the
2007-2009 financial crisis and brutal recession that continues
to hamper the world economy. Data in recent months, however,
have shown the sector is on the mend.
"Although there are good reasons to be encouraged by the
recent direction of the housing market, we should not be
satisfied with the progress we have seen so far," Bernanke told
the Operation HOPE Global Financial Dignity Summit.
The Fed chairman noted that tighter credit standards were an
appropriate response to the peak in house prices and the crisis
"However, it seems likely at this point that the pendulum
has swung too far the other way, and that overly tight lending
standards may now be preventing creditworthy borrowers from
buying homes, thereby slowing the revival in housing and
impeding the economic recovery," Bernanke said.
Earlier this year, the Fed had suggested other policymakers
in Washington consider steps to free up credit and lift the
housing sector. Critics on Capitol Hill, however, charged that
the central bank should stick to formulating monetary policy.
In his speech on Thursday, Bernanke steered clear of
offering any policy prescriptions as he detailed steps officials
have already undertaken.
House prices have edged up nationwide this year, and there
are also positive signs in residential investments, sales,
demand and home-building sentiment. Housing usually leads the
U.S. economy out of recession, but the vast equity losses have
stymied the market this time.
Bernanke said Americans remain worried over the labor
market, housing prices, and the economy in general, which in
turn is keeping potential home buyers on the sidelines.
Unfortunately, problems in the sector are disproportionately
affecting lower-income and minority communities, he added.
"For the first time in a number of years, the housing sector
is improving, adding to growth and jobs," Bernanke said. "But
the housing revival still faces significant obstacles, and the
benefits of that revival remain quite uneven."
In September, the Fed unveiled a plan to buy $40 billion per
month in mortgage-backed securities in part to unstick a housing
sector that Bernanke called "a missing piston" in the U.S.
The U.S. central bank is relying on such market actions
since its key interest rate, the traditional monetary policy
tool, has been near zero since late 2008 to battle the Great
(Reporting by Karen Jacobs; Writing by Jonathan Spicer; Editing
by Neil Stempleman and James Dalgleish)