Bernake and the Housing Sector

Ben Bernake, Federal Reserve Chairman, gave an update on the state of the housing market at his press conference today. He also provided an update on efforts to modify loans and the effect on home sale prices.

 "The current outlook is significantly different from what we were facing in August of last year. We no longer have a deflation risk…We’re certainly no longer in any deflationary situation. And, notwithstanding the disappointing news recently, the labor market has been performing better than it was last year. On top, of that we have an awful lot of uncertainty right now about how much of this slowdown is temporary and how much is permanent, so that would suggest, all else equal, a little bit of time to see what happens would be useful in making policy decisions.

There are a number of fundamental factors which are slowing the market down and they do present very difficult challenges.

I’d like to see further efforts to modify loans where appropriate, and where not appropriate to speed the process of foreclosure and disposition of foreclosed homes in order to clear the market and get these homes out of the pipeline and allow people to operate in a market where they are more confident that prices will be stable, rather than falling."

Based on the conference today it’s apparent that the Fed is continuing to push loan modification. The Fed is trying to keep people in their home longer – whether they can pay for it or not.