Fed Gov. Duke: Uncertainty Holding Back Housing
Uncertainty is a key factor preventing a stronger recovery in the housing market, said Federal Reserve Governor Elizabeth Duke. Speaking on May 15 to the National Association of Realtors, Duke said that no single prescription will cure the housing market. However, moving forward on a number of "difficult decisions" that will affect mortgage markets is "perhaps the most important solution,"she added.
Other factors, such as a stronger economic recovery and continued efforts to stanch the flow of foreclosures and distressed sales, would also help contribute to a stronger housing market, Duke said.
Uncertainty among potential homebuyers—about the economy and house prices, for example—is influencing demand for housing. At the same time, mortgage lenders also face a host of unknowns, including the strength of the economic recovery, the future path of house prices, and the regulatory environment. These factors and others "have an important bearing on the future strength of the housing market,"Duke explained.
Other indicators also point to factors
Pending regulations on servicing requirements, capital requirements, and underwriting requirements could also affect the supply of mortgage credit, Duke noted. The Fed will carefully consider the impact its new rules will have on the availability of credit. But regardless of their final shape, the mortgage market will likely benefit from the clarity that comes from having the rules finalized, she noted.
Persistent questions also restrain market
Although there is no easy response to the complex issues facing the nation's housing market, perhaps the most important step is for "the path for the future of housing finance to be set,"Duke said. "It's time to start choosing that path.”
May 30, 2012