Dudley: Housing Recovery "Disappointing" Despite Fed's Extraordinary Easing Measures
Bill Dudley, president and CEO of the
Federal Reserve Bank of New York and vice chair of the Federal Open Market
Committee (FOMC) told a conference audience Friday that despite some extraordinary
measures taken by FOMC the recovery has been disappointing. Dudley spoke to a conference co-sponsored by
the Federal Reserve and the Rockefeller Institute of Government titled "Distressed
Residential Real Estate: Dimensions,
Impacts, and Remedies.
Dudley said that while measures taken by
the Fed have certainly helped to make the economy stronger than it otherwise
would have been, over the three year period from mid-2009 to mid 2012 the real
output of the economy has grown at a compound annual rate of just over 2
percent. Thus employment gains have been
modest and unemployment remains unacceptably high.
He pointed to several headwinds
restraining economic growth, one that the housing market has failed to respond
fully to the significant easing of monetary policy. While it is true that some housing indicators
have improved lately such as increasing housing starts and home sales and
stabilizing home prices, the absolute level of starts and sales remain quite
low, especially when viewed on a per capita basis.
There is also a considerable variation
in market conditions across the country and the worst performing areas are still
experiencing high volumes of distressed sales and annual price declines of
around 5 percent. This means that, while
housing's contribution to growth has finally turned positive, it has much less
impact that in previous recoveries.
Dudley said there are several factors
behind the sluggishness of the market.
Mortgage credit availability, while improving, is still limited,
especially for borrowers with less than perfect credit. Many more borrowers are underwater and may
not be able to refinance or sell and there are still huge inventories of
properties that have either been foreclosed or are moving toward it.
He said that the New York Fed is deeply
committed to helping to resolve the housing crises and continues to monitor the
market and analyze its impact on the economy while the bank works with
community groups that aid distressed homeowners and the Fed's lawyers work pro
bono with homeowners facing foreclosure.
Fed researchers and market analysts have developed proposals to mitigate
current problems and improve the future structure of housing finance.
The Fed released data about foreclosure
inventories and owned real estate (REO) at the conference, presented through a
series of national, state, and regional interactive maps. The national maps present three scenarios for
foreclosure inventories, showing the difference in the increase or decrease in
owned real estate (REO) if the current trend in the number days a property
remains seriously delinquent and in foreclosure continues its pattern of
increases. In that instance the
inventories of REO in most states would decline but would increase
significantly in a few states, especially New York and New Jersey.
the second scenario, assuming that the average number of days stabilizes, the
REO in most Western states would decline while states in the Northeast would
have sizable increases.
the third scenario should happen, i.e. the average number of days a loan remains
delinquent declines, then REO would increase nearly everywhere and especially
in New York and New Jersey. Only in California
and Arizona would the situation improve.
released by the Federal Reserve present information on the State and Regional