Economists and real estate experts have discussed, debated, and driven home the important role a housing recovery has in helping the overall economy recovery.
Despite the end of the recession in 2009, many American households continue to struggle. The unemployment rate remains elevated, hovering between 8 and 9 percent. Home prices are on the downturn, falling over 4 percent in the last year, and distressed properties still dominate many markets.In a recent speech during the 2012 National Association of Homebuilders International Builders' Show, Federal Reserve Chairman Ben Bernanke emphasized the need for just that, a housing recovery.
Additionally, potential would-be buyers have been sidelined by tightened credit standards, including the need for excellent credit and at least 20 percent down.
Bernanke commented on today's conditions, noting, "Though some progress has been made in reversing the losses in jobs and income sustained during the recession, the pace of expansion has been frustratingly slow and the unemployment rate remains very high by historical standards. The state of the housing sector has been a key impediment to a faster recovery."
Existing-home sales and new construction have seen minor rises in recent data studies, but the pace has not been enough to offset the large inventory glut of home.
In his speech Bernanke gave an overview of the state of housing. He showed how the past few years have seen a big disparity between supply of single-family homes and demand for thesehomes. Supply has far outweighed demand. This has left lots of unoccupied homes.
He said, "While this figure has declined slightly during the past few years, it is nonetheless up dramatically from the first half of the 2000s, when readings of about 1-1/4 million vacant homes were the norm."
Additionally, "In each of the past few years, roughly 2 million homes have entered the foreclosure process, and many of these homes have been put up for sale, crowding out much of the need for new building."
Declines is home prices have meant a reduction in homeowner equity by more than 50 percent from the peak of the boom. That translates to a loss of $7 trillion in household wealth. Even more troublesome is the group of 12 million homeowners who are now upside down in their mortgages.
It is these problems with housing that have kept the economy from recovering as quickly and robustly as it should. Bernanke notes, "The state of housing and mortgage markets may also be holding back the recovery of our financial system and the normalization of credit conditions. Mortgage delinquencies surged between 2007 and 2009 and remain high, imposing losses on lenders, mortgage insurers, and investors."
In order to help the depressed housing market, and in turn help the overall economic recovery and employment situation, there need to be "sustained efforts to address the many interlocking factors holding back the housing market will pay dividends in the long run."