Housing Still Impediment to U.S. Growth
A message from Jay Robertson – President of First Capital
A disappointing rebound in U.S. housing continues to trip up the country’s overall economic recovery, two influential Federal Reserve officials said on Friday, highlighting a corner of the economy that still frustrates monetary policymakers.
New York Federal Reserve Bank President William Dudley said the housing market’s failure to fully respond to the Fed’s easy money policies remains a headwind to U.S. growth, while Elizabeth Duke, a governor at the central bank, highlighted problems associated to the “extraordinary” level of abandoned properties.
A bubble in the U.S. housing market was at the core of the 2007-2009 financial crisis and the lackluster environment that continues to hamper the world economy today.
Though national house prices have edged up this year, Dudley said credit availability remains “impaired” and the overall pace of the broader U.S. economic recovery has been disappointing. “While there are several headwinds that have been restraining economic growth, a key impediment is that the housing market has failed to respond fully to the significant easing of monetary policy,” Dudley said at a residential real estate conference hosted by the New York Fed.
The central bank has kept benchmark interest rates ultra low for nearly four years and has bought more than $2 trillion in large-scale assets to kick-start growth and get Americans back to work. It launched a third round of asset buying last month and signaled it would keep rates near zero for three more years.
Many economists believe the housing market has finally turned a corner as prices have started to stabilize, while home sales were around two year highs in August. But the large overhang of foreclosures and the many people who are underwater on their homes are among the hurdles the sector still faces.
