Federal Reserve Chairman Ben Bernanke on Friday issued a call to action to restore U.S. housing markets, saying depressed house prices and sales are a serious drag on the economic recovery.
"The state of housing has been an impediment to a faster recovery," he told a home builders' conference. "We need to continue to develop and implement policies that will help the housing sector get back on its feet."
The Fed last month issued a paper discussing possible remedies for the housing sector, some of which Bernanke touched on in his speech. That paper drew sharp criticism from some Republicans in Congress, who accused the Fed of intruding on fiscal policy.
Bernanke made the case that overly tight credit in mortgage markets had undercut the effectiveness of the central bank's aggressive efforts to stimulate growth. In a typical recovery, a rebound in housing fuels hiring and income gains, but that has not been the case this time, the Fed chairman said. Recent declines in home prices have slashed household wealth by as much as $7 trillion, he said.
The U.S. housing recovery has been slow for a number of reasons, Bernanke said. One is overly tight credit, he said, and he called on lenders and regulators to look at rules and practices that may hold back the origination of sound mortgages.
An overhang of vacant homes and a glut of foreclosures is also weighing on housing activity, Bernanke added. It could make sense in some markets to turn some of the foreclosed homes into rental properties, he said.