For those hoping that the real estate downturn was going to end this year, Federal Reserve Chairmen Ben Bernanke is not on your side. Speaking to a conference in Georgia named “ Navigating the New Financial Landscape” Bernanke admitted that the rate of foreclosures in not going down and will be increasing. He is hoping that the foreclosure rate may start going down in 2012.
US Federal Reserve Chairman Ben Bernanke said late Monday that he expects to see a very high rate of foreclosure starts in 2011. We hope to see this decline by next year, he said in a speech delivered in Georgia.
Bernanke added that foreclosures are negative at a macroeconomic level for the United States. The most important transmission mechanism is that, so long as foreclosure are creating an ongoing supply of housing vacancies, we will be seeing continued softness in house prices, he said.
This in turn affects household wealth, consumer confidence, consumer liquidity and the rate of new construction, he added.
The high rate of foreclosures is obviously a serious problem and one of the reasons why our recovery is not as strong as we would like it to be, he said.
For those in the real estate industry this is not good news. The incredible amount of short sales and foreclosures is impeding the real estate market from getting it’s footing. In fact, in many parts of the country there is not a real market, just a collection of homes that are severely discounted that cash buying investors are scooping up.
Until the average American family looking to buy a home has the confidence that the price of the home they are looking to buy today will hold it’s value or be able to be resold in a reasonable amount of time, the real estate market is broken in my eyes.
The slow walk down to the bottom of the real estate market has been one of the most destructive economic calamities in the history of the United States. The myriad of government programs and investments has led to the suffering and impoverishment of millions of families.
Let the market find it’s bottom naturally. At that point we can recover, buyers will have confidence, sellers will not have illusions, and we can move forward honestly. If we had followed this advice in 2007 we would not be having this discussion today.
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