The housing market continues to remain a strong point for the overall economic recovery, but has a long road ahead of it, Federal Reserve Chairman Ben Bernanke said Tuesday.
The Fed Chair discussed housing and mortgage financing to the Economic Club of New York at the Marriott Marquis Hotel in Times Square.
The housing market continues to show "clear signs of improvement" with an increase in home sales, prices and construction, the Fed chief noted.
Although developments are positive and residential investments are likely to be a source for growth and jobs, a number of factors continue to stall a full-blown recovery.
Bernanke said tighter lending conditions have been a major factor in the housing slowdown.
"It seems at this point the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes," he recently said.
The Fed is currently working to improve credit conditions, and keeping mortgage rates at record lows will be a key factor in boosting housing and affordability.
As mortgage lending continues to improve, banks are more likely to increase mortgage origination capacity, Bernanke said.
In regards to the supervisory side, the Fed will encourage banks to make more loans while remaining “prudent,” by offering options such as foreclosure alternatives.
On the regulatory side, the central banks are trying to capitalize on rules within Basel III to achieve greater financial stability. Bernanke gave no indication that a deadline to finish writing the rules is in place.
While there seems to be some light shining through the housing recovery tunnel, the "barriers to rapid housing growth are many and diverse."