Fed Chief Says Housing Slowdown Going Smoothly

All appears to be well with the slowing housing market, Federal Reserve Chairman Ben Bernanke told members of the House Financial Services Committee yesterday.
By: Barbara Hagenbaugh: REALTOR® Magazine Online
So far, all appears to be well with the slowing housing market, Federal Reserve Chairman Ben Bernanke told members of the House Financial Services Committee yesterday.

"The downturn in the housing market so far appears orderly. The level of [housing] activity is still relatively high on a historical basis," Bernanke says.

In response to questions about the risk of rising interest rate driving more mortgage holders into foreclosure, Bernanke says the Fed estimates that 20 percent of outstanding mortgages have variable rates and half of those are set to change interest rates this year.

"So there will be some effect on variable-rate mortgages," Bernanke says. "But it should be a relatively slow process that would provide some cushion."

Bernanke's testimony came a few hours before the Fed released minutes from its latest meeting in June, when policymakers raised interest rates for the 17th time in two years. The minutes largely echoed Bernanke's testimony on the economy and suggested Fed officials are unclear about what they will do with rates in the months ahead.

When asked directly about another increase, Bernanke refused to comment.