WASHINGTON (AP) — Ben Bernanke says declines in home prices have forced many Americans to cut back sharply on spending and warns that the trend could continue to weigh on the economy for years.
The Federal Reserve chairman draws the connection between home values and consumer spending, which fuels 70 percent of economic activity, in a speech to homebuilders in Orlando.
Bernanke says people are spending less because they are stuck in "underwater" homes, which are worth less than what is owed on the mortgage. He notes that home values are falling because of foreclosures and tight credit — even in areas with lower unemployment.
Bernanke says there's no "silver bullet" to rescue the housing market. But he says renting out foreclosed homes and reducing or modifying mortgages could help.