Industry News

Bernanke: Subprime fallout hurts housing demand

Tighter standards, bad news keep some from borrowing

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Tighter standards in subprime lending -- along with bad publicity that may keep eligible borrowers from applying for loans -- will continue to restrain demand for housing, Federal Reserve Chairman Ben Bernanke told international bankers Tuesday. Speaking via satellite to bankers and policy makers attending the International Monetary Conference in Cape Town, South Africa, Bernanke said it's unlikely that troubles in subprime mortgage lending will "seriously spill over to the broader economy or the financial system." Bernanke said that while a leveling-off of sales late last year hinted at a possible stabilization of housing demand, more recent readings indicate demand weakened further over the first four months of the year. "As you know, the downturn in the housing market has been sharp," Bernanke said. "From their peaks in mid-2005, sales of existing homes have declined more than 10 percent, and sales of new homes have fallen by 30 percent." Home prices "decelerated shar...