The housing market is beginning to stabilize, and the recession should end later this year, Federal Reserve Chairman Ben Bernanke told Congress this week. However, Bernanke said this will happen only if the financial system continues to gradually improve and doesn’t relapse into a credit squeeze.
The slight improvement with the housing market is the first to be seen in three years. Bernanke said that sales of resale homes are stable, and sales of new homes have recently increased, though both still remain at depressed levels. According to Bernanke, the affordability of homes is the most steadying factor.
Though the housing market is looking up and Bernanke hypothesizes that the recession’s end is in sight, he said that growth will remain slow and unemployment high for a year after the recession ends.
"We continue to expect economic activity to bottom out, then to turn up later this year," Bernanke told the congressional Joint Economic Committee.
According to an article from the UK’s Guardian, Stephen Stanley, an economist at RBS Securities in Greenwich, Conn., said Bernanke’s comments were "undoubtedly significantly more upbeat than his last congressional appearance in February."
Treasury Secretary Timothy Geithner said Wednesday that none of the 19 largest U.S. banks that were the focus of government "stress tests" are insolvent, Bloomberg reported, and that "the results will be, on balance, reassuring."
Bernanke said the stress tests will give a better idea on exactly where the banks stand, and he said he expects they will raise money from private sources. (Read more of Bernanke’s testimony here.)
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