The Housing Market - 4500 Words in a Nutshell

Federal Reserve Chairman Ben Bernanke's speech on October 15, 2007 at the Economic Club of New York contained around 4500 words. I thought that many real estate professionals might find it difficult to get the time to go through it carefully, so I'll hit some high points with quotes and my ever so humble interpretation of them.

"significant deterioration in market functioning" - The housing market stinks.

"The banking system is healthy." - Our job is to keep the banking system healthy. We're doing our job.

"cut the discount rate" and "adjusted its usual practices" - The Fed has taken action in multiple ways to help.

"Either the central bank provides the liquidity demanded by lending against good collateral, or forced sales of illiquid assets will drive the prices of those assets well below their longer-term fundamental values, raising the risk of widespread insolvency and intensifying the crisis. If the crisis becomes sufficiently severe, history suggests that damage to the broader economy is likely to follow." - We had to do something or all heck would break loose.

"On the other hand, no amount of liquidity provision by the central bank can be expected to solve the problems regarding the valuation of complex securitized assets or to reverse the credit losses on subprime mortgages." - But we can only do so much.

"Since the September meeting, the incoming data have borne out the Committee's expectations of further weakening in the housing market, as sales have fallen further and new residential construction has continued to decline rapidly." - We told you in September it would get worse, and we were right.

"it is not the responsibility of the Federal Reserve--nor would it be appropriate--to protect lenders and investors from the consequences of their financial decisions" - You made your bed, now lie in it.

"but a full recovery of market functioning is likely to take time" - The housing market still stinks and will for a while.

I hope that taking the 4500 or so words down to a couple of hundred helps the really busy Realtors® out there. Or perhaps you're not busy and could read it and let me know if your take was the same as mine.

Seriously though, we all have our own interests at the top of the list. Keeping the economy as a whole sound and healthy is important. The Fed seems to be doing as it is mandated. Maybe we could ask for a little more help though?