He has resorted to unorthodox policies six years after home prices started a plunge that knocked the economy into the longest recession since the Great Depression.
While tighter credit standards after a collapse in the subprime mortgage market were appropriate, “it seems likely at this point that the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes, thereby slowing the revival in housing and impeding the economic recovery,” Bernanke said.
Some members of the Federal Open Market Committee said monthly mortgage bond purchases by the Fed are “likely to reinforce the nascent recovery in the housing market,” according to minutes of their Oct. 23-24 meeting released Nov. 14.
Construction and home repair companies may get a lift from clean-up activity after superstorm Sandy, which swept up the Atlantic coast and left a path of destruction in the New Jersey and New York. The storm may provide a boost similar to that provided by Hurricane Irene, which added about $360 million in sales last year, Home Depot Inc. executives said on a Nov. 13 earnings call.
“The property damage, as we understand it, related to Irene was about $16 billion; the property damage for Sandy is about $20 billion, so it would suggest possibly higher sales, but it’s impossible for us to know right now,” said Carol Tome, the Atlanta-based company’s chief financial officer.
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