The Obama administration's plans to get the nation's huge inventory of vacant homes back on the rental market is an "interesting direction," Federal Reserve Chairman Ben Bernanke said Tuesday.
Testifying in front of the Senate Budget Committee on the state of the U.S. economy, Bernanke underscored the imbalance between the supply of housing and demand for rental housing and the negative effects of leaving homes unoccupied.
"There's a shortage of rental housing, there's an imbalance there," Bernanke said, mentioning recent plans to convert government-owned foreclosures to rentals. "There are heavy costs to leaving homes unoccupied for long periods of time, vandalism and neglect. It hurts the neighborhood."
[Read: Fed Taking Heat on Housing Policies.]
Bernanke also said other options exist to "maintain continuous inhabitation" of homes including rent-to-own programs and short sales.
"Occupation by an owner or renter is a positive," he said.
But the Fed chairman wasn't too optimistic about the outlook for housing a month into 2012. While mortgage rates have sunk to even lower lows—average rates for 30-year fixed-rate mortgages currently sit around 3.9 percent, according to Freddie Mac—those low rates and the record affordability of housing haven't been the siren song to would-be homebuyers experts had hoped for.
Though January saw surprisingly good employment numbers—the economy added 243,000 jobs, almost twice the number economists expected—uncertainty surrounding how long that positive trend can go on continues to make Americans gun-shy when it comes to bigger purchases. Add still-declining home values to the mix, and demand for housing continues to remain weak, stunting recovery in many parts of the country.
It all hinges on jobs.
"The strengthening employment picture last Friday provides encouragement that the improving trend in consumer confidence will continue and will at some point be reflected in a firming up of consumer spending," said Doug Duncan, vice president and chief economist of Fannie Mae, in a statement.
While that rebound might be slow to come, a rosier jobs outlook could ultimately mean higher interest rates according to Duncan, which could give consumers the kick they need to start buying homes again.
"A more meaningful housing recovery may not be far behind if consumers are faced with the prospect of rising mortgage rates and home prices amid increased job security," he added.
- 'Mixed Signals' in Obama's January Housing Scorecard.
- Poll: Americans Want More Help for the Housing Market.
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