According to Federal Reserve Chairman Ben Bernanke the economy will rebound from it’s slower first quarter. But any rebound in the real estate markets is not going to happen anytime soon. The Fed Chairman see’s the high rate of delinquencies and foreclosures of subprime loans a drag on both the housing market and economy as a whole. However, he expects the rest of the economy to continue to grow at it’s normal growth rate of 3.25 percent.

Even with Bernanke’s hopeful outlook, the Fed chief did make clear once again that the painful residential real-estate bust, which started last year, “appears likely to remain a drag on economic growth for somewhat longer than previously expected,” he said. Residential construction will likely remain “subdued for a time” until builders can pare down a backlog of unsold new homes, he noted. But, thus far, the problems in the housing market haven’t spread through the broader economy in a significant way, Bernanke said. “We have not seen major spillovers from housing onto other sectors of the economy,” he observed…

Besides talking about the economy, Bernanke also discussed the troubles plaguing both lenders and borrowers with high-risk “subprime” mortgages, which are made to people with spotty credit histories. Foreclosures and delinquencies have spiked as rising interest rates and falling home prices made it difficult for some people to keep up with their payments.

Bernanke, as he said in a speech last month, predicted there will be further increases in delinquencies and foreclosures this year and next as interest rates on many subprime adjustable-rate loans will go up as they reset. via the Houston Chronicle

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