(AP) WASHINGTON — Ben Bernanke says declines in home prices have forced many Americans to cut back sharply on spending and warns that the trend could continue to weigh on the economy for years.
The Federal Reserve chairman drew the connection between home values and consumer spending, which fuels 70 percent of economic activity, on Friday during a speech to the National Association of Home Builders in Orlando.
Bernanke says the broader economy won’t fully recover until the depressed housing market turns around. People are spending less because they are stuck in “underwater” homes, which are worth less than what is owed on the mortgage. And home values are falling because of foreclosures and tight credit — even in areas with lower unemployment.