by Calculated Risk on 5/18/2006 12:02:00 PM

From Reuters: Bernanke sees cooling housing market

The current cooling in the U.S. residential housing market looks to be orderly and moderate at this time, Federal Reserve Chairman Ben Bernanke said Thursday.

"In combination with rising interest rates affordability is becoming much more difficult and therefore as you would expect you are seeing some cooling in those markets," Bernanke said in a question and answer session after speaking to the Chicago Fed conference on banking regulation.

The central bank is watching carefully for signs that the slowdown might be faster than expected, Bernanke said.

Still, with the U.S. labor market strong and incomes rising, 2006 could still turn out to be a pretty strong year for real estate, he said.

So far the slowdown has been orderly, but there are definite warning signs of both rising inflation and a slowing economy.