by Calculated Risk on 6/05/2007 10:42:00 AM

Chairman Bernanke spoke today: The Housing Market and Subprime Lending. This is basically the same speech Bernanke gave back in November 2006. Back then, Bernanke said:

"Over the next year or so, the economy appears likely to expand at a moderate rate, close to or modestly below the economy's long-run sustainable pace."

Now Bernanke says:

On average, over coming quarters, we expect the economy to advance at a moderate pace, close to or slightly below the economy’s trend rate of expansion.

Same thing. But the differences are interesting. Back in November, Bernanke talked about "stabilization" in the housing market. And as recently as April, the Fed's Mishkin saw "minimal" spillover from housing:

"... spillovers to other segments of the mortgage market or to financial markets in general appear to have been minimal."

Now Bernanke talks about further weakness in housing and no "major spillovers".

"... the adjustment in the housing sector is still ongoing, and the slowdown in residential construction now appears likely to remain a drag on economic growth for somewhat longer than previously expected.

... we have not seen major spillovers from housing onto other sectors of the economy."

I do have a problem with Bernanke's "fundamentals":

"... fundamental factors--including solid growth in incomes and relatively low mortgage rates--should ultimately support the demand for housing."

In the short term, the key fundamentals for housing are supply and demand. Income growth is important for the long term. Perhaps Bernanke should read my recent post: Housing Update, June 2007. The outlook for housing is dismal.

And finally, I wish Bernanke would stop talking like a NAR economist when he talks about interest rates. In the near future I'll discuss interest rates and the impact on housing.