No let up yet in housing downturn

Philadelphia Fed President and CEO Charles Plosser, in a speech today at the University of Delaware in Newark:

“On the housing front, I expect to see stabilization but not much improvement in 2012. We entered the Great Recession over-invested in residential real estate, and we are not likely to see a housing recovery until the surplus inventory of foreclosed and distressed properties declines.

“Even as the economy rebalances, we should not seek, nor should we expect, housing and related sectors to return to those pre-recession highs. Those highs were unsustainable, and the housing crash that ensued destroyed a great deal of wealth for consumers and the economy as a whole.

“The losses are real and the consequences severe for many individuals and many businesses. Moreover, monetary policy cannot paper over these losses, nor should it try to do so. Households and businesses, nevertheless, continue to make progress on restoring the health of their balance sheets by paying down debt and increasing savings.

“Most economists, including me, believe that this process will continue into 2012.”

The good news, at least for Pennsylvania and Delaware, is that the unemployment rate remains below the national average. Pennsylvania’s rate is 7.6 percent; Delaware’s is 7.4 percent, Plosser said.