House sales cooling, Fed chairman says

WASHINGTON — The housing market, after flying high for five years, has lost altitude and appears headed for a safe landing, Federal Reserve Chairman Ben Bernanke said Thursday.

"It seems pretty clear now that the U.S. housing market is cooling," Bernanke said in a question-and-answer session after a speech in Chicago.

He noted that home sales are slowing as is housing construction.

"Our assessment at this point ... is that this looks to be a very orderly and moderate kind of cooling," Bernanke said.

One of the things that Bernanke and his Fed colleagues are keeping close tabs on is the extent to which a housing cool down will slow overall economic activity.

The housing market has been a top economic performer. The sector has racked up record-high sales five years in a row. Rapid appreciation in house prices has made homeowners feel wealthy and has powered consumer spending, helping the economy move solidly ahead.

Cooling of the housing sector is expected to be a factor in slower economic growth in the months ahead.

The economy in the first three months of this year grew at a brisk 4.8 percent pace, the fastest in 2 ½ years. Many economists predict growth will moderate to around 3 percent in the April-to-June quarter, still a good pace.

Separately, former Fed Chairman Alan Greenspan said Thursday that the "extraordinary" boom in the U.S. housing market in recent years is over.

"This has been quite an extraordinary boom," Greenspan told a Bond Market Association dinner in New York. "The boom is over. I think we can safely say that with a strong degree of confidence."

Greenspan said there was a "high degree of froth in the system," and that it was clear that home-equity extraction and the turnover of home sales was waning.

He said it wasn't clear how this will affect the notoriously resilient U.S. consumer.

Greenspan departed from the Fed on Jan. 31. He was the second-longest serving chairman in the Fed's 92-year history, having served more than 18 years.

Rates on 30-year mortgages climbed this week to their highest point in nearly four years, helping take the exuberance out of the housing market.

Freddie Mac, the mortgage company, reported Thursday that for the week ending May 18 rates on 30-year, fixed-rate mortgages averaged 6.60 percent, up from 6.58 percent last week.

This week's rate was the highest since the week ending June 20, 2002, when 30-year mortgages stood at 6.63 percent.

Greenspan comments provided

by Reuters.