Dudley, who as head of the powerful New York Fed bank has a permanent vote on monetary policy, said “various housing market indicators have looked somewhat better of late,” including home prices.
But he said the absolute level of housing starts remains low and housing market conditions vary across the country, causing problems. “The net result is that while housing’s contribution to growth has finally turned positive, its magnitude is far below that experienced in previous recoveries,” Dudley said.
U.S. growth cooled in the second quarter to a tepid 1.3 percent annual rate, and forecasters do not think the economy is expanding much faster. Yet in a promising sign for the economy, data earlier on Friday showed that the U.S. jobless rate fell to a near four-year low of 7.8 percent last month, from 8.1 percent in August.
In a speech that dug into the details of where and why homes became vacant, Duke identified three broad categories that described most concentrations of abandoned U.S. homes: post-housing boom neighborhoods, poorer inner city districts, and less-obvious suburban communities in prolonged decline.
“Doubtless there will be costs associated with solving these problems, but it is important to also consider the costs of doing nothing,” Duke said at the same conference, citing lost tax-revenue and the cost of demolition.
Among the fallout from the housing bust, the many abandoned properties inflict heavy costs on the wider community which may warrant government aid to ease the problem, she argued.
“In order to see the robust economic recovery we all want, we need to deal effectively with the large volume of vacant and distressed properties throughout the country,” said Duke, one of the seven presidentially appointed Fed governors who have permanent votes on monetary policy.
Although unsold home inventory levels have declined as real estate has picked up, the number of abandoned homes remains stubbornly high, she noted.