Is Fed Chairman Ben Bernanke right about housing's impact on the broader economy?

Federal Reserve Board Chairman Ben Bernanke testifies on Capitol Hill in Washington, Wednesday, Feb. 14, 2007, before the Senate Banking Committee hearing on monetary policy. (AP Photo/Dennis Cook)
Dennis Cook

"Bernanke is sugar coating the housing situation. The worst is yet to come in the housing market. I am in the mortgage industry. The reality is foreclosures are going to continue to go up because of the inflated appraised values that were used to purchase/refinance homes."
-- Robert C., Indiana

"I do agree with Ben Bernanke on his assessment of the current housing market. We have only been in a downturn for the last year and a half and history shows that these things take 5-7 years to correct (look at 1990, 1980 and 1974). Alan Greenspan told us six months ago that the bottom of the housing market was in but we all know how bad his track record is for predictions."
-- Dwuight M., Pennsylvania

"The housing "bust" is going to be a slow-motion affair, unlike the dot-com crash. While any individual quarter may not show a definitive impact, the cumulative effect over 5-7 years will be significant."
-- Nick A., Virginia 

"No. We’ve seen the tightening in credit standards and we are starting to see falling prices brought about by slower sales. What we haven’t really seen yet is the foreclosures. Increased foreclosures will create a downward spiral for home prices, which will hurt homeowner’s ability to sell at a profit and reduce their ability to take equity out of their homes because of lower appraised values. These have been two of the major forces driving economy recently. Add this to the pressure already on consumers due to high gas prices and you are going to see reduced consumer spending, which will pull the economy down. As is consistent with their track record, the Fed will wait too long to cut rates."
-- Kyle M., Ohio

"Yes, because people will not continue spending until their house is in order, so to speak. From 1900–2000 housing prices rose at the rate of inflation, from 2000–2005 they soared. Housing prices will have to fall another 40% to revert to the mean, which they will."
-- Ray M., Florida

More comments...

"Absolutely, just like he is right in every forecast he's given so far. Remember, the first quarter drag came from trade and inventories (investment overall), which has got nothing to do with real estate."
-- Nick K., Moscow

"Bernanke is attempting to play to public opinion or just plainly play down the impact of the housing slump to the greater market.  Think about it, the home is the largest investment for the majority of folks and a paper slide (home equity reduction)  let alone a real slide (i.e. foreclosures) creates a significant impact to the public confidence."
-- Joe

"I think the Fed Chairman is right-on in watching inflation. The housing market like any other market will eventually correct itself." 
-- Cary W., Arizona

"Mostly likely we have not reached the trough of the adjustment  in real estate prices.  Foreclosures are only ramping up now.  Foreclosed properties will begin to pile up in bank portfolios.  At some point, creditors will liquidate these assets at below-market prices.  Those sales will undermine normal real estate market and lead to sharper drops in pricing.  The blood letting should begin next year and the recover could follow in 2009 or 2010.  These cycles are always difficult to predict when you are mired in them." 
-- Nate