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UPDATE 1-US level of vacant homes is 'extraordinary' -Fed's Duke

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WASHINGTON, Oct 5 (Reuters) - The housing bust has saddledthe United States with an "extraordinary" level of abandonedproperties that inflict heavy costs on the wider community andgovernment aid may be needed to tackle the problem, a top U.S.central banker said on Friday.

"In order to see the robust economic recovery we all want,we need to deal effectively with the large volume of vacant anddistressed properties throughout the country," said FederalReserve Board Governor Elizabeth Duke.

The Fed has cut interest rates to almost zero to boostgrowth in the aftermath of the recession and vowed in Septemberto buy $40 billion of mortgage-backed bonds every month untilthe U.S. labor market recovered.

In prepared remarks to a New York conference on thedistressed U.S. property market, Duke noted that although unsold

home inventory levels have declined as real estate has pickedup, the number of abandoned homes remains stubbornly high.

Quoting Census Bureau data, Duke said vacant homes for salehad fallen to 1.6 million in the second quarter of 2012, versusa 2 million peak in 2010, but pointed out there were still 2-1/2times as many vacant homes out there, just not for sale.

"Some neighborhoods likely will not recover without theassistance of government, and in this time of scarce resources,it is critical that the public sector has the information andtools necessary to ensure that any assistance that is providedis effective," Duke said.

In a speech that dug into the details of where and why homesbecame vacant, Duke identified three broad categories thatdescribed 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 theseproblems, but it is important to also consider the costs ofdoing nothing," she said, citing lost tax-revenue and the costof demolition. "Ultimately, a policy of neglect will be just as- or even more - costly than finding and implementingconstructive solutions to the vacancy issue."

(Reporting by Alister Bull; Editing by Neil Stempleman)

((alister.bull@thomsonreuters.com)(+1-202-898-8392)(Reuters

Messaging: alister.bull.thomsonreuters.com@reuters.net))

Keywords: USA FED/DUKE