Federal Reserve Vice Chairman Stanley Fischer said a long period of low interest rates may have contributed to “high and rising” home prices in several countries, cautioning against forgetting the lessons of the 2007-09 housing crisis.
“There is more to be done, and much improvement to be preserved and built on,” Fischer said, speaking at an event in Amsterdam on Tuesday that was closed to the press. “The world as we know it cannot afford another pair of crises of the magnitude of the Great Recession and the Global Financial Crisis.”
Fischer emphasized that much has been achieved to shore up the global financial system since the last recession. His remarks struck a cautionary tone at a time when the value of residential real estate is climbing from Canada and the U.K. to Australia.
“House prices are now high and rising in several countries, perhaps as a result of extended periods of low interest rates,” Fischer said in the prepared remarks, without specifying any particular frothy markets. He also noted that in the U.S., Fannie Mae, Freddie Mac and the Federal Housing Administration are “now the dominant providers of mortgage funding.”
Government support for housing should be explicit where it exists, he said, and its costs should be balanced against its benefits. Likewise, rules and expectations for mortgage modifications and foreclosure “should be clear and workable.”
In the U.S. and around the world, “much has been done,” he said. “The core of the financial system is much stronger, the worst lending practices have been curtailed, much progress has been made in processes to reduce unnecessary foreclosures.”
Fischer made no mention of the path forward for monetary policy or the economic outlook in his speech.