By Peter Schroeder - 11/15/12 06:54 PM EST
But at the same time, he cautioned that 20 percent of homeowners are still "underwater" on their mortgages, owing more than the home is now worth. And 7 percent of all mortgages are either delinquent or in foreclosure as the homeownership rate has slipped nationwide in the wake of the crisis.
"The housing sector is far from being out of the woods," he said. "Although there are good reasons to be encouraged by the recent direction of the housing market, we should not be satisfied with the progress we have seen so far."
While the housing crisis that sent the market into a tailspin was brought on by lax subprime lending that resulted in a wave of foreclosures, Bernanke now cautioned that lenders may be too restrictive in doling out home loans. He noted that a tightening of credit standards is an "appropriate response" to the misdeeds of the subprime crisis, but warned that "the pendulum has swung too far the other way."
"Overly tight lending standards may now be preventing creditworthy borrowers from buying homes, thereby slowing the revival in housing and impeding the economic recovery," he said.
At the same time, Bernanke noted that there are no easy solutions to achieving a booming housing market. Some lenders are looking into alternatives to foreclosure and ways to help homeowners who owe more than their home is worth.
And the Fed has sought to help the housing market by lifting the overall economy, according to Bernanke. He noted the Fed's efforts to bring down interest rates to historically low levels have helped bring mortgage rates to record low levels, although the central bank remains "quite concerned about the stubbornly high level of unemployment."