Letter from the President
2013 was a historic year for the Federal Reserve and for the United States economy. The Federal Reserve System commemorated the centennial of the signing of the Federal Reserve Act and 100 years of operating the third central bank in the nation’s history—the other two each lasting only 20 years.
Additionally, 2013 provided strong evidence that the recovery from the severe economic downturn following the financial panic of 2007–09 was proceeding steadily—data reported during the third quarter and at year’s end were particularly encouraging. Production finally exceeded prerecession levels, consumer spending increased at a better-than-forecasted pace, job creation advanced at an improved rate and inflation has leveled out at a low—but still positive—rate. In sum, 2013 proved wrong the dismal projections of what I often call the “Eeyore faction” of economists.
The driving force behind the severe economic downturn from which we are now recovering was the housing market and the financial excess that accompanied it. The most precious of any family’s assets, its home, is the foundation of economic security. The Federal Reserve has endeavored to spark a recovery in the housing markets and the economy by conducting an aggressively accommodative monetary policy: It has added $1.55 trillion of mortgage-backed and federal agency securities to its portfolio, as well as $1.75 trillion of U.S. Treasury notes and bonds, while holding short-term interest rates near zero.
Given the importance of the health of the housing sector to our economy, these special report essays are written by our associate director of research, Vice President John Duca. John is widely recognized as one of the nation’s foremost experts on housing, and we are pleased to present three essays containing insights that John is uniquely qualified to provide.
One essay traces housing nationally and how it arrived at what appears to be a sustainable rebound. Another discusses differences across regions and major metropolitan areas, with particular emphasis on Texas. And one reviews the main, less-predictable factors that will likely shape the path of the housing sector over the next several years.
With a durable housing recovery at hand and the broader U.S. economy poised to further improve, we are confident that 2014 will bring new opportunities for the country and the Eleventh District, whose economic performance has led the nation forward from one of its toughest periods.
Richard W. Fisher
President and CEO
Federal Reserve Bank of Dallas