many years, many households were underwater on their existing mortgages, with more owed on their housing than their homes were worth, while others were unable to obtain a loan to finance a new purchase. as a result, housing demand remained very weak for an extended period. another factor that played a role in the slow housing recovery was the low rate of household formation, which dropped significantly during the recession and remained low for most of the following decade. much of this drop was due to a larger share of young people continuing to live with their parents, though this is not unusual when the economy is weak and jobs are hard to find. 2 in the past few years, though, we have seen some encouraging signs that the broader strength in the economy has eased these housing market headwinds. along with ongoing improvements in households ’ balance sheet conditions, mortgage credit conditions appear to be less of a constraint for creditworthy borrowers. i should add that housing activity is also being supported by interest rates that remain quite low by historical standards, with the fixed rate charged on a 30 - year mortgage now below 4 percent, substantially lower than the rates observed just before the last recession. as you well know, activity in the housing sector is highly sensitive to interest rates and other factors that have a powerful effect on the overall cost of owning a home. in addition, amid the strong job market of the past few years, we have seen a rise in the rate at which young adults are moving out of their family homes and forming households of their own. even so, millions of young adults are still living with their parents who likely wouldn ’ t have been before the crisis. while their reasons for doing so are probably varied, there is potential for many more individuals to shift back to forming new households. although the effects may evolve slowly, the higher rate of household formation will eventually result in higher demand for housing and encourage further increases in homebuilding. home sales have been rising in recent years, the percentage of homes that are vacant has been falling, and inventories of both new and existing homes for sale have drifted back down to relatively low levels. in fact, at this point, the residential real estate market is quite tight in some areas of the country and by enough that i have heard that the volume of home sales is being restricted by the low inventory of homes on the market. the most recent housing data have been encouraging : both new and existing home sales moved up strongly in the second half of 2019, and traffic of prospective buyers

112 of fdicia requires management to report annually on the quality of internal controls and outside auditors to attest to that control evaluation. control assessments coso requires all managers to, at least once a year, step back from their other duties and evaluate risks and controls within their span of authority. each manager should consider current and planned operational changes, identify risks, determine appropriate mitigating controls, establish an effective monitoring process, and evaluate the effectiveness of those controls. managers then should report their assessment up the chain of command to the chief executive officer, with each new level of management in turn considering the risks and controls under its responsibility. the results of this process are ultimately reported to the audit committee of the board of directors. in the case of banks, management publicly reports on its assessment of the effectiveness of controls over financial reporting and the external auditor is required to attest to this self - assessment. thus, the process helps managers communicate among themselves and with the board about the dynamic issues affecting risk exposures, risk appetites, and risk controls throughout the company. risk assessments such as the one outlined in coso presumably could also be useful in assessing various lines of business when formulating business strategies. but not all corporations and boards consider risk during their annual strategic planning or other evaluation processes. the 2002 survey of corporate directors conducted jointly by the institute of internal auditors and the national association of corporate directors showed that directors are not focusing on risk management. i was surprised to learn that 45 percent of directors surveyed said their organization did not have a formal enterprise riskmanagement process - or any other formal method of identifying risk. an additional 19 percent said they were not sure whether their company had a formal process for identifying risks. these percentages indicate that some companies have directors who don't understand their responsibilities as the representatives of shareholders. the shareholders of those companies should be asking the directors how they govern an organization without a good understanding of the risks the company is facing and without knowledge of a systematic approach to identifying, assessing, monitoring, and mitigating excessive risk - taking. i trust that none of the directors who participated in the survey were on the board of a financial services company. although directors are not expected to understand every nuance of every line of business or to oversee every transaction, they do have responsibility for setting the tone regarding their corporations'risk - taking and establishing an effective monitoring program. they also have responsibility for overseeing the internal control processes, so that they can reasonably expect that their