the first quarter of 2011, compared with 6 percent of mortgages originated to borrowers in high - income neighborhoods. the higher rates of delinquency suggest that homeownership may have been a riskier proposition over the past decade for households in low - and moderate - income neighborhoods than in high - income neighborhoods. delinquency rates are higher, in part, because borrowers in these communities were more likely to end up in complicated or inappropriate mortgage products, unacceptably often as a result of unfair and deceptive lending practices. but borrowers in these communities may also be more sensitive to house price declines because they may have fewer financial resources outside of housing, and they may have had little equity in the property to begin with. 10 although investing in a home has risks, it also has positive qualities. households may feel more comfortable investing in housing than in other investments because houses are familiar, tangible, and provide concrete ties to the community. regular mortgage payments may serve as a useful savings commitment device. finally, homes pay out a “ dividend ” in the form of housing services – that is, providing a place to live. the housing services provided by an owner - occupied home – such as control over one ’ s own space – may be preferable to those provided by a rental. in making a decision about homeownership, prospective buyers need to consider the risks as well as the benefits – in particular, the possibility that house prices can fall and that such declines can have long - lasting effects on their financial well - being. the current decline in national house prices and the preceding run - up were, of course, unusually large even by historical standards. but even during times when house prices were rising nationally, prices fell steeply in certain local markets, such as texas in the mid - 1980s or massachusetts in the for a further discussion of the increase in lending over this period, see, christopher mayer, and karen pence ( 2008 ), “ subprime mortgages : what, where, and to whom? ” finance and economics discussion series 2008 – 29 ( washington : board of governors of the federal reserve system, june ). houses represented nearly three - fourths of total assets for homeowners in low - and moderate - income neighborhoods in 2007, according to the survey of consumer finances. in contrast, homes typically represented a bit over half of gross assets for homeowners in higher income neighborhoods in 2007. the median combined loan - to - value

william c dudley : the us economic outlook remarks by mr william c dudley, president and chief executive officer of the federal reserve bank of new york, at the washington and lee university h parker willis lecture in political economics, lexington, virginia, 1 april 2010. * * * thank you for that kind introduction and the opportunity to speak here today. the past few years have been an extraordinary time for policymakers. we have been very aggressive in providing support to the economy, and it now appears that a sustainable recovery is underway. however, given the headwinds created by the collapse of the u. s. real estate market and its consequent damage to the financial system and household balance sheets, it seems unlikely that the recovery will be as strong as we would desire. as a result, the substantial amount of slack in productive capacity that exists today will likely only be absorbed gradually. consequently, trend inflation, at least over the near term, should remain very low. this is why the federal open market committee ( fomc ) concluded at its march meeting that “... economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period ”. what i would like to do today is to explain in some detail the logic underlying this expectation that economic conditions will warrant exceptionally low levels of the federal funds rate for an extended period. this conclusion stems from the observation that the current economic environment is qualitatively different from previous post - world war ii business cycles. most post - war recessions were preceded by high rates of resource utilization and rising trend inflation. this prompted a tightening of monetary policy, which, in turn, dampened interestrate sensitive spending, particularly on housing and consumer durable goods. then, as underlying inflation pressures subsided, monetary policy was eased and interest - rate sensitive spending rebounded, often quite sharply. the current business cycle is different in one key respect. it was preceded by a global financial crisis. the financial crisis was due, in large part, to excessive leverage and excessive investment in real estate assets. it will take time to unwind these excesses. today, i will offer a framework for assessing the forces that have shaped the recent performance of the u. s. economy. this framework will provide context to the fiscal and monetary policy responses to what is now being called the “ great recession. ” then, i will discuss the economic outlook for the united