Likewise, some homeowners have responded to declining home values by cutting back their spending, and residential construction remains subdued. Thus, weakness in the housing market has proved a serious drag on overall economic activity. A slowing economy has in turn reduced the demand for houses, implying a further weakening of conditions in the mortgage and housing markets.
Reducing preventable foreclosures Because developments in the housing sector have become so interlinked with the evolution of the financial markets and the economy as a whole, both macro and micro policies have a role in addressing the strains in housing. At the macro level, the Federal Reserve has taken a number of steps, beginning with the easing of monetary policy.