Fed’s Barkin: not yet seeing excess leverage in housing market

(Reuters) – Federal Reserve Bank of Richmond President Thomas Barkin on Tuesday said surging home prices are being driven by a jump in demand and constrained supply but not by excess leverage, reducing the potential risk to the broad financial system should prices fall.

“I don’t look at plummeting house prices as a first order risk, but if it were to happen, it only becomes a financial stability risk if you’ve got too much leverage against it,” Barkin told the Wilmington Chamber of Commerce in a virtual event.

“That’s what I watch is the leverage in the housing market and again, based on what I can tell, I don’t see it going to excess levels yet; that of course is something we are going to have to watch as we get into this.”

(Reporting by Ann Saphir; Editing by Andrew Heavens)