WASHINGTON (AP) — Ben Bernanke said declines in home prices have forced many Americans to cut back sharply on spending and warned that the trend could continue to weigh on the U.S. economy for years.

The Federal Reserve chairman drew the connection between home values and consumer spending, which fuels 70 percent of economic activity, on Friday during a speech to the National Association of Home Builders in Orlando, Florida.

Bernanke says the broader economy won't fully recover until the depressed housing market turns around. People are spending less because they are stuck in "underwater" homes, which are worth less than what is owed on the mortgage. And home values are falling because of foreclosures and tight credit — even in areas with lower unemployment.

"Recent declines in housing wealth may be reducing consumer spending between $200 billion and $375 billion per year. That reduction corresponds to lower living standards for many Americans," Bernanke said.

The Fed chairman said there's no "silver bullet" to rescue the housing market. Renting out foreclosed homes and reducing or modifying mortgages are among steps that could help.

"Low or negative equity creates additional problems for households," Bernanke said. "It reduces financial flexibility: Homeowners who are underwater on their mortgages cannot tap home equity to pay for emergency health expenses or their children's college educations.

There have been modest signs of improvement in recent months. Sales of previously occupied homes rose in the last three months. Homebuilders are more optimistic after seeing more people express interest in buying this year. And home construction picked up in the final quarter of last year, which helped housing contribute to broader economic growth.

Still, last year was the weakest for new-home sales on records dating back to 1963. Sales of previously occupied homes have also been at depressed levels. And home prices continue to fall.

The Fed issued a white paper last month that included a number of proposals to boost home sales. The paper sparked some criticism. Rep. Scott Garrett, a New Jersey Republican, told Bernanke last week during a congressional appearance that he was taken aback that the Fed would offer unsolicited advice to Congress, putting forward proposals which Garrett said mirrored in many ways ideas being pushed by the Obama administration.

Bernanke said the Fed only wanted to provide pros and cons on various approaches, and he said Fed officials remained concerned because the weak housing sector was holding back overall growth.

The central bank has tried to help by keeping its benchmark interest rate at a record low near zero. And the Fed recently signaled that it doesn't plan to raise the rate before late 2014.

The Fed's decision to hold rates down, along with two major rounds of bond purchases, has led to lower mortgage rates.

Lower mortgage rates typically encourage more buying and refinancing.

Still, damage from the housing crisis has been so widespread that even the cheapest mortgage rates in history haven't been enough to lift home sales. And many banks have restricted lending to only those with the best credit.

After the Fed's meeting in January, Bernanke said the Fed has not ruled out a third round of bond purchases. Bernanke told the builders' group Friday that the Fed has been working to loosen tight lending standards.

"I do think that conditions are still too tight for the health of the financial system, the construction industry and our economy," Bernanke said. "As regulators, we have been very clear to the banks ... that we want them to take a balanced approach. We want them to make prudent loans and we don't want them to turn away creditworthy borrowers."

Asked about unanticipated shocks that could set back economic growth, Bernanke cited the European debt crisis and continued budget uncertainties in Washington.

"We will be paying close attention to what is happening and hoping that our economy is developing enough steam so that it will be able to continue to recover even if there are some bumps along the road," Bernanke said.

Bernanke's speech came a day after the government announced it had reached a landmark $25 billion deal with the nation's biggest mortgage lenders over foreclosure abuses that had occurred after the nation's housing bubble burst in the middle of the last decade.

That deal will require five of the largest banks to reduce loans for about 1 million households at risk of foreclosure. The lenders will also send checks of $2,000 to about 750,000 American who were improperly foreclosed on.