NEW YORK (CNNMoney)
"One cautionary note, though, is that readings on housing activity -- a sector that has been recovering since 2011 -- have remained disappointing so far this year and will bear watching," she told the Joint Economic Committee in prepared remarks Wednesday.
The housing sector was a key part of the economic recovery last year but has since fallen short of economists' expectations. Building permits -- a gauge of future home construction -- fell 2.4% in March, and existing home sales were flat. Economists had expected both these indicators would improve more, especially after a blizzards and a cold winter put the housing sector largely on hold.
Yellen cautioned that the the warmer weather may not be enough to turn things around.
"The recent flattening out in housing activity could prove more protracted than currently expected rather than resuming its earlier pace of recovery," she said.
U.S. markets started the day higher, but have since gone negative as Yellen continues speaking.
As for the broader economy, Yellen isn't too worried. The U.S. economy stalled in the first quarter, growing at merely a 0.1% annual rate, but she blames the weakness largely on the harsh winter.
"I see that pause as mostly reflecting transitory factors, including the effects of the unusually cold and snowy winter weather," she said.
"With the harsh winter behind us, many recent indicators suggest that a rebound in spending and production is already under way, putting the overall economy on track for solid growth in the current quarter," she noted. 
First Published: May 7, 2014: 10:26 AM ET
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