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Greenspan: Worst is Over for Housing
newsmax.com ^ | Friday, Dec. 1, 2006 10:36 p.m. EST

Posted on 12/01/2006 8:49:30 PM PST by InvisibleChurch

Friday, Dec. 1, 2006 10:36 p.m. EST Greenspan: Worst is Over for Housing

Former Federal Reserve chairman Alan Greenspan said on Tuesday that the worst of the housing adjustment was over, and that he was preparing to publish an analysis of the "serious dispute" over the true effect of mortgage wealth on consumer spending.

Housing starts and other data indicated the dampening effect that a slow housing market had on gross domestic product was at its maximum in the third quarter, when growth slowed to a weaker-than-expected 1.6 per cent annual rate, he said at an investor conference organized by investment bank Friedman, Billings, Ramsey Group Inc.

Greenspan said he expected inventory levels to come down at a "reasonably rapid pace" and that "it looks as though sales figures have stabilized." But he also said there would be actual price declines in housing. "That will have some impact on consumer expenditures," he said. "We haven't seen it yet."

Separately, the National Association of Realtors reported Tuesday that the median price of a home dropped to $221,000 in October, a decline of 3.5 per cent from a year ago. It was the biggest year-over-year price decline on record for an asset that many Americans use as a gauge of their financial well-being.

The question over mortgage equity extraction was whether equity that is extracted is "acting as a proxy for all types of financing of goods that would've been bought anyway."

"The debate going on is a very interesting one, but I would say is inconclusive," Greenspan said. Continue Article

The paper Greenspan is co-writing will include data on gross equity extraction dating to 1968 and a more detailed analysis of data from 1991 to the present. He did not say when the research would be released.

He also spoke on topics ranging from the burden of the Sarbanes-Oxley law, the transfer of workers from centrally controlled economies to market-based ones, the separation of banking from commerce and the appeal of gold.

While he said it was difficult to tell whether Sarbanes-Oxley has affected capital investment, he was critical of the accounting aspects of the landmark 2002 reform law. He said most of the law is a "cost-creator with no benefit I'm aware." Greenspan said the whole process of accounting dictated by the regulation is essentially a diversion that keeps chief executives from doing what they should be, namely thinking through projects, instead of figuring out how to stay out of jail.

He said regulators were examining regulatory adjustments but he believed there should be statutory changes in the law.

"I hope it happens before the whole financial system walks off to London," he said.

On the separation between banks and other companies, he said that the changing nature of the economy was making the distinction between the two less obvious.

"Over time, we will find it impossible to make that distinction," he said, in response to a question about Wal-Mart Stores Inc., which has applied to establish an industrial loan corporation, a kind of bank. "Banking is now essentially in cyberspace."

He predicted that physical bank branches would become anachronisms but conceded that an obstacle to that was that people like dealing with people.

About global inflation, he said the shift of people from rural areas to urban ones, such as the one happening on a large scale in China, is leading to a very significant fall in labour costs around the world. He said it would reduce the rate of inflation and accelerate growth in developing countries.

Greenspan, who retired as Fed chairman in January, is writing a book and runs Greenspan Associates, a consulting firm in Washington.

© 2006 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.


TOPICS: Business/Economy; News/Current Events
KEYWORDS:

1 posted on 12/01/2006 8:49:33 PM PST by InvisibleChurch
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To: InvisibleChurch

This man should retire. Housing will fair far better without him IMO.


2 posted on 12/01/2006 8:51:30 PM PST by kinoxi
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To: InvisibleChurch; ex-Texan

Paging ex-texan! LOL!


3 posted on 12/01/2006 8:53:18 PM PST by FReepaholic (Give me ambiguity or give me something else.)
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To: InvisibleChurch

Greenspan is smoking sumthin'


4 posted on 12/01/2006 8:58:44 PM PST by finnman69 (cum puella incedit minore medio corpore sub quo manifestu s globus, inflammare animos)
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To: kinoxi

I thought he DID retire.....


5 posted on 12/01/2006 9:37:10 PM PST by goodnesswins (I think the real problem is islamo-bombia! (Rummyfan))
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To: InvisibleChurch

The housing market is starting to turn the corner. Demand seems to be increasing and supply has leveled off. Prices should be flat for a while then start to turn up again early next year.


6 posted on 12/01/2006 9:52:24 PM PST by Always Right
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To: InvisibleChurch

I wonder what interest rates on a fixed 15 year mortgage are. It might be worthwhile for me to refinance.


7 posted on 12/01/2006 10:21:08 PM PST by AlaskaErik (Everyone should have a subject they are ignorant about. I choose professional corporate sports.)
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To: Always Right

Your screen name reminds me of this slate plaque I bought for Mrs. Wasp. It says:"When I married Mr. Right, I didn't know his first name was Always!"


8 posted on 12/01/2006 10:26:30 PM PST by SierraWasp (Welcome to the next four years of Schwartzenborrowingspender's Republican Socialism in healthcare!!!)
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To: Always Right

I'm in suburban Washington DC. We hear nothing but doom and gloom here--but two weeks ago a neighbor of mine put his house on the market for waaaay more than anybody else would have dreamed of, and it sold in a week. Despite the fact that few people want to buy at Christmastime. I hope this is a harbinger of good things to come in the spring.


9 posted on 12/01/2006 10:29:40 PM PST by Fairview
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To: Always Right

Housing has barely started its crash. Prices won't bottom out until 2008 or 2009.


10 posted on 12/01/2006 11:01:28 PM PST by Neanderthal
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To: Neanderthal

"Housing has barely started its crash. Prices won't bottom out until 2008 or 2009."

Given the comparison between your supporting reasons (none), and Greenspan's--I'll go with Greenspan.

The US economy performed very well during his tenure...and his successor seems to be following similar policies. It has absorbed 9/11/2001, two wars, Katrina, recent slowdowns in housing and autos; yet continues to grow.

The real estate market is local, as well as regional and national. If a particular locale or region is bottoming out in 2008 or 2009 it will be due more to local factors, than to national ones.

If I'm wrong and you are right, we will have more problems with our economy than just housing. Therefore I expect the Fed to keep interest rates as low as possible, and that was a big factor giving the strength of the economy under Greenspan.

Besides, low interest rates are GOOD just like low taxes are GOOD.


11 posted on 12/01/2006 11:18:50 PM PST by truth_seeker
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To: InvisibleChurch

this is the official signal.

the Fed will begin to ease at the next meeting.


12 posted on 12/01/2006 11:21:14 PM PST by oceanview
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To: FReepaholic
Paging ex-texan! LOL!

Ha! You beat me to it!

13 posted on 12/01/2006 11:23:01 PM PST by Lancey Howard
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To: truth_seeker
Greenspan is the one who created the tremendous credit bubble that caused the housing bubble that has now popped. His judgment turned out to be terrible.

He also incinerated the dollar. The Euro is now $1.30 or so. It was less than $1.00 when he started trashing the dollar.

You're right that no one knows for sure when housing will bottom out, but its absurd to say that prices are on their way up. Just look at inventories, the amount of ARM's that will reset over the next two years, and the house price to income ratios, which are at totally unsustainable levels. We haven't seen anything yet.

14 posted on 12/01/2006 11:56:37 PM PST by Neanderthal
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To: Neanderthal

They won't even be able to build enough houses in the DC area in the next 10 years to keep up with the incredible demand that is coming here. How does that enter into you figures?


15 posted on 12/02/2006 12:10:01 AM PST by TheLion (We are not the health maintenance organization for Mexico)
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To: Neanderthal

Greenspan also helped keep inflation at bay....give the guy some credit.


16 posted on 12/02/2006 12:12:07 AM PST by TheLion (We are not the health maintenance organization for Mexico)
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To: Neanderthal

The national numbers are not looking good short term. Many local markets will rebound/stabilize by this spring IMO. 2009 is quite a dire prediction, I'd like to hear your rationale.


17 posted on 12/02/2006 1:10:06 AM PST by kinoxi
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To: kinoxi

One rationale for Neanderthal's dire prediction could be based on the fact that in the past, most real estate markets rose and fell on ten year cycles, or 5 year drops followed by 5 year surges. The great news is that the surges almost always dwarf the drops by at least a 3:2 margin, which have created a 45% upward tilt in property values since WW2.

I think the next growth period will buck the 5 year drop trend, and will come sometime mid to late 2007, fueled by retiring baby boomers, who are only starting to retire.


18 posted on 12/02/2006 2:48:24 AM PST by Garden Island (US out of Iraq!.....And into Iran, Syria, and Pakistan!)
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To: Always Right
The housing market is starting to turn the corner. Demand seems to be increasing and supply has leveled off. Prices should be flat for a while then start to turn up again early next year.

Said President Hoover 1930

19 posted on 12/02/2006 2:52:19 AM PST by dennisw
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To: Garden Island
You like/trust charts. I don't. This is unlike any market ever charted in reality. Blindly following lines on a chart is for snobby sheeple IMO.
20 posted on 12/02/2006 2:53:06 AM PST by kinoxi
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To: truth_seeker
U feel the same way about "fiat money" I presume?...Sir Alan didn't at one time...>> http://www.321gold.com/fed/greenspan/1966.html
21 posted on 12/02/2006 4:15:23 AM PST by M-cubed (Why is "Greshams Law" a law?)
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To: TheLion
Greenspan also helped keep inflation at bay....give the guy some credit.<<<

Have u checked M-3 lately???...Oh u cant now can u?...I wonder why?....(see tagline)
22 posted on 12/02/2006 4:19:20 AM PST by M-cubed (Why is "Greshams Law" a law?)
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To: finnman69

He's attempting to cover his "legacy."

A loan company in our area is offering one year of mortgage covered by them if the homemoaner pays taxes and insurance, AND will throw in a nifty stove, refrig or washer to boot.

It isn't recovering. There is a glut of inventory to work through the system.


23 posted on 12/02/2006 4:30:18 AM PST by OpusatFR ( ALEA IACTA EST. We have just crossed the Rubicon.)
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To: oceanview

"the Fed will begin to ease at the next meeting."

And the energy markets are just daring him to do so. Prices are up this week and will skyrocket if he does. FCB's that buy our paper will not allow him to cut.


24 posted on 12/02/2006 4:31:42 AM PST by OpusatFR ( ALEA IACTA EST. We have just crossed the Rubicon.)
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To: dennisw
Said President Hoover 1930

LOL, I feel sorry for you. I really do.

25 posted on 12/02/2006 6:20:17 AM PST by Always Right
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To: Neanderthal
Housing has barely started its crash. Prices won't bottom out until 2008 or 2009.

Bookmarked stupid prediction for later reference.

26 posted on 12/02/2006 6:22:20 AM PST by Always Right
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To: oceanview
the Fed will begin to ease at the next meeting.

We are in stagflation and the Fed must choose between rescuing the dollar or the economy.

It can't do both.

I am betting on continued debauchery of the dollar.


BUMP

27 posted on 12/02/2006 6:34:26 AM PST by capitalist229 (Get Democrats out of our pockets and Republicans out of our bedrooms.)
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To: Always Right

Inventories have been falling for 4 months in Northern Virginia.


28 posted on 12/02/2006 6:45:52 AM PST by WashingtonSource
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To: OpusatFR

I think the falling dollar and swooning stock market are due, in fact, to the expectation rates WILL be cut soon. The FCB's, as you call them, are grumbling. But demand for Treasuries seems only to rise -- witness the falling rates of 10-year bonds.


29 posted on 12/02/2006 6:49:56 AM PST by WashingtonSource
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To: capitalist229

I keep hearing "stagflation, stagflation, stagflation." Is anyone actually looking at the inflation numbers? Does anyone remember the Carter years? If this is stagflation, I'll take it.


30 posted on 12/02/2006 6:50:56 AM PST by WashingtonSource
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To: Always Right; nopardons
America's flation crisis is only beginning to get bad. Time to buy more GOLD!
31 posted on 12/02/2006 6:52:43 AM PST by Petronski (I just love that woman.)
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To: WashingtonSource

I don't see them cutting. I know the smart money has already priced in the cut, but I'm oil, currency and pm's which I'll add to as the dollar comes up on a dead cat bounce. Oil's priced in dollars and will continue to rise as the dollar drops while it drops or stabilizes as the other currencies rise.

Paulson and Bernake are in for a good hinney bustin' if they drop the rates. Stagflation will get them.


32 posted on 12/02/2006 6:55:07 AM PST by OpusatFR ( ALEA IACTA EST. We have just crossed the Rubicon.)
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To: InvisibleChurch

"While he said it was difficult to tell whether Sarbanes-Oxley has affected capital investment, he was critical of the accounting aspects of the landmark 2002 reform law. He said most of the law is a "cost-creator with no benefit I'm aware.""


The headline says housing...above makes the most sense...


33 posted on 12/02/2006 6:57:11 AM PST by dakine
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To: Petronski
America's flation crisis is only beginning to get bad. Time to buy more GOLD!

Yep, there is never a good time to buy housing.


34 posted on 12/02/2006 7:34:38 AM PST by Always Right
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To: OpusatFR

yes, oil prices will rise.


35 posted on 12/02/2006 1:07:55 PM PST by oceanview
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To: Neanderthal
Based on what?

Is that across the board, or in a specific area/s?

You DO know, don't you, that there has never been and is not now, an across the board housing price in America.

36 posted on 12/02/2006 1:23:38 PM PST by nopardons
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To: Petronski
This garbage doom&gloom has been posted, CONTINUOUSLY, to FR for the past four years. During that time, the stock market has gone up, up, up, UP and so has the cost of housing ( with that coming down some this year ) and none of the gloomers has recanted nor backed away.

Goldbuggery has been the cri de guere ( sp? ), for some here ( most of them long ago banned, with a few newbies taking their place ) for at least seven years. LOL

37 posted on 12/02/2006 1:31:14 PM PST by nopardons
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To: nopardons

"cri de guerre"


But I would give you full credit for knowing the phrase...loony French spelling is extra credit only. ;O)


38 posted on 12/02/2006 2:07:27 PM PST by Petronski (I just love that woman.)
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To: Petronski

Thanks....my spelling stinks in ANY language and FR's spell check function only works for English words and sometimes, not even them. LOL


39 posted on 12/02/2006 2:14:20 PM PST by nopardons
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To: nopardons

"cri de guere..."

How about cri de coeur?

Seriously, I'm not wedded to a position but you could have made some serious coin on the metals over the past three years. I have one miner I donk with regularity.


40 posted on 12/02/2006 3:46:30 PM PST by OpusatFR ( ALEA IACTA EST. We have just crossed the Rubicon.)
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To: TheLion

"They won't even be able to build enough houses in the DC area in the next 10 years to keep up with the incredible demand that is coming here"

How so? Really, I am curious. What will drive people there? Is not that area already packed?


41 posted on 12/02/2006 6:38:43 PM PST by mr_hammer (Pro-life, Pro-gun, Pro-military, Pro-borders, Limited Govn't will win in 08!)
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To: mr_hammer

I read that 125,000 will be coming to this area. Government jobs and a great economy. Lots of great private industry jobs also.

Suprisingly there is a lot of room left for building. I'm 50 miles west of DC and we fight development tooth and nail.


42 posted on 12/02/2006 6:43:31 PM PST by TheLion (We are not the health maintenance organization for Mexico)
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To: mr_hammer

Sorry, that was meant to be 125,000 per year!


43 posted on 12/02/2006 6:45:40 PM PST by TheLion (We are not the health maintenance organization for Mexico)
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To: OpusatFR
Nope, it is their raison d'etre and cri de guerre, but never cri de coeur.

Having a bit of gold in one's portfolio, from time to time, is perfectly sane. To claim, as the goldbuggers do, that gold is it, it, IT and ONLY IT, is delusional.

44 posted on 12/02/2006 7:31:42 PM PST by nopardons
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To: M-cubed
Have u checked M-3 lately???...Oh u cant now can u?...I wonder why?....

Why can't you use M2? Repurchase agreement information is still available. Where's the conspiracy?

If the money supply is being expanded so far beyond what's required for GDP growth, where's the inflation? 10-year bonds are yielding about 4.4% so inflation is in the 2.5% range. You can still get a 30-year mortgage for 6.15%, which means that the long term expectation for inflation is low.

Besides, The Fed has used interest rates instead of money supply to spearhead monetary policy for the past 20 years. The fact that M2 and M3 have grown so much with low inflation speaks volumes to the disconnect.

45 posted on 12/02/2006 9:16:59 PM PST by Mase (Save me from the people who would save me from myself!)
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To: Neanderthal
He also incinerated the dollar. The Euro is now $1.30 or so. It was less than $1.00 when he started trashing the dollar.

The Euro was worth $1.20 when it was created. You say it's now worth $1.30. That means the Euro is less than 10% stronger today than when it was introduced. Is that how you define incinerated? No wonder you worry so much.

46 posted on 12/02/2006 9:21:17 PM PST by Mase (Save me from the people who would save me from myself!)
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