Skip to comments.Greenspan: Worst is Over for Housing
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.
This man should retire. Housing will fair far better without him IMO.
Paging ex-texan! LOL!
Greenspan is smoking sumthin'
I thought he DID retire.....
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.
I wonder what interest rates on a fixed 15 year mortgage are. It might be worthwhile for me to refinance.
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!"
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.
Housing has barely started its crash. Prices won't bottom out until 2008 or 2009.
"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.
this is the official signal.
the Fed will begin to ease at the next meeting.
Ha! You beat me to it!
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.
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?
Greenspan also helped keep inflation at bay....give the guy some credit.
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.
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.
Said President Hoover 1930
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