In a speech to The National Association of Realtors in Washington, D.C. on Tuesday former U.S. Federal Reserve Chairman Alan Greenspan said he’s starting to see “seeds of bottoming” in the housing market, though that isn’t reflected yet in home prices.
From DJ: [Greenspan] called home prices the “Achilles’ heel” of the U.S. economy, “which is otherwise running extraordinarily well in recent weeks.”
The economy could withstand another 5% drop in home prices, Greenspan said. But if they fall much beyond that, more conventional mortgages will be underwater, he warned.
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Greenspan was asked after the speech whether, in hindsight, he thought interest rates should have risen more when he was chairman earlier this decade. He responded that housing activity is driven by long-term rates, and not the overnight rates set by the Fed.“I’ve always argued that you do not capitalize the value of a piece of real estate…with overnight interest rates,” he said.
Greenspan’s speech to the NAR Conference
[...] Ritholtz of The Big Picture blog poses a logical question regarding Greenspan’s comments made yesterday at The National Association of Realtors [NAR]. “We are finally beginning to see [...]
[...] comments seem a bit contradictory. Only a few days ago he said he was seeing ’seeds of bottoming’ in the housing market. Share: [...]