Greenspan sees no housing bubble

Federal Reserve chairman says sector shows sign of 'froth' but doesn't perceive a national bubble.
May 20, 2005: 3:08 PM EDT


WASHINGTON (Reuters) - Federal Reserve Chairman Alan Greenspan said Friday the booming U.S. housing sector shows signs of some "froth" but that the central bank does not see a national housing bubble.

"We don't perceive that there is a national bubble but it's hard not to see ... that there are a lot of local bubbles," Greenspan told the Economic Club of New York.

Greenspan said he saw "very significant acceleration" in the turnover of U.S. homes, due in part to purchases of second homes.

He said speculation in both the housing and mortgage markets had accelerated, and that people were reaching financially to purchase homes, using adjustable-rate and interest-only loans to make houses more affordable.

But the central bank chief said the inability to reduce home prices, which have climbed by double-digit percentages over the past few years, was not a serious macroeconomic problem. Prices, he said, were supported by relatively slow productivity growth in home building.

Eventually, home prices will decline because the underlying pattern is unsustainable, Greenspan said.

"Without calling the overall national issue a bubble, it's pretty clear that it's an unsustainable underlying pattern. What we see are a number of forces, which are, as far as I can judge, not infinitely projectable," he said.

But when home prices slow, only those who purchased homes just as the prices begin to drop will be impacted by the decline, Greenspan said.

"The number of occasions in which an average level of prices in the United States have actually gone down are very rare," he said.

"Even if there are declines in prices, the significant run-up to date has so increased equity in homes that only those who have purchased very recently, purchased just before prices actually literally go down, are going to have problems," he said.

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So what did he say exactly, this Federal Reserve Chairman who thinks illegal immigration is "healthy" for the US Economy?

He sees no bubble but admits there are bubbles locally in different markets across the country. He sees no bubble but admits the uderlying pattern (the economy) can not sustain prices. He sees no bubble but admits that if you bought a home recently, you'll lose value. He sees no bubble but admits that buyers are "stretching" to buy using ARMS as well as interest only loans to buy, which people do when they can't actually afford the home.

Alan is blooooooowing bubbles!

I repeat from another post, this man admitted on television several years ago that he does his best thinking while taking a "bubble bath." God help us.

Everyone...be very careful about any major purchases like a new home at this time. This economy is in dire straights and it is holding together by a thread. If we don't get these aliens out of the country and out of our jobs, get these jobs back into the hands of capable Americans with a free legal labor market, the continued deflation of wages and the loss in jobs will burst Greenspan's bubbles that he "doesn't see" and Americans will lose both shirt and home.