Housing Prices Will Continue to Fall - Greenspan

Housing prices in the United States will continue to drop, as new home sales are barely even making a dent in overgrown inventories, former Federal Reserve Chairman Alan Greenspan said Monday. Greenspan conceded a global liquidity crisis may be showing signs of healing, but warned the speculative fever that drove the housing bubble must be allowed to run its course before a full recovery would be imminent. "As in similar situations of inventory excess, I would expect home price declines to continue until the rate of inventory liquidation reaches its peak," Greenspan said at Reuters, London. "There is little relevant American history to guide us in judging the ultimate extent of home price decline or the timing of a new price recovery... All that I conclude is that the process of inventory adjustment has just started, and we have a long way to go before residential housing and mortgage markets stabilize in the U.S." U.S. consumer spending would likely remain weak due to reduced household wealth, Greenspan said.

Sources: Reuters
Commentary: Alan Greenspan Talks Housing • Greenspan Admits the Fed Has No Idea What It's Doing
Stocks/ETFs to watch: XHB, DIA, XLY

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Comments

[censeo]

Alan "Rand" Greenspan has, of course never made a mistake and he is doing a lot of quick reactive damage control for his wrong calls while he led the Fed.
In this case he is dead on as to the global scope and components likely to stifle liquidity. He is wrong about his solution/prognosis. The subprime fiasco is simply the initial inkling into the vast changes in global financial structure. Far more significant systemic weaknesses will be exposed that will demonstrate elaborated RE derivatives as only one--and perhaps not the biggest--sub rosa construct to come out of those too clever Wall Streeters' heads.
If it sounds too good to be true; It probably isn't.