Greenspan Predicts Housing Bottom, Reiterates View On American Economy
Thursday, September 11th, 2008
In a September 9th interview with CNBC’s Maria Bartiromo former Chairman of the Federal Reserve, Alan Greenspan, reiterated early comments stating that there is a greater than fifty percent chance that the economy tips into a recession. However, Greenspan says he is thus far surprised at the resiliency of the economy in the face of the historic credit problems sweeping across the financial markets.
Greenspan blames home price decline on collapsing credit markets
Greenspan blames the collapsing housing market for the problems in the financial sector saying that it is the equity in a home that ultimately determines the underlying value of mortgage backed securities. He goes on to say that it will continue to be difficult to assess the value of outstanding MBS until home prices, and thus the equity, begin to stabilize and increase. When home prices finally do stabilize, Greenspan predicts that financial markets should begin to heal.
Former Federal Reserve Chairman predicts housing bottom
In the same interview, Alan Greenspan predicts that home prices should stabilize “later this year and early next year”. As far as I can recall, this is the first time Greenspan has publicly predicted when a bottom in housing may occur. Perhaps interesting is Greenspan’s words in the beginning of the year; while the storm clouds were on the cusp of casting a pall over the financial markets and economy Greenspan predicted that the economy would not grow until home prices stabilize. Now he is saying that the credit markets won’t ease until home prices find a bottom.
