Greenspan’s tips for fixing the housing market
Alan Greenspan has definitely been keeping busy since retiring from the Federal Reserve; apparently he’s been strategizing ways to solve the housing crisis, among other things.
In the Capital column in today’s Wall Street Journal, he shares his thoughts on the real estate market and the housing bailout bill recently signed by President Bush. The column, written by economics editor David Wessel, seems likely to have some people talking, or muttering to themselves.
First, Greenspan, who left the Fed chairman’s post in 2006, after helping push interest rates to the lowest levels in years, says he expects housing prices to bottom out in the first half of 2009. But, he cautioned, prices could continue to drift lower for a little longer.
Then he questions the wisdom of the bailout bill, saying he thinks that instead of bolstering Fannie Mae and Freddie Mac, lawmakers should have broken the companies up. Both federally backed and publicly traded companies -- which buy mortgages from lenders to keep loan money available for buyers -- should have been nationalized, he told Wessel.
Wessel saves the most intriguing and possibly controversial suggestion for last.
Greenspan said one possible means of kick-starting home sales may be expanding the quota of skilled immigrants allowed into the country. Though he acknowledges this may not be a politically popular suggestion, Greenspan argues bringing well-paid, skilled workers to the country would generate additional demand for homes and help get some homes off the market.
Obviously this is just a summary of a more in-depth WSJ column, but I think I’ve hit the highlights. So, what are your thoughts on Greenspan’s comments?
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Greenspan is the reason we are in this mess in the first place. Maybe we should all stop listening to him. House prices were artificially inflated due to low interest rates and the irrational thought that house prices would keep rising. House prices and wages are out of wack. The US just had the biggest housing boom the world has ever seen. The party is over and the hang over is going to last for years. The market is not going to come back in a year or even 10 years. People in this country need to wake up and start thinking for themselves. Our government is not going to be able to bail us out of this one.
I can't think who would want housing advice from a man who dismissed the housing bubble and told Americans to get ARMs when 30-year rates were at their lowest, with nowhere to go but up.
That said, he's right that the GSE's shareholders should have been wiped out. Lending them money puts taxpayers at risk when their toxic waste goes south. And the entire federal budget isn't big enough to fully bail out Freddie and Fannie.
However, his predictions of an end to declines are just as bad as all his previous projections. We are now glimpsing the huge scope of shadow inventory, houses at some stage of pre- or post-foreclosure that the banks have yet to put on the market. And the upcoming implosion of Alt-A mortgages will finally bring significant numbers of distress sales to tony "immune" towns like Newton and Wellesley.
At the end of the day, Greenspan is just jawboning to rescue his reputation. And it's way too late for that.
That's funny. Back at the end of July Greenspan said falling U.S. home prices are ``nowhere near the bottom'' . Now he says the recovery is less than a year away. Well, what do you expect from the man who was at the helm of the FED during one of the most fiscally irresponsible times in monetary history; a time when the largest US credit bubble and real estate bubble were created. Guess it's tough to break the FED speak habit of talking out of both sides of your mouth.
Northing wrong with admiting more immigrants into the country, but do we really expect them to buy houses right away? I would think this is reasonable as a long term fix, but dont expect this to have an effect in the near term.
Greenspan, like the rest of the bloodsuckers on Wall St., really has no clue when home prices will stop falling. It's all just wishful thinking from greedy corporate leeches who are making millions off the backs of average working stiffs.
He is saying that the current inventory of houses, and those that will come on the market in the next year, will not be purchased by those who already own homes since they can't sell the homes that they currently own. The glut will not diminish until the pool of first time buyers expands, and some will come from the pool of those who relocate to the USA from other countries. The inventory is huge. Will they, and other first time buyers, want to or be able to live in the geographic locations where the glut of foreclosed and unsold homes exists?
JK said - "The US just had the biggest housing boom the world has ever seen. "
That is not entirely incorrect. Japan in the early 1990s had an RE boom so big that 100-year interest-only loans were the norm. Similar madness in Spain and England recently.
Although the US bubble was big, compared to other's in the world, is was actually pretty tame. And in the US, the worst was really contained to the Sunbelt and Florida.
Although the US bubble was big, compared to other's in the world, is was actually pretty tame. And in the US, the worst was really contained to the Sunbelt and Florida.
No. Of course not. The recent bubble was the largest in recorded history, and affected most of the largest US markets.
You may wish to review the Case-Shiller indices. And Mr. Talbot's useful book, Sell Now.
This blogger might want to review your comment before posting it.
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