Alan Greenspan, interviewed by the FT ahead of the release of his new book, said that he expects housing prices to drop sharply from "current levels." There is still some hope in the market, perhaps misplaced, that the sharp fall in homes values will be largely restricted to the subprime market.
Greenspan's comments are unlikely to help shares of beaten down homebuilders such as Lennar (NYSE: LEN). The FT writes that Mr Greenspan said he would expect "as a minimum, large single-digit" percentage declines in US house prices from peak to trough and added that he would not be surprised if the fall was "in double digits".
If Greenspan is right, and he often is, the fall-out in home devaluations would likely be fairly deep and lead to a long recession. A very sharp drop in home values, coupled with rising consumer credit card debt, and high oil prices would likely be a set of straws that would break the back of US consumers.
Greenspan's opinion has not been echoed by current members of the Fed. Perhaps they are hoping against hope that a rate cute will save the US economy from negative growth.
But, as each day passes, Greenspan's view look more likely to be true.
Douglas A. McIntyre is a partner at 24/7 Wall St.com.
Closing Bell: Economic Catapult for Thanksgiving & Black Friday (WMT, TGT, GRMN, GOOG, MSFT)
Deere up on Q4 earnings performance
Reid Hoffman: LinkedIn will go public (at some point)
Reader Comments (Page 1 of 1)
9-17-2007 @ 11:18AM
beanspants said...
A minimum of a "large single digit" percentage decline, hmmm? so 9.9% at minimum?
That's actually not bad at all, considering CA, FL, WA and NY house prices rose something like 20% per year from like 2002-2005, and 9% last year. They'd have to drop something like 30% to be back in line with the national average.
I don't see that happening.
9-17-2007 @ 2:43PM
FELIX SOTO said...
DRIVE THRU ANY NEIGHBORHOOD AND SEE FOR SALE SIGNS SPROUTING LIKE DAISIES IN SPRING.PEOPLE ARE TO HOPING TO BAIL OUT AND KEEP THEIR CREDIT.THEN THEY BUNK WITH FRIENDS OR MAMA.
9-24-2007 @ 4:17PM
Janet said...
Stop this gloom and doom that is hovering over the housing market. We have had tough times before and pulled our way back. It is about time that people realize that there must be guide lines for what they can buy... Who said every young executive has to have a $800,000 home when he can only afford a $500,000 home? Time to wake up people, live within your means, your parents did!