Market News
Former Federal Reserve chairman Alan Greenspan offered a bit of optimism about the housing market in an interview this week with David Wessel of the Wall Street Journal.
Greenspan said that he expects housing prices to begin to stabilize in the first half of 2009 although they could continue to drift lower for quite some time thereafter, even after essentially reaching bottom.
An end to the decline in house prices matters not only to American homeowners but, he said, is "a necessary condition for an end to the current global financial crisis."
"Stable home prices will clarify the level of equity in homes, the ultimate collateral support for much of the financial world's mortgage-backed securities. We won't really know the market value of the asset side of the banking system's balance sheet -- and hence banks' capital -- until then."
The former Chairman, a rapt student of the housing sector, bases his prediction on the supply of vacant, single-family homes for sale - both new homes and existing ones owned by investors and foreclosing lenders - and a comparison of the current prices of houses with the government's estimate of when it is cheaper to own than to rent.
