Wednesday, July 20, 2005

Greenspan: 'regional markets with speculative fervor'

Greenspan has finally fully conceded that there is a bubble market in certain housing markets. Here are some key comments he made in today's testimony:

"Whether home prices on average for the nation as a whole are overvalued relative to underlying determinants is difficult to ascertain. Among other indicators, the significant rise in purchases of homes for investment since 2001 seems to have charged some regional markets with speculative fervor.

We certainly cannot rule out declines in home prices, especially in some local markets. If declines were to occur, they likely would be accompanied by some economic stress, though the macroeconomic implications need not be substantial."

Greenspan's comments are certainly disappointing news to the housing bulls. The bubble is now on its last legs.


  1. If I/O loans are a symptom of people stretching to reach impossible housing prices or hoping for an equity miracle to bail them out when their mortgage rate adjusts, then the bubble is taking in quite a bit of territory this year.