Greenspan Says U.S. Home Prices May Stabilize Later This Year
By Scott Lanman and Lily Nonomiya
April 8 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said
the drop in U.S. home prices will probably end ``well before'' early next year
as the number of houses on the market diminishes, aiding an economic rebound.
``It will not be until early 2009 that we will get close to having eliminated
most of this'' home inventory, Greenspan told a conference in Tokyo today
sponsored by Deutsche Bank AG and co-hosted by Bloomberg LP. ``But it is very
likely that home prices will stabilize well before that.''
The health of the U.S. housing market is tied to broader financial markets
that rely on bundling mortgages to sell as securities, Greenspan said. His
successor, Fed Chairman Ben S. Bernanke, and other Fed officials have
highlighted declining home prices as a major economic risk that may further
hurt household wealth and consumer spending.
``Once the markets start to stabilize, especially if the real economies don't
go into a severe recession,'' then ``we can expect a recovery to begin to take
place,'' Greenspan, 82, said via satellite from Washington. ``It will be slow,
it will be hesitant.''
He said the extent of damage stemming from the collapse of the
subprime-mortgage market won't be known for months.
``Have we reached a point where prices are stable? We cannot know that for a
couple of months,'' Greenspan said. ``It looks as though we're going to get a
very large rate of liquidation, but not until the second half of this year.''
Inflation Contained
The yield on the 10-year Treasury note fell 2 basis points to 3.52 percent as
of 11:25 a.m. in Tokyo, according to bond broker Cantor Fitzgerald LP.
Greenspan said inflation will be contained during the current slowdown before
picking up as the world economy recovers.
``It's difficult to imagine any major breakout of inflation as economic slack
continues to increase,'' he said. ``What we will see is gradually rising
inflationary pressures that will probably be subdued during the current period
of slack, but that will surely reemerge when economies pick up.''
Greenspan spoke via satellite from Bloomberg Television's studio in
Washington, answering questions from Peter Hooper, chief economist at the
securities unit of Deutsche Bank, which hired Greenspan as a consultant in
August.
Greenspan, who retired in 2006 after 18 years as the U.S. central-bank chief,
has come under increasing criticism for his policies as last year's
subprime-loan meltdown spread into a broader financial crisis. One recent book,
``Greenspan's Bubbles'' by money manager William Fleckenstein, argues the
former Fed chief helped inflate stock and home prices.
Left to Bernanke
In response to the bursting of the Internet and technology bubble and the
Sept. 11 terrorist attacks, Greenspan lowered the Fed's key rate in 2001 from
6.5 percent to 1.75 percent, then reduced it further in 2003 to 1 percent, a
45-year low.
He left the rate there for a year before starting to raise borrowing costs in
quarter-point increments, leaving it Bernanke to decide when to stop. Some Fed
critics, such as Bear Stearns Cos. economist John Ryding, say rates were too
low for too long, encouraging the easy credit that helped inflate a housing
bubble and has now returned to burn investors.
Greenspan, who published his memoir ``The Age of Turbulence'' in September,
has taken to defending his legacy in newspaper opinion articles.
Yesterday, in a Financial Times piece headlined ``The Fed is blameless on the
property bubble,'' Greenspan wrote that the evidence is ``very fragile'' that
Fed interest-rate policy added to the U.S. bubble and that ``it is not credible
that regulators would have been able to prevent the subprime debacle.''
Worst Credit Crisis
Greenspan said today that ``the current credit crisis is the most wrenching
in the last half century and possibly more.''
Such remarks echo the assessments of economists including those at the
International Monetary Fund, and may add to pressure on policy makers to
strengthen their response to the credit crunch. Fed officials last week
acknowledged that capital markets remain distressed even after the fastest
interest-rate cuts in two decades, and may be rethinking their aversion to
acting against asset-price bubbles.
After last month's near-collapse of Bear Stearns, Minneapolis Fed Bank
President Gary Stern -- the longest-serving policy maker -- said on March 27
that it's possible ``to build support'' for practices ``designed to prevent
excesses.''
Greenspan, in yesterday's FT piece, reiterated his doubts about taking a more
active role in leaning against asset bubbles.
At least 14 banks and securities firms have sought cash from outside
investors in the past year after more than $230 billion of global markdowns and
losses caused by the collapse of the U.S. subprime mortgage market, Bloomberg
data show.
Bernanke, 54, told Congress last week that the U.S. economy may contract in
the first half of 2008 and for the first time acknowledged the chance of a
recession.
Later today, the Fed releases minutes of its March 18 interest-rate decision
and any other conference calls in February and the first half of March. The
Federal Open Market Committee that day lowered its benchmark rate by 0.75
percentage point to 2.25 percent, capping 3 points of cuts since September.
To contact the reporters on this story: Scott Lanman in Washington at [EMAIL
PROTECTED]; Lily Nonomiya in Tokyo at [EMAIL PROTECTED]
IDX Analyst <[EMAIL PROTECTED]> wrote: Beli sekarang.. mumpung lagi
discount.. kira2 perkiraan tahun 2008 berapa incomenya kalau harga gas naik
10-20%?
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