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REAL ESTATE Greenspan: House prices to drop much lower

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Russ H

Gold Contributor
Read Millionaire Fastlane
Speedway Pass
Jul 25, 2007
Napa Valley, CA
Fri Sep 21, 3:25 AM ET

VIENNA (Reuters) - A big overhang of property will bring U.S. house prices down further, but it is too early to say if the economy will plunge into recession, former Federal Reserve chief Alan Greenspan was quoted as saying on Friday.

Greenspan said in an interview with Austrian magazine Format that low interest rates in the past 15 years were to blame for the house price bubble, but that central banks were powerless when they tried to bring it under control.

"It's a difficult situation, there is an enormous overhang on the real estate market," Greenspan was quoted as saying. "Many buildings which just have been finished can't be sold ..."

"So far, prices have dropped only slightly. But it was enough to cause alarm around the world," he said. "Prices are going to fall much lower yet."

"However, it is too early to answer the question about a recession. We simply don't know yet. It depends on how flexibly the economy can react," he said.

Greenspan said deregulation and the introduction of market economies in the former Communist bloc after the Berlin Wall fell in 1989 had caused a global boom and a worldwide reduction of interest rates, which both helped fuel the property bubble.

"There is no doubt about the fact that low interest rates for long-term government bonds have caused the real estate bubble in the United States," he said.

"The Federal Reserve began a series of interest rate increases in 2004. We were hoping to bring the speculative excesses in the real estate sector under control. We failed. We tried it again in 2005. Failure," he said.

"Nobody could do anything about it, neither us nor the European Central Bank. We were powerless," he said.


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Oct 4, 2007
I think homes in certain area such as SF had reached its peak. Its almost the computer industry where it reached its top and collapse then never regained back. I remember when they first came out with the pcjrs for like $5000 dollars and kept going with new processor such as the pentium every other month or so. Others wasnt even out fully yet and another one comes out. I think it might not even come back for a long time as the wages people make is not enough at all to afford the homes anymore. You have to have 2 jobs making at least $70k+ to $100k total to make it nowadays and to have a decent living home and area. I'm making great money but cant even afford my current home now.
What are they gonna do? Offer the new 50 year loan available? Im 34 now and another 50 i would be 84! I dont even know if i'll make it that far with all this sickness such as cancer etc... Is it because where so surrounded by radiation satellites, cellphones, computers, microwave, technology waves, food we eat? Never had this problem much as now?

I also think theres a lot of investors that panicked and didnt helped the market when they started dumping thier properties out. Some good investors actually saw an opportunity while others saw it negatively. Lots of builders also made this market like the way it is specially in my surrounding area of SF. Some builders actually got stuck with thier current homes still not done.

I think it wont go back until the wages changes also bigtime. Home prices, economy, retail items just surpassed the wages way too high than what it used to be.

Sorry not too good in writing my thoughts. Hope you guys understand. :)

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