Greenspan: US home prices may stabilise this year

Former US Federal Reserve Chairman Alan Greenspan said the drop in American 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 be close to having eliminated most of this home inventory,” Mr Greenspan said yesterday. “But it is very likely that home prices will stabilise well before that.”

Mr Greenspan said the health of the United States housing market is tied to broader financial markets that rely on bundling mortgages to sell as securities.

His successor, Mr Ben Bernanke, and other Fed officials highlighted declining home prices as a major economic risk that may hurt household wealth and consumer spending.

“Once the markets start to stabilise, especially if the real economies don’t go into a severe recession we can expect a recovery to begin to take place,” Mr Greenspan, 82, said.

Mr Greenspan described the current credit crisis as the worst in at least 50 years, adding that the extent of damage stemming from the collapse of the sub-prime market would not be known for months.

“Have we reached a point where prices are stable? We cannot know that for a couple of months,” he 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.”

Source : Today – 9 Apr 2008

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