U.S. house prices to fall further, says Greenspan
LONDON – House prices in the United States will continue to decline as new sales are still barely denting the supply overhang, former Federal Reserve Chairman Alan Greenspan said today.
Greenspan said there were signs the lending crisis gripping global financial markets was possibly coming to end as demand for more risky assets grows but warned the speculative fever must be allowed to run its course to enable a full recovery.
“As in similar situations of inventory excess, I would expect home price declines to continue until the rate of inventory liquidation reaches its peak,” Greenspan told an audience at Reuters in London.
“There is little relevant American history to guide us in judging the ultimate extent of home price decline or the timing of a new price recovery, or by extension, the economic impact on the rest of our trading partners.
“All that I conclude is that the process of inventory adjustment has just started and we have a long way to go before residential housing and mortgage markets stabilize in the U.S.”
Greenspan said consumer spending and economic growth in the world’s biggest economy were also likely to remain under pressure given lower household wealth resulting from housing market weakness.