Greenspan’s Housing Bottom: Agree or Disagree?

Last night, we looked at yet another Greenspan housing bottom call.

This morning, the WSJ forum asked the following question:

Do you agree with Alan Greenspan’s forecast for house prices to stabilize in the first half of 2009?

Here are the results: About 42% that think the Housing rout is coming to an end soon, versus 58% that believe it has further to go.





32% agree with Greenspan, 10% are more bullish on Housing than Easy Al, and 58% think Housing has longer to go. 


Print Friendly, PDF & Email

What's been said:

Discussions found on the web:
  1. Wisdom-seeker commented on Aug 14

    Nominal prices have a ghost of a chance of stabilizing as inventory starts to clear in the bubble zones, but real prices will fall for several more years.

  2. Bruce in Tennessee commented on Aug 14

    Well, two things about this morning’s pre-market numbers…and a housing bottom…

    The unemployment numbers are starting to look nasty…revised up another 5000 to 460,000 last time and 450,000..our recession is in full bloom…

    Second, maybe we are in a deflation, maybe, but this inflation is going to kill us by the time it takes to get there…

    Housing bottom with numbers like these? Nope.

    Bruce in Tennessee

  3. ReturnFreeRisk commented on Aug 14

    The quote that I read is more ambiguous:

    “Home prices in the U.S. are likely to start to stabilize, or touch bottom, sometime in the first half of 2009, though prices could continue to drift lower through 2009 and beyond.”

    Or could drift lower – I am betting on that. Once the builders are through their inventory (that will take a while to work through) and foreclosures are off the market (more ifs), the market will drift. Depends on a lot of political factors – like are they going to ban banks from foreclosing (happening everywhere).

  4. Danny commented on Aug 14

    If the economy itself weren’t spiraling out of control, then yes, a first half ’09 recovery might be possible, if unlikely.

    However, with real income coming down, rising unemployment actually accelerating, this will exacerbate the decline in housing, beyond what people are expecting.

    The hilarious part is people are cheering a stronger dollar. So our exports are propping the economy up, but now there is a global downturn, decreasing demand for our exports, at the same time the dollar is strengthening? That sounds like a nasty brew for the US economy.

  5. Donkei commented on Aug 14

    What, exactly, is a “housing bottom”? Is it when prices stabilize, i.e., quit falling? But if they quit falling, does that mean they’ll start rising? Or, will they bump along the bottom for an extended period, and then go up or down from there?

    Alternatively, does it mean that transaction volume has increased? That couldn’t be it, though, if a goodly portion of the volume is liquidation due to foreclosure, could it?

    Greenspan likes people to think he is an oracle about the Big Picture. But I prefer this blog’s Big Picture oracle anyday.

    Housing prices will stabilize when all of the inflation-induced oversupply is wrung out of the system, which won’t happen until the government reverses its housing nationalization program and allows prices to find a bottom in a free market for housing. Until then, any “bottom” is a government-induced illusion.

    It’s ironic that Greenspan is considered a free-market proponent, when it was his control of the government’s monopoly on the creation of money that initiated and promulgated this mess. Nick Greenspan.

  6. popo commented on Aug 14

    So, the architect of our current problems — a man who evidently did not understand the practice of banking in modern times, and who failed to see the danger until it was at his door — is now calling a bottom.

    Thousands of economists, bloggers and journalists saw the danger years before this man. He should be hanging his head in shame and saying nothing other than, “I have no right to comment on this issue because I was the last to understand it. … And I helped create it.”

    Alan needs to be put out to pasture.

    And the media needs to stop quoting him as if he is deserving of some sort of “expert” status.

  7. Mel commented on Aug 14

    Either wages go up, or home prices go down until they are “affordable.” If McCain wins, wages will have an enemy. Democratic control will probably encourage unions to grow some spine, and maybe regain some power. Hopefully Bernanke resigns on January 20, giving the new president some control over this mess.

  8. Jeff commented on Aug 14

    The WSJ continuing its slow decline to mediocrity (or worse) with Greenie’s article on the front page today…….

  9. Clay commented on Aug 14

    Housing stabilize in the 1st half of 2009?

    Doubtful with unemp. rising, inflation up, and more constriction of the credit lending faucet on the way due to another estimated $.5(IMF estimate) to $1.5 trillion(Roubini estimate) in losses and writedowns. Also, as Americans see their assets deflating(real estate, stocks, MF’s, other) it will be a natural gut reaction to tighten the belt, spend less, and take fewer risks. And U.S. consumers are dragging a lot of debt behind them.

    Housing bottom? Who knows? 2010…maybe?

  10. leftback commented on Aug 14

    32% of WSJ readers are tools….??

  11. CaptiousNut commented on Aug 14

    House prices need to rise roughly 4% per year, for 30 years to justify borrowing at 6% to buy them.

    A flat housing market is a killer. Don’t forget the transaction costs of selling and moving either.

  12. john haskell commented on Aug 14

    Greenspan said that house prices will bottom in 2009, unless they don’t. AGREE.

  13. ECONOMISTA NON GRATA commented on Aug 14

    The “(10%) No, prices will stabilize sooner”, are all employees of the NAR….

    Best regards,


  14. Bill Rice commented on Aug 14

    I am going with the “drift lower through 2009 and beyond.” Bottoms always seem to drift beyond rational behavior–just like tops.

    I do, however, agree with this statement:

    “A necessary condition for an end to the current global financial crisis is the stabilization of the price of homes in the U.S. Stable home prices will clarify the level of equity in homes, the ultimate collateral support for much of the financial world’s mortgage-backed securities. We won’t really know the market value of the asset side of the banking system’s balance sheet — and hence banks’ capital — until then.”

    I think this is a very important issue to focus on. Without an understanding of loss severity in these REO portfolios and generally impaired assets we are in for a volatile ride to the bottom.

    Continue to short banks.

  15. whatistruth commented on Aug 14

    The US economy, and the system that runs it in its current form, is like The Matrix.

    Take the red pill. Ignore AG and his ilk. They are from the Ministry of “Truth”. This is all Newspeak. And we all believe the current CPI + GDP (deflator is accurate) numbers as well… ( 1984. Are we there yet? (rhetorical question). Bread and circuses until after Nov. elections…

    Morpheus to Neo:
    “Remember, all I’m offering is the truth. Nothing more.”

    Along that same vein:

    “Then you will know the truth, and the truth will set you free.” – Jon 8:32

  16. Eric commented on Aug 14

    I appreciate how BR continues to go back over the statements that people like Alan Greenspan, Ben Stein, John Thain and Henry Paulson have made on the record over the years to pierce their veil of credibility and insight. Clearly, when we’re talking about people who have influence over the minds of investors, it is a worthwhile endeavor — not a waste of precious time on this planet. : )

  17. Jim D commented on Aug 14

    The question itself is nonsense. The real question isn’t “when?”, instead, the real question is “how much?”. As in, how much will they fall?

    50%, real, from peak would seem likely. More if we start to have deflation in the general economy. Far less in nominal terms if the Fed is successful in preventing deflation by adding inflationary pressures. Why 50%? That allows for a bit of overshoot as prices come back down to match their historic relationship to other prices, as well as incomes.

    If that happens by early 2009, we’re in for a world of hurt. Heck, if it takes 3 more years, it’ll still stink, but at least it probably won’t break the banking system in a permanent manner.

    Think 50% can’t happen? Let me run some names by you where it’ll be worse: Sacramento, California’s Inland Empire district, Pheonix, Tampa, Miami, Las Vegas. Los Angeles, San Francisco, San Jose, Seattle, New York will probably see prices fall by about that much. Atlanta and Austin look to fall by nearly that much as well.

    And that’s just the places I follow.

    Gonna be grim – short homebuilders and banks. You won’t lose if you hold for a year, barring a currency collapse.

  18. winslow commented on Aug 14

    Greenspan usually has blinders on. Any prediction is a guess. If unemployment continues to get worse, the outcome may be very dire. If unemployment can stabalize, then sometime in 2009 housing will begin to level off.

  19. Jim D commented on Aug 14

    “If unemployment can stabalize, then sometime in 2009 housing will begin to level off.”

    How will that work, exactly? Because the housing fairy will leave one under every pillow? Even if unemployment is flat, there’s little reason to expect that that will cause people to buy houses at the previous bubble rate. And we’re already got about 12 months of inventory. Essentially, for housing prices to stabilize, you’ve got to work off the inventory to below 6 months. How do you get there from here in just one year? Especially since forclosures are *still* rising right now, as we speak?

    Please, when giving an answer like this, show your work.

  20. dan k commented on Aug 14

    32% … isn’t that about the same number of people who claim they’ve been abducted by aliens? (no, not illegal immigrants – Martians!!!)

  21. AGG commented on Aug 14

    The median price tumbled to $206,500 from $223,500 a year earlier, the Chicago-based National Association of Realtors said today.
    We’re getting there. May I repeat that the main pressure to lower housing prices is from wages. The formula is: Median annual wages times 2.5 equals median housing prices. If the median wages right now are $60,000 a year, then the bottom is at a median housing price of $150,000.
    I bon’t know what the median wage is right now. I do know the liquidity that ballooned housing prices is gone so we will get real now.
    And while we’re at it, let’s get real about what you think you have; The nominal amount of money you have means very little when inflation eats it up like moths do the clothes in a closet. Most people reading this are really about 30% poorer than they believe they are. Anchoring doesn’t just occur with stubborn people that want to sell their house at an unmarketable price. Remember that money really does make stupid people think they are smart.

  22. Scott in Chicago commented on Aug 14

    Apparently Greenspan has adopted the Friedman unit (Tom not Milton), meaning that no matter when you ask “things will improve in six months.” Greenie seems to be on an “I did too do everything right” tour, hoping to rebuild his Maestro image before, alas, he goes the way of all flesh. Greenie fed from the Friedman (Milton this time) teet for so long that he is unable to wipe away the sticky residue.

  23. Scott in Chicago commented on Aug 14

    Speaking of tools: I guess maybe I am one. To answer the actual question, no I don’t think the housing bottom will be reached in Q1 or Q2 of ’09; a double no in real dollar terms. There are so many debt pitfalls and pratfalls to unwind that I’m thinking years not months..
    Someone said Greenspan often has blinders on. Is that Alan Blinders by any chance? Yeah, I know..bad pun

  24. BlackSwan2008 commented on Aug 14

    If the vulture and sovereign funds start buying blocks of homes in the next 6 months, then yes we will have a bottom in 2009.

  25. Sarah commented on Aug 29

    Home prices are still not in line with income. Doesn’t anyone get that? People can’t afford these homes.

  26. Sarah commented on Aug 29

    Home prices are still not in line with income. Doesn’t anyone get that? People can’t afford these homes.

  27. Sarah commented on Aug 29

    Home prices are still not in line with income. Doesn’t anyone get that? People can’t afford these homes.

  28. Sarah commented on Aug 29

    Home prices are still not in line with income. Doesn’t anyone get that? People can’t afford these homes.

Posted Under