RISMEDIA, May 23 -- (KRT) -- The nation's housing market contains "a lot of local bubbles" with "unsustainable" price gains, but significant price declines are unlikely, Federal Reserve Chairman Alan Greenspan said Friday.
Even if housing prices do fall, the drop won't hit most homeowners hard because of the huge amount of equity already in their homes, Greenspan told more than 1,000 onlookers at a meeting of the New York Economic Club.
"There are a number of things which I think suggest, at minimum, that there's a little froth in this market," Greenspan said, to laughs from those thinking that might be an understatement.
The Fed chairman argued that while there isn't a national housing bubble, many regional high-priced pockets exist.
"It's pretty clear that it's an unsustainable, underlying pattern," he said.
In the metropolitan area, including Nassau, Suffolk and Queens counties, prices rose 16 percent in April, compared with April 2004, according to the Long Island Board of Realtors. The median closing price regionwide is $415,000.
Greenspan pointed to second home sales that are, in part, fueling "accelerated speculation." Sellers, he noted, don't have the same "inhibitions" about second homes, because they don't have to move and therefore they buy something else at the higher price levels.
Interest-only mortgages and hybrid adjustable-rate loans also are driving the market, Greenspan said.
"People are reaching to be able to pay the prices to move into a home," he said.
Prices will, Greenspan predicted, "soon simmer down." But he also said there's "a very considerable unlikelihood" of a significant decline in home prices. Any decline that does occur may only hurt those who buy right before it happens, avoiding the large numbers of bankruptcies others have predicted.
Greenspan's comments on the housing market came during Friday's question-and-answer session, after a speech focused on world energy prices that suggested energy demand and usage would likely decline if prices keep rising. |
