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9/22/2017 12:11:25 AM
Posted: 8/27/2005 10:42:08 AM EDT
business.timesonline.co.uk/article/0,,16849-1752866,00.html

US heading for house price crash, Greenspan tells buyers

By Graham Searjeant, Financial Editor

WALL STREET shuddered yesterday after Alan Greenspan, the United States’ central banker, warned American homebuyers that they risk a crash if they continue to drive property prices higher.

He said that the US house-price spiral had become an economic imbalance, threatening stability like the country’s trade gap or its budget deficit.

In a pre-retirement speech to fellow central bankers at Jackson Hole, Wyoming, Mr Greenspan said that people were investing in houses as if they were a one-way bet, not allowing for the risk of price falls. He said “history had not dealt kindly” with investors who kept ignoring risks.

The Federal Reserve Chairman’s warning, his strongest yet, sent share prices falling on Wall Street, at one point knocking 66 points off the Dow Jones industrial average. By the close the Dow had recovered to 10,397.30, down 53.30 points.

Traders said that Mr Greenspan’s comments were reminiscent of his 1996 inveighing against “irrational exuberance” on the stock market, for fear that a crash there would hit consumers and push the economy into recession. When the share price bubble finally burst, Mr Greenspan cut Federal interest rates to 1 per cent, triggering the flood of cheap loans for housing. He fears that rate increases set in train as the economy recovered could throw the housing market into reverse and suggested that the twin deficits would now restrict his room to manoeuvre if a house price downturn hit spending. Asset prices were, he complained, driving monetary policy more than ever before.

Share traders were also worried by an unexpectedly sharp fall in the University of Michigan consumer confidence index, a small but influential barometer, which fell for the first time in three months. The expectations index slid from 88.5 to 76.9.

Rob Carnell, of ING Bank in London, said that Mr Greenspan’s warning was an eerie reminder of a successful campaign last summer by Mervyn King, Governor of the Bank of England, to “use rhetoric rather than interest rates” to cool an overheating homes market. Britain has avoided a crash thus far.

On traditional tests, about a third of US local homes markets are now markedly overpriced. Over the past five years, the average US house price has risen by 50 per cent, half the rate of increase in UK prices in the five years to summer 2004. However, prices have risen more sharply in favoured areas, such as New York, and more than doubled in a few cities, such as San Diego.
Link Posted: 8/27/2005 10:48:57 AM EDT
Soooo... what you're saying is that I should sell my house right before the crash and buy after?
Link Posted: 8/27/2005 10:49:58 AM EDT

Originally Posted By napalm:
Soooo... what you're saying is that I should sell my house right before the crash and buy after?



LOL!!!
Link Posted: 8/27/2005 10:52:29 AM EDT
For my own selfish reasons, I hope this is true. I want to buy a house in 1 to maybe 1.5 years. If it became a buyer's market, it would be very advantageous for me.

Link Posted: 8/27/2005 10:53:53 AM EDT

Originally Posted By Justa_TXguy:
For my own selfish reasons, I hope this is true. I want to buy a house in 1 to maybe 1.5 years. If it became a buyer's market, it would be very advantageous for me.




I was think the same thing.
Link Posted: 8/27/2005 11:01:32 AM EDT

Originally Posted By 2A373:

Originally Posted By Justa_TXguy:
For my own selfish reasons, I hope this is true. I want to buy a house in 1 to maybe 1.5 years. If it became a buyer's market, it would be very advantageous for me.




I was think the same thing.



Same here.
Link Posted: 8/27/2005 11:15:04 AM EDT
You can expect prices to flatten over the next year or two but to expect them to fall is a bit of a stretch.
Link Posted: 8/27/2005 11:20:00 AM EDT
He's been saying this since 1999. Hell, when there was a bona fide bubble in stock prices, Greenspan was more concerned about housing prices.
Link Posted: 8/27/2005 11:24:07 AM EDT
Link Posted: 8/27/2005 11:27:46 AM EDT

Originally Posted By Airwolf:
US heading for house price crash, Greenspan tells buyers

Yeeeehaaaww! Cheap houses!
Link Posted: 8/27/2005 11:30:14 AM EDT
Bah, Greenspan is a hack.
Stop jacking with interest rates and lower taxes, increase minumum wage to kepp up with inflation, pay off the skyrocketing deficit. He's just spinning "reaganomics" another way. We already know it doesn't work.

Look at the 1950s, low taxes, high wages, low national debt. The average citizen was much more prosperous. In Greenspan's world, the middle class exists only to fund the antics of the very wealthy.

Has nothing to do with Republican or Democrat policies, it has to do with sound economic policy, or lack of it. We are headed for a big fall, any way you look at it. By "we" I mean the middle class. You and me.
Link Posted: 8/27/2005 11:34:57 AM EDT
I don't see prices dropping here in Charleston. At least two of the communities here have been rationing builders permits. It has made the high prices even higher. At closing my house appraised at $50,000 more than I paid. Fricking nuts.

Link Posted: 8/27/2005 11:38:19 AM EDT
Good to hear, fricikin Bastards building all over here and the Scum that will buy it....I hope they lose there arse
Link Posted: 8/27/2005 11:39:52 AM EDT

Originally Posted By _DR:

Look at the 1950s, low taxes, high wages, low national debt. The average citizen was much more prosperous.



NOT EVEN. Taxes were insane, especially if you were in the top bracket. 90% top rate. Things weren't bad in the 1950's but it was hardly a utopia, economics-wise.

I'm also fairly certain that real incomes and net worths are much higher today than they were in the worst year of the 50's. The country's much richer in real terms than it was just 25 years ago. Only stands to reason it's better off than it was 45-50 years ago.
Link Posted: 8/27/2005 11:52:04 AM EDT
[Last Edit: 8/27/2005 11:56:53 AM EDT by _DR]

Originally Posted By raven:

Originally Posted By _DR:

Look at the 1950s, low taxes, high wages, low national debt. The average citizen was much more prosperous.



NOT EVEN. Taxes were insane, especially if you were in the top bracket. 90% top rate. Things weren't bad in the 1950's but it was hardly a utopia, economics-wise.

I'm also fairly certain that real incomes and net worths are much higher today than they were in the worst year of the 50's. The country's much richer in real terms than it was just 25 years ago. Only stands to reason it's better off than it was 45-50 years ago.



Saying the countryis richer now may or may not be true depending on what economic class you are in.
I'm in the upper third of the middle class and doing well, but many are struggling.

comparative value of minimum wage:
You can see that those earning minimum wage are actually making far less income relative to the real costs of living than they were in the 1950s and 1960s.



Source
Link Posted: 8/27/2005 11:54:26 AM EDT

Originally Posted By _DR:
Bah, Greenspan is a hack.
Stop jacking with interest rates and lower taxes, increase minumum wage to kepp up with inflation, pay off the skyrocketing deficit. He's just spinning "reaganomics" another way. We already know it doesn't work.

Look at the 1950s, low taxes, high wages, low national debt. The average citizen was much more prosperous. In Greenspan's world, the middle class exists only to fund the antics of the very wealthy.

Has nothing to do with Republican or Democrat policies, it has to do with sound economic policy, or lack of it. We are headed for a big fall, any way you look at it. By "we" I mean the middle class. You and me.



If you artificially increase min wage you will increase inflation, deficit, I agree, we need to reign it in. We also need to kill off about 60% of all social programs at the least, local, state, and fed. We as people need to quit buying on credit, houses and cars should be it on credit and I don't even like the car bit myself. We also need to live within our means, that means buying houses within our budget, not 3000 sq foot ones for 2 people that take up 50% of the budget. Cut ALL taxes [you know that thats reaganomics don't you?]or go to a flat tax. The rich pay much more as a share then the rest of the population as a whole cept for those with "found" money. [Ever wonder why rich democrats like unkie ted push for more rich people taxes? It's because for them it means nothing as the wealth was created long ago and is not really taxed like made money]

Are we headed for a fall? I think in house prices, yes, forclosures are hitting the gen population pretty hard, at least in my area, a lot of is because people who make 50K should NOT own 200K+ houses, but they do, with the increased costs of taxes, upkeep, and the rest. Those same people have no savings, no emergency fund, NOTHING but CC debt and bills. What a life!!

I unfortunately think America has peaked and is headed downward, everything is now "owed" to people based on nothing more then feelings. That along with the wholesale shipping of jobs overseas has allowed other countries to expand enourmously while we spend billions, taking the worlds beggers at their word that it will somehow make it better. We allow our County to be over run by Illegal Aliens and watch the Govt do nothing again and again.

I don't know where it will end up, but I'd bet it will be somewhat like England, economically.
Link Posted: 8/27/2005 12:00:29 PM EDT

Originally Posted By fxntime:

Originally Posted By _DR:
Bah, Greenspan is a hack.
Stop jacking with interest rates and lower taxes, increase minumum wage to kepp up with inflation, pay off the skyrocketing deficit. He's just spinning "reaganomics" another way. We already know it doesn't work.

Look at the 1950s, low taxes, high wages, low national debt. The average citizen was much more prosperous. In Greenspan's world, the middle class exists only to fund the antics of the very wealthy.

Has nothing to do with Republican or Democrat policies, it has to do with sound economic policy, or lack of it. We are headed for a big fall, any way you look at it. By "we" I mean the middle class. You and me.



If you artificially increase min wage you will increase inflation, deficit, I agree, we need to reign it in. We also need to kill off about 60% of all social programs at the least, local, state, and fed. We as people need to quit buying on credit, houses and cars should be it on credit and I don't even like the car bit myself. We also need to live within our means, that means buying houses within our budget, not 3000 sq foot ones for 2 people that take up 50% of the budget. Cut ALL taxes [you know that thats reaganomics don't you?]or go to a flat tax. The rich pay much more as a share then the rest of the population as a whole cept for those with "found" money. [Ever wonder why rich democrats like unkie ted push for more rich people taxes? It's because for them it means nothing as the wealth was created long ago and is not really taxed like made money]

Are we headed for a fall? I think in house prices, yes, forclosures are hitting the gen population pretty hard, at least in my area, a lot of is because people who make 50K should NOT own 200K+ houses, but they do, with the increased costs of taxes, upkeep, and the rest. Those same people have no savings, no emergency fund, NOTHING but CC debt and bills. What a life!!

I unfortunately think America has peaked and is headed downward, everything is now "owed" to people based on nothing more then feelings. That along with the wholesale shipping of jobs overseas has allowed other countries to expand enourmously while we spend billions, taking the worlds beggers at their word that it will somehow make it better. We allow our County to be over run by Illegal Aliens and watch the Govt do nothing again and again.

I don't know where it will end up, but I'd bet it will be somewhat like England, economically.



Agreed, a big part of the problem is people living beyond their means.
My wife is British, I hope you are wrong. While basic standard of living is OK in the UK, for the majority cost of living is outrageous and disposable income is far less. Then again, many get 5 weeks of vacation annually by law.
Link Posted: 8/27/2005 12:02:35 PM EDT
I just hope nobody messes with my current tax appraisal figure. Its around 50% of the actual fair market price.
Link Posted: 8/27/2005 12:08:03 PM EDT

Originally Posted By _DR:

Originally Posted By fxntime:

Originally Posted By _DR:
Bah, Greenspan is a hack.
Stop jacking with interest rates and lower taxes, increase minumum wage to kepp up with inflation, pay off the skyrocketing deficit. He's just spinning "reaganomics" another way. We already know it doesn't work.

Look at the 1950s, low taxes, high wages, low national debt. The average citizen was much more prosperous. In Greenspan's world, the middle class exists only to fund the antics of the very wealthy.

Has nothing to do with Republican or Democrat policies, it has to do with sound economic policy, or lack of it. We are headed for a big fall, any way you look at it. By "we" I mean the middle class. You and me.



If you artificially increase min wage you will increase inflation, deficit, I agree, we need to reign it in. We also need to kill off about 60% of all social programs at the least, local, state, and fed. We as people need to quit buying on credit, houses and cars should be it on credit and I don't even like the car bit myself. We also need to live within our means, that means buying houses within our budget, not 3000 sq foot ones for 2 people that take up 50% of the budget. Cut ALL taxes [you know that thats reaganomics don't you?]or go to a flat tax. The rich pay much more as a share then the rest of the population as a whole cept for those with "found" money. [Ever wonder why rich democrats like unkie ted push for more rich people taxes? It's because for them it means nothing as the wealth was created long ago and is not really taxed like made money]

Are we headed for a fall? I think in house prices, yes, forclosures are hitting the gen population pretty hard, at least in my area, a lot of is because people who make 50K should NOT own 200K+ houses, but they do, with the increased costs of taxes, upkeep, and the rest. Those same people have no savings, no emergency fund, NOTHING but CC debt and bills. What a life!!

I unfortunately think America has peaked and is headed downward, everything is now "owed" to people based on nothing more then feelings. That along with the wholesale shipping of jobs overseas has allowed other countries to expand enourmously while we spend billions, taking the worlds beggers at their word that it will somehow make it better. We allow our County to be over run by Illegal Aliens and watch the Govt do nothing again and again.

I don't know where it will end up, but I'd bet it will be somewhat like England, economically.



Agreed, a big part of the problem is people living beyond their means.
My wife is British, I hope you are wrong. While basic standard of living is OK in the UK, for the majority cost of living is outrageous and disposable income is far less. Then again, many get 5 weeks of vacation annually by law.



Yes 5 weeks is nice but when you can't pay to go anywhere, what do you do? Watch Benny Hill reruns? I hope I am wrong but my State is in dire straits with a Canadian born, Berkley Kali taught liberal gov who thinks raising taxes on everything that breathes, moves, or sits still is they way to go. Add in the SBT [single Business Tax on corperations [end user of course pays but it increases the costs associated with the product] and move outs of companies and it's going to be Carter Malaise all over again. Only thing keeping inflation down is low interest rates which should be raised up at least 2 or 3 percentage points tho in the short run it'll hurt like hell.
Link Posted: 8/27/2005 12:11:25 PM EDT

Originally Posted By NYPatriot:

Originally Posted By 2A373:

Originally Posted By Justa_TXguy:
For my own selfish reasons, I hope this is true. I want to buy a house in 1 to maybe 1.5 years. If it became a buyer's market, it would be very advantageous for me.




I was think the same thing.



Same here.




Me too and I already own my home. Lucky for me I wouldn't lose even if there was a price crash, since I didn't overpay through the nose when I bought mine.
Link Posted: 8/27/2005 12:15:00 PM EDT
Link Posted: 8/27/2005 12:17:33 PM EDT

Originally Posted By 2A373:

Originally Posted By Justa_TXguy:
For my own selfish reasons, I hope this is true. I want to buy a house in 1 to maybe 1.5 years. If it became a buyer's market, it would be very advantageous for me.




I was think the same thing.



Problem is, income is likely to be affected as well. The economy has to really tank before the "buble" can burst, so it's ain't gonna be pretty no matter how it happens.
Link Posted: 8/27/2005 12:18:20 PM EDT

Originally Posted By NYPatriot:

Originally Posted By 2A373:

Originally Posted By Justa_TXguy:
For my own selfish reasons, I hope this is true. I want to buy a house in 1 to maybe 1.5 years. If it became a buyer's market, it would be very advantageous for me.




I was think the same thing.



Same here.


Yep we are selfish...
Link Posted: 8/27/2005 12:19:01 PM EDT
I hope house prices crash.

I have cash
muahahahah
Link Posted: 8/27/2005 12:25:32 PM EDT
The states will never allow this to happen........they keep raising property values so they get more income from property tax.............The rate in our town was $33 per thou untill last October or so. Then they finished a revaluation, They more than doubled the value of my house but dropped the tax rate to $22 per thou. I had an increase of $1600 per year. The state of NH mandates that the towns must revalue every 8 yrs I think it is............So the states would stand to loose a very big chunck of revenue if this actually did happen......................Right now 3/4 of my check goes to Mortgage/tax/insurance payment..........4 yrs ago it was a little less than 1/2...we have had tax increases every year that since we bought this house on 01...............The town had a 4% increase increase in revenue last year.......The Selectboard took that and increased the town budget.......So they spend as much as they can steal.
Link Posted: 8/27/2005 12:27:22 PM EDT
As long as ppl. keep putting so much of their money into a house, it won't help create jobs. If housing prices crashed, money would go back into the market and help create some jobs...hopefully even jobs here in the US, and not in the 3rd world...
Link Posted: 8/27/2005 12:33:02 PM EDT
[Last Edit: 8/27/2005 12:36:09 PM EDT by fxntime]

Originally Posted By MK4Mod0:
The states will never allow this to happen........they keep raising property values so they get more income from property tax.............The rate in our town was $33 per thou untill last October or so. Then they finished a revaluation, They more than doubled the value of my house but dropped the tax rate to $22 per thou. I had an increase of $1600 per year. The state of NH mandates that the towns must revalue every 8 yrs I think it is............So the states would stand to loose a very big chunck of revenue if this actually did happen......................Right now 3/4 of my check goes to Mortgage/tax/insurance payment..........4 yrs ago it was a little less than 1/2...we have had tax increases every year that since we bought this house on 01...............The town had a 4% increase increase in revenue last year.......The Selectboard took that and increased the town budget.......So they spend as much as they can steal.



Whoh!! Man, I pay only a bit over 700 a year in taxes on my house, lived here since 94 and have no reason to move. I cover payment, taxes and utilities with just over 1 check. I might not live in a huge grandiouis house but it works for me, and if I don't move they can only raise my taxes 1% a year or inflation whichever is lower. If I sell tho the cap comes off and it goes to the assessed amount for the poor sucker who buys the house. If I buy another one I am the sucker.Unfortunately people do not understand that and sell and buy every couple of years. Fools. Buying property for rent etc is fine, but people are using that same scenario to buy property to live in which is not the investment one thinks it really is. It CAN be but only if you move to an area that is cheaper to live in.
Link Posted: 8/27/2005 12:34:28 PM EDT
Guys, I know it's tempting to think "good, cheap housing" but it's a bit more complicated than that.

It's not just a bubble in RE, it's a general liquidity (debt) bubble that manifests itself most obviously in housing because housing is the most debt-dependent market.

When the bubble bursts and people stop borrowing money it will have serious consequences for the economy in general.

We're currently borrowing 30% of our GDP every year, that's net new debt. That liquidity injection is only possible in an environment of rapidly rising asset prices, and without it we'd have significantly lower living standards.

Two other reasons for caution in the near future, The new bankruptcy laws take effect Oct 17, as do the new consumer credit laws that double minimum payments.

These factors combined with a soft RE market (doesn't even have to crash, just has to level off to slow or even stop the credit expansion) could spell big trouble, and that's what Greenspan is warning publicly, for the first time, about.

Our economy requires continuous positive growth in total credit(debt) to function, if debt stabilizes the M3 contracts and GDP growth goes negative(recession)

It's a crazy system, it's unsustainable, meaning temporary, meaning most of us will see the US monetary system radically changed, as it has been pretty regularly(every 20-30 years) over the last century.
Link Posted: 8/27/2005 12:41:28 PM EDT

Originally Posted By K2QB3:
Guys, I know it's tempting to think "good, cheap housing" but it's a bit more complicated than that.

It's not just a bubble in RE, it's a general liquidity (debt) bubble that manifests itself most obviously in housing because housing is the most debt-dependent market.

When the bubble bursts and people stop borrowing money it will have serious consequences for the economy in general.

We're currently borrowing 30% of our GDP every year, that's net new debt. That liquidity injection is only possible in an environment of rapidly rising asset prices, and without it we'd have significantly lower living standards.

Two other reasons for caution in the near future, The new bankruptcy laws take effect Oct 17, as do the new consumer credit laws that double minimum payments.

These factors combined with a soft RE market (doesn't even have to crash, just has to level off to slow or even stop the credit expansion) could spell big trouble, and that's what Greenspan is warning publicly, for the first time, about.

Our economy requires continuous positive growth in total credit(debt) to function, if debt stabilizes the M3 contracts and GDP growth goes negative(recession)

It's a crazy system, it's unsustainable, meaning temporary, meaning most of us will see the US monetary system radically changed, as it has been pretty regularly(every 20-30 years) over the last century.



It's not "good" but you know it's going to happen soon, don't you? We are there NOW, only artificially low interest rates have sustained us thus far. It'll only go so long tho and when it corrects it will be a painful experience for all. I am, for better or worse all set. Own what I have, and CC payed off monthly, I can survive. I just hope it'll happen in Hitlerys term............
Link Posted: 8/27/2005 12:41:30 PM EDT
Greenspan is a fucking idiot.

CW
Link Posted: 8/27/2005 1:06:18 PM EDT
[Last Edit: 8/27/2005 1:12:38 PM EDT by K2QB3]

Originally Posted By fxntime:

Originally Posted By K2QB3:
Guys, I know it's tempting to think "good, cheap housing" but it's a bit more complicated than that.

It's not just a bubble in RE, it's a general liquidity (debt) bubble that manifests itself most obviously in housing because housing is the most debt-dependent market.

When the bubble bursts and people stop borrowing money it will have serious consequences for the economy in general.

We're currently borrowing 30% of our GDP every year, that's net new debt. That liquidity injection is only possible in an environment of rapidly rising asset prices, and without it we'd have significantly lower living standards.

Two other reasons for caution in the near future, The new bankruptcy laws take effect Oct 17, as do the new consumer credit laws that double minimum payments.

These factors combined with a soft RE market (doesn't even have to crash, just has to level off to slow or even stop the credit expansion) could spell big trouble, and that's what Greenspan is warning publicly, for the first time, about.

Our economy requires continuous positive growth in total credit(debt) to function, if debt stabilizes the M3 contracts and GDP growth goes negative(recession)

It's a crazy system, it's unsustainable, meaning temporary, meaning most of us will see the US monetary system radically changed, as it has been pretty regularly(every 20-30 years) over the last century.



It's not "good" but you know it's going to happen soon, don't you? We are there NOW, only artificially low interest rates have sustained us thus far. It'll only go so long tho and when it corrects it will be a painful experience for all. I am, for better or worse all set. Own what I have, and CC payed off monthly, I can survive. I just hope it'll happen in Hitlerys term............



I've been watching this situation unfold for years now, and have always refrained from setting a date, because seeing what's coming is easy but seeing WHEN it's coming is hard. Also it's a long process rather than an event like the '87 crash in stocks.

But I feel pretty confident in saying it isn't going to wait for Hillary, it's coming soon, with Bush at 36% approval.

Another issue, There's an emergency meeting on credit derivatives set for Sept 16, all the players will be there, FED, JPMC, CITI, etc. etc. Greenspan is spooked, or just feels like he's got to speak his mind on the record before he retires....

Batton down the hatches boys.

P.S. Artificial interest rates are the cause of the problem, and its sustenance. When I speak of monetary reform it's free market interest rates that I hope for, the alternative is totalitarianism in one form or another.
Link Posted: 8/27/2005 1:14:46 PM EDT
I don't know what I've done in my life to accumulate so much good Karma...

When I inherited this house from my parents it was assessed at 165k. I have put NOTHING into it between then (1998) and now. Escrow closes Tuesday. After the cost of sale expenses and paying off ALL my debts I'll have around 350k in the bank.

If things are going to go south, I couldn't ask to be in a better position to take advantage of it.
Link Posted: 8/27/2005 1:20:07 PM EDT
Airwolf,

Good for you! Just don't try and catch the falling knife.

Solar panels get you a 30% tax CREDIT up to $2K in '06 and '07 and you can roll the credits forward. Energy independence is on sale, $4K off via the new energy bill.

Since you're in the sunbelt and flush with cash...
Link Posted: 8/27/2005 1:26:17 PM EDT
Link Posted: 8/27/2005 1:51:28 PM EDT
[Last Edit: 8/27/2005 1:54:25 PM EDT by rssc]

Originally Posted By 2A373:

Originally Posted By Justa_TXguy:
For my own selfish reasons, I hope this is true. I want to buy a house in 1 to maybe 1.5 years. If it became a buyer's market, it would be very advantageous for me.




I was think the same thing.



+1. I want to buy a house. There's no possible way I can afford even a starter home after the more than doubling in price in my area..
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