Greenspan’s Idea of a Housing Bottom

Pat writes: “You must be relieved to know that Alan Greenspan says housing has hit bottom.”

Right. I especially liked this part of Mr. Greenspan’s interview with David Wessel:

“Home prices in the U.S. are likely to start to stabilize or touch bottom sometime in the first half of 2009,” he said in an interview. Tracing a jagged curve with his finger on a tabletop to underscore the difficulty in pinpointing the precise trough, he cautioned that even at a bottom, “prices could continue to drift lower through 2009 and beyond.”

I’m puzzled as to what kind of bottom has prices still drifting lower. If he means that prices could bounce along a sideways line for a while, fine, but if they drift lower too much then I guess we can’t really say they hit bottom prior to that. If so, why not say they hit bottom last December and have just drifted lower since?

Richard Lefrak, one of New York’s top real estate moguls, said we’re nowhere near the bottom of the housing market because we’re sitting on the highest inventory of unsold homes in 20 years, the coming wave of foreclosures means that the inventory is going to rise even more, and banks are fresh out of cash to lend potential buyers.

A thriving economy would help but with retail sales falling and inflation and unemployment rising, don’t hold your breath.

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