Extra, Extra, Extra … Alan Greenspan Predicts Housing Declines!

You probably heard the old adage “when Alan Greenspan talks –the financial world listens”. I was part of this world yesterday - listening to Leslie Stahl interview Alan Greenspan on 60 Minutes. When he mentioned Housing - I was all ears. Mr. Greenspan’s opinion was that the housing market has much lower to fall, with home prices declining even farther. To get a better sense on his views I did a quick search this morning and found a bit more from the interviews in Wall Street Journal on-line edition and Financial Times.

These are the key predictions Mr. Greenspan makes: 

• Possibility of far bigger housing price declines – possibly in double digits               

• More defaults on sub-prime mortgages

• Increased pressure on consumer spending

• The recession could be avoided, because of the strength in the economy

• Couple months ago – put odds of national housing decline at less then 50-50

The reason Mr. Greenspan’s views are so important is because of the great weight the financial markets and the consumers place on them. I am concerned that consumers will be “spooked” even farther by these predictions, which will cause even more downward pressure on the housing prices and become a self-fulfilling prophesy. I am not an economist, but would like to know what you think the market will look like by spring of 2008.