"Too Little Too Late" For Greenspans' Bubble Talk
The economic world is commenting on Alan Greenspans' remarks about the housing bubble yesterday. The LA Times has some quotes. "'Affordability is a serious issue,' said Esmael Adibi at Chapman University in Orange. 'The fact is that more people are trying to buy more housing than their incomes can justify.'"
"By letting short-term interest rates hit rock bottom, the central bank helped drive down mortgage rates. That in turn created an exaggerated demand for housing, Adibi said. 'The Fed caused some of the problem, no question,' said Adibi, who believes local housing prices may start to fall by the end of the year."
"Adibi and others suggested that Greenspan might be trying to reduce the impending shock of a slowing housing market. But Greenspan's remarks may be 'too little, too late,' said Christopher Thornberg, a senior economist at the UCLA Anderson Forecast who has been among the few economists to emphatically describe California's housing market as a bubble."
"People have been freely spending 'because they feel wealthy' thanks to soaring home prices, he said. 'When the market cools, it will have implications beyond real estate,' Thornberg added."