Now I know that Alan Greenspan has never been wrong, well, except that little dot.com crash thingy, but I think we're going to be able to test his wisdom one more time before he leaves and I'm guessing it's going to cement his place in history as a disastor. His "frothy" comments about the housing pockets that could spell trouble really won't hold up because this is not 1805. This is 2005 and we are much too integrated and connected for pockets to not have a ripple effect.
We have plenty of housing markets (DC, Boston, SF, etc) that are insanely expensive but what does the Fed leader think will happen when they crash? Some conservative estimates are saying that a leveling off, not a crash, would cut the GDP growth by 1% but that is not a crash.
The IMF study found that while stock market collapses are more frequent, housing busts do a lot more damage.Is this guy serious? I am still waiting to talk to the person he's talking about because everyone now talks about the wild price gains. I see a problem here.
"The output loss associated with the typical housing price bust (about 8 percent of GDP) was twice as large as that associated with a typical equity price bust," the study said.
Jonas Fisher, a senior economist and housing expert at the Chicago Fed, said the assumption that spending was being driven by consumer expectations of home price gains might be flawed. "Instead, consumers think in terms of long-term trends, and will view much of the price appreciation as temporary or unsustainable," he said.
Paul Ashworth, North American economist for Capital Economics, says 933,000 of the jobs created in the current U.S. economic upswing owe their existence in one way or another to real estate.
"A full 37.8 percent of all new jobs created have come in construction, real estate, architecture, building supply, home furnishing retailers and building services, even though those sectors only account for 11.6 percent of total nonfarm payrolls," he said.
