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Archive for August 14th, 2008

You probably would be better off just reading the Wall Street Journal article because it is sort of interesting.  If you don’t want to, here is what he has to say.  Not sure he is worth listening to, but the WSJ felt strong enough to put him above the fold.  Then again, one time he sneezed, and it made headlines…

  • Home prices will stabilize by first quarter of 2009.  Greenspan bases this on projections that show inventory dropping below the current 800,000 units above normal.  I could predict a dip in houses on the market too simply because we are heading into the Fall.  I also predict a ton of old, pulled listings re-hitting the market next Spring if the market shows any sign of rebounding or stabilizing in the first quarter.  Everyone is going to try to finally sell their houses that wouldn’t sell in the 2008 buying season.  This has to complicate projections.
  • The global financial crisis is tightly tied to the domestic housing crisis because banks’ capital is difficult to establish if the value of mortgage backed securities are incalculable.  And if Banks general health can’t be “clarified,” then the market is screwed.
  • He brushed off the notion that he is partially to blame for the housing meltdown because he didn’t do enough to regulate the credit market, saying that unusually low interest rates on an international level made housing prices soar.
  • The Bailout of quasi-federal Fannie Mae and Freddie Mac was poorly conceived and that if there was to be a bail out, then the shareholders should get the boot and the two corporations should have been nationalized.  Bear Stearns was a terrible precedent.  Memorable quote in the article goes to George Shultz, former Secretary of State: “If they are too big to fail, make them smaller,” referring to the idea of nationalizing or more heavily regulating Freddie and Fannie.

When will the prices stop falling?

“We will get to the point where there will be willing holders of vacant single-family dwellings, and that will no longer act to depress the price level.” says Greenspan.

Stated another way:  “They offered us how much for our house!  Tell them to go crap in their hat! I’m not selling.  I’d rather have the house sit vacant than take that price!”

Once you start hearing that kind of language from sellers, you know the market is stabilizing.  ATTENTION: TO THOSE READERS ONLY INTERESTED IN ATHENS RELATED CONTENT:  I hear the above statement everyday, and if it is truly an indicator of general market well being, we here in ATH are better off than a lot of areas of the country.

The Modest Proposal

Here is the conclusion to the article from the WSJ: “‘The most effective initiative, though politically difficult, would be a major expansion in quotas for skilled immigrants,’ (Greenspan) said. The only sustainable way to increase demand for vacant houses is to spur the formation of new households. Admitting more skilled immigrants, who tend to earn enough to buy homes, would accomplish that while paying other dividends to the U.S. economy.”

Whoa!  Cool!  He just slipped that right in at the end!  Almost makes you wonder if the whole article was concocted all for that last little bit about immigration.  Does this officially mean we are now talking about increasing skilled foreign workers?  Like when Bush just kind of started talking about Iraq back in 2001?  Does anyone smell Band-Aids?  And what are the “other dividends?”

I also smell an agenda and a D.C. Beltway PR machine behind this article.  Lou Dobbs is going to have a field day with this one: Guest workers displace Americans who will then need to sell their homes because they lost their jobs to the guest workers who we thought could help pull us out of the housing crisis.  For the record, I would never have Lou Dobbs over for dinner.  Just seems a little smarmy…

JP

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