WSJ: Greenspan Reflects on the Bottom of the Housing Market, Fannie/Freddie Bailout, and Immigration?
Former Federal Reserve Chairman, Alan Greenspan tries again to call the bottom of the housing market in an interview timed around the release of the paperback version (equipped with a new chapter defending his record) of his recent book. He give sound rationale and methodology on how to guesstimate the bottom, using housing supply and spread between owing and renting. However, he gets a little bizarre and recommending immigration policy as a solution to soak up excess housing supply.
He did offer one suggestion: “The most effective initiative, though politically difficult, would be a major expansion in quotas for skilled immigrants,” he 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.
This article touched off a few commentaries in the blog world:
- Greenspan’s Greater Foreign Fool Theory (Infectious Greed)
- Greenspan and Housing Prices (Straight Talk About Mortgages)
- Immigration, Social Security, and Housing Markets (Economist’s View)
- Greenspan’s Housing Bottom: Agree or Disagree? (The Big Picture)
FT.com: US Inflation at highest since 1991
Consumer price index jumped to 5.6% year-over-year, exceeding forecast and biggest jump since 1991. Recent drops in oil prices seemed to have little impact as core prices, excluding food and energy surged. Stacked against rising cost and unemployment The Fed is in a pickle.
The soaring consumer price index highlights the dilemma facing the Federal Reserve as its policymakers weigh the risks of the rising cost of living against increasing unemployment, a weak consumer and stress in the financial services industry. The Fed has maintained interest rates steady at 2 per cent over the past two meetings to set monetary policy as it has balanced those dangers.
RealtyTrac: Foreclosure Activity Increases 8 Percent in July
I think the bigger story sits in the bank repossession and REO numbers:
“Bank repossessions, or REOs, continued to be the fastest growing segment of foreclosure activity in July, posting a 184 percent year-over-year increase — compared to a 53 percent year-over-year increase in default notices and an 11 percent year-over-year increase in auction notices,” said James J. Saccacio, chief executive officer of RealtyTrac. “The sharp rise in REOs, combined with slow sales, has resulted in a bloated inventory of bank-owned properties for sale. RealtyTrac now has more than three quarters of a million properties in its active REO database, a number that represents approximately 17 percent of the inventory of existing homes for sale reported in June by the National Association of Realtors.”
Get my commentary on rising foreclosure rates at MortgageLoan.com.
About Bill Rice