Interesting discussion between Senator Bayh and Greenspan Tues. a.m. regarding housing inflation.
<One senator tried to get a comment on the level of home prices. "Housing price escalation has exceeded personal income growth for some time," pointed out Senator Evan Bayh, Democrat of Indiana. "Is it your view that this can go on indefinitely?"
Instead of answering, Mr. Greenspan launched into a discussion of productivity in the construction industry, which he said could help to explain why home-price inflation would outpace general inflation. He did not address the affordability question raised by Mr. Bayh.
The economy would be hurt far more now by a slide in home prices than it has been by the stock market slump, for as Mr. Greenspan noted, the vast majority of Americans have more invested in their homes than in their other investments. But while Mr. Greenspan was eager to denounce the excesses of the last decade, he did not choose to address either the likelihood of or the possible damage from an end to the current boom in housing.>
.....<<But while Mr. Greenspan was eager to denounce the excesses of the last decade, he did not choose to address either the likelihood of or the possible damage from an end to the current boom in housing.>>
......perhaps that's because Uncle Alan knows full well the exposure Freddie & Fannie will have if the bubble pops.... ....."Fannie Mae and Freddie Mac have raked in huge profits from the housing bubble. But they have also concentrated in themselves, an enormous exposure to mortgage debt�a concentration even greater than the 35% of all financial derivatives contracts sitting in one bank, J.P. Morgan Chase�and have issued some obligations which are very risky. Thus, it is ironic that the housing market depends on Fannie Mae and Freddie Mac, which are in such rotten condition that they could puncture the very housing bubble which they are called upon to support." Richard Freeman in "Fannie and Freddy Were Lenders: The US Real Estate Bubble Nears Its End"...7/21/02 Executive Intelligence Review