Bloomberg Greenspan Sees ‘Seeds of a Bottoming’ in U.S. Housing

May 12 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said that the decline in the U.S. housing market may be bottoming and it’s “very easy to see” financial markets continuing to improve.

“We are finally beginning to see the seeds of a bottoming” in the housing industry, Greenspan said today during a conference of the National Association of Realtors in Washington. The U.S. is “at the edge of a major liquidation” in the stock of unsold properties, which may help to stabilize prices, Greenspan said.

Home-sales figures in recent weeks have shown a slower pace of decline, and the slide in property prices has eased, according to gauges including the S&P/Case-Shiller index.

The former Fed chief, who was among the first prominent economists to warn about the risk of a recession in 2007, said housing prices could fall another 5 percent without putting too much strain on the economy.

“We run into trouble if it’s very significantly more than that,” Greenspan said. Housing prices remain “the critical Achilles’ heel” of the economy.

While the housing bottom may not be obvious in prices, it is becoming clear in “significant regional differences,” where some of the hardest-hit areas are starting to show signs of improvement, he said.

Greenspan said in congressional testimony in October that “a flaw” in his free-market ideology contributed to the “once-in-a-century” credit crisis. more...