Worst housing woes are behind us
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Worst housing woes are behind us
Former Fed chief warns that the housing market will continue to weaken but says sector has already posted its sharpest decline.
November 6 2006: 4:43 PM EST
WASHINGTON (Reuters) -- The U.S. housing market will weaken further, but the sharpest decline is over as inventories of unsold homes decrease, former Federal Reserve Chairman Alan Greenspan said on Monday.
"This is not the bottom, but the worst is behind us," Greenspan said at a conference organized by financial services firm Charles Schwab.
Former Federal Reserve Chairman Alan Greenspan
Greenspan retired from the U.S. central bank in January, but his comments have still had the power to move financial markets.
A decline in U.S. home sales and construction has contributed to an overall slowing of economic growth to 1.6 percent in third quarter. But Greenspan said housing market activity is likely no longer to be a drag on overall economic growth as unsold inventories clear out and stabilize against sales levels.
The slowdown has hurt profits and sales for the nation's major homebuilders, including Pulte Homes (up $0.08 to $30.18, Charts), Centex (Charts), D.R. Horton (Charts), Lennar (Charts), K.B. Home (Charts) and Toll Brothers (Charts).
Fed policy-makers are watching closely to see if the slowdown in the economy will ease a little of the worrisome upward pressure that a tight labor market has been exerting on prices. Fed officials have said they are confident the housing slowdown has not spread into other areas of the economy and that slightly higher rates of growth will return in 2007.
Hopes for Fed rate cuts die
The former central banker said he is "reasonably confident" the United States will not slide into recession because businesses appear to be strong, as evinced by strong corporate profit margins and healthy levels of capital investment.
Greenspan, whose every move as Fed chairman was scrutinized for clues about monetary policy and the economic outlook, laid to rest the legend that Fed interest rate decisions could be divined by how full his briefcase appeared to be when he went to work.
"The extent to which my briefcase was fat or thin depended on whether my wife had time to make me lunch," he said.
On interest rates, the former Fed chair cautioned that global factors that helped push down long-term interest rates, fueling the U.S. housing boom of the early part of the decade, are not permanent features of the economic landscape.
Greenspan once famously described the phenomenon of stubbornly low long-term interest rates, despite the Fed's steady increases in short-term benchmark rates, as a conundrum.
On Monday, he said that forces such as a flood of new workers into the world economy after the collapse of communism and the global integration of China were one-time events that will eventually stop playing a role in keeping long-term interest rates as persistently low.
"There is a turning point but I don't know where it is," he said.
http://money.cnn.com/2006/11/06/news/economy/bc.economy.greenspan.reut/index.htm?postversion=2006110616
Former Fed chief warns that the housing market will continue to weaken but says sector has already posted its sharpest decline.
November 6 2006: 4:43 PM EST
WASHINGTON (Reuters) -- The U.S. housing market will weaken further, but the sharpest decline is over as inventories of unsold homes decrease, former Federal Reserve Chairman Alan Greenspan said on Monday.
"This is not the bottom, but the worst is behind us," Greenspan said at a conference organized by financial services firm Charles Schwab.
Former Federal Reserve Chairman Alan Greenspan
Greenspan retired from the U.S. central bank in January, but his comments have still had the power to move financial markets.
A decline in U.S. home sales and construction has contributed to an overall slowing of economic growth to 1.6 percent in third quarter. But Greenspan said housing market activity is likely no longer to be a drag on overall economic growth as unsold inventories clear out and stabilize against sales levels.
The slowdown has hurt profits and sales for the nation's major homebuilders, including Pulte Homes (up $0.08 to $30.18, Charts), Centex (Charts), D.R. Horton (Charts), Lennar (Charts), K.B. Home (Charts) and Toll Brothers (Charts).
Fed policy-makers are watching closely to see if the slowdown in the economy will ease a little of the worrisome upward pressure that a tight labor market has been exerting on prices. Fed officials have said they are confident the housing slowdown has not spread into other areas of the economy and that slightly higher rates of growth will return in 2007.
Hopes for Fed rate cuts die
The former central banker said he is "reasonably confident" the United States will not slide into recession because businesses appear to be strong, as evinced by strong corporate profit margins and healthy levels of capital investment.
Greenspan, whose every move as Fed chairman was scrutinized for clues about monetary policy and the economic outlook, laid to rest the legend that Fed interest rate decisions could be divined by how full his briefcase appeared to be when he went to work.
"The extent to which my briefcase was fat or thin depended on whether my wife had time to make me lunch," he said.
On interest rates, the former Fed chair cautioned that global factors that helped push down long-term interest rates, fueling the U.S. housing boom of the early part of the decade, are not permanent features of the economic landscape.
Greenspan once famously described the phenomenon of stubbornly low long-term interest rates, despite the Fed's steady increases in short-term benchmark rates, as a conundrum.
On Monday, he said that forces such as a flood of new workers into the world economy after the collapse of communism and the global integration of China were one-time events that will eventually stop playing a role in keeping long-term interest rates as persistently low.
"There is a turning point but I don't know where it is," he said.
http://money.cnn.com/2006/11/06/news/economy/bc.economy.greenspan.reut/index.htm?postversion=2006110616
작성일2006-11-07 08:54
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