Greenspan’s “Interest Rate Conundrum”

While Fed Chairman Alan Greenspan once again told Congress he does not see a national housing bubble, he repeated his warning of May 20, the day Greenspan first used the "F" word:

"…at a minimum, [there are] signs of froth in some local markets where home prices seem to have risen to unsustainable levels."  Expressing his concern about interest-only loans, Greenspan added, "To the extent that some households may be employing these instruments
to purchase a home that would otherwise be unaffordable, their use is
beginning to add to the pressures in the marketplace."

According to NPR’s "All Things Considered," mortgage rates fell again today and stand at a 14 month low.  In the past, Greenspan has called that "a conundrum" because "falling interest rates have [historically] signaled looming problems."  Greenspan does not see that this time, according to NPR, because globalization is changing price structures, easing concerns of inflation. 

Interest rates at 14 month lows may sound good to some home buyers, but not everyone agrees.  According to Tom Ashbrook, host of NPR’s nationally syndicated OnPointRadio, low interest rates may "portend real shocks down the road." 

Posted in Defensive Homebuying, In the News, Real Estate Bubble

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