From Reuters:
House prices to drop much lower: Greenspan
big overhang of property will bring U.S. house prices down further, but it is too early to say if the economy will plunge into recession, former Federal Reserve chief Alan Greenspan was quoted as saying on Friday.
Greenspan said in an interview with Austrian magazine Format that low interest rates in the past 15 years were to blame for the house price bubble, but that central banks were powerless when they tried to bring it under control.
“It’s a difficult situation, there is an enormous overhang on the real estate market,” Greenspan was quoted as saying. “Many buildings which just have been finished can’t be sold …”
“So far, prices have dropped only slightly. But it was enough to cause alarm around the world,” he said. “Prices are going to fall much lower yet.”
“However, it is too early to answer the question about a recession. We simply don’t know yet. It depends on how flexibly the economy can react,” he said.
…
“There is no doubt about the fact that low interest rates for long-term government bonds have caused the real estate bubble in the United States,” he said.“The Federal Reserve began a series of interest rate increases in 2004. We were hoping to bring the speculative excesses in the real estate sector under control. We failed. We tried it again in 2005. Failure,” he said.
“Nobody could do anything about it, neither us nor the European Central Bank. We were powerless,” he said.
“Nobody could do anything about it, neither us nor the European Central Bank. We were powerless,” he said.
Can this guy this stop. He never makes any mention of Bernanke’s “special” trip to Japan in 2003. As a result of this powerplay, the BOJ created $35 trillion yen. The carry was born. They bought the dollars that their citizens had accumulated. If they didn’t do this the whole charade would not work. Forget about Greenspan lowering rates, this was the culprit. Would someone please ask AG a question regarding this?
What an A$$. All this guy had to do 3 years ago was publicly admit there was a bubble and things would have started correcting themselves in a soft landing
Greenspan just keeps repeating the same old crap.
I actually have a real estate broker question. Saw a house I like that was just listed. Broker told me that right away owner got offer of less than asking and less than the “magic number” he would accept. So I ask the RE Broker what is the amount of the offer she said she can’t tell me but it is less than asking.
Does the realtor have to tell what formal offers are to buyers or not? If not I don’t even understand why not.
When I sold a house in 2004, we got a few offers and I told person number two about offer one and he toped it and person three about offer two and he topped it etc.
I am not going to randomly throw out an offer other than a low ball if I don’t know the price. But lets say I had my own secret number of how much the house was worth and the first offer was below that number I might top it.
These games the realtor is playing is so 2004 to 2006 when they had round robin secret offers and buyer wars. Now there are only serious buyers who just want to know what the actual price is and realtors are still jerking around.
Imagine when I sold my used camry if I started telling people “I have an offer on the car but it is top secret so blindly bid on your own and get back to me”. Real buyers would just walk away.
John,
If the offer was turned down, you should be told ” they have turned down $300,000. If there is a multiple bid situation ( rare ) you are not told. Think of this 2 ways – as a buyer who without knowledge of another buyer put in offer in good faith,there were no other offers at that time, then someone else comes along and offers $1,000. more based on the realtor telling 2nd buyer the offer. Perhaps the second buyer would have put in a lower offer? Is that fair to the 1st buyer? Or.. another scenario is 1st buyer puts in offer 2nd buyer comes along was going to put in an offer of 10,000 more than first buyer but he finds out 1st buyer’s offer and offers 1,000 more instead. Is that fair for the seller? When you tell the next buyer and the next buyer you create a bidding war, and people end up possibly paying more than they would have. Offer what you think the house is worth based on whatever you use as your guide, comps, needs, etc.
It’s difficult to explain thouroughly the nuances of these situations in print. I hope I was able to shine a different light on this situation for you.
KL
Aout realtor games -I was looking for a house – and on few I was interested on realtor told me that there was already an offer and surprise – surprise – very close to my upper pre-approval limit in all cases. I said #@ck that and told that realtor that I was not interested in his services anymore. I stopped looking all together in NJ since I saw the notes of increasing taxes in my town – 8% increase in average. As long as tax increases are 5% more than my salary yearly increase I am not buying in NJ. I wil happily rent, save as much as I can and buy a house in cheap area and live rent free – without mortgage payments or rent I can easilly take 30-50% cut in pay and still come ahead.
Interestingly enough, A year later 3 of the homes I was loooking at are still on the market. – so realtors are still trying to create sense of usrgency and push people into buying fast…
I general the whole bidding in the dark process creates aura of unfairness – how come realtor and not the seller ahve all the information about teh bids and everything else – I think it should be open precess with all written offers available to everybody to see.
re 4:
It is well known that even open auctions work in the seller’s favor. If I recall correctly, studies comparing auctions with reserve prices did not produce better results than those without.
Could you cite that comparison study?
I’m curious and surprised about that.
But I thought the realtor worked for seller not buyer so whole point is to get people to pay as much as possible, even if the buyer overpays.
Bidding wars was just a product of the 1999 to 2006 era when houses were going through the roof. Back in the 1992 through 1998 period, hey you listed a house for 320K that you would take 300K for you happily accepted a 280K offer and said I will get back to you within two weeks if I accept and then only took offers above 280K. Kinda like when I sold my last used car, it was in paper thursday, friday saturday and I took offers and sold Monday, offer one was just starting point. There was no bidding war, who the heck would pay over the KBB on a car but everyone would have thrown out a low ball number that weekend if I did not at least have a starting point.
rhymingrealtor Says:
September 21st, 2007 at 8:58 am
John,
When you tell the next buyer and the next buyer you create a bidding war, and people end up possibly paying more than they would have.
KBB is to car
as _______is to house.
KL
Thank you Mr. Greenspan for stating the obvious to sell more books.
I also found it strange that every house my wife and I bid on (2 years ago) all of a sudden, magically, received other bids….out of nowhere. Very shady.