Reply #70: Greenspan: Any home price fall not necessarily disruptive [View All]

[UpInArms]

http://www.marketwatch.com/news/newsfinder/pulseone.asp?dateid=38621.5632498843-843803899&siteID=mktw&scid=0&doctype=806&

WASHINGTON (MarketWatch) -- Any decline in home prices would not necessarily be disruptive, Fed chief Alan Greenspan said Monday. In a speech to the American Bankers Association, Greenspan said it is "an open question" what the impact of higher mortgage rates or any drop in home prices would have on the economy. Consumer spending would fall as homeowners would not be able to finance spending from the rise in their home's value, but the low personal savings rate would rise and the U.S. trade deficit would shrink, Greenspan said. The vast majority of homeowners have a sizable equity cushion to absorb a potential decline in house prices, he said. "That said, the situation clearly will require our ongoing scrutiny in the period ahead, lest more adverse trends emerge," he said. In a short statement on Hurricanes Katrina and Rita, Greenspan said the Fed will continue to follow developments closely to assess their implications for the economy.