clock menu more-arrow no yes

Filed under:

Froth Report: A Little Foam Never Hurt Anybody

A scant three months ago, it seemed a near certainty that Alan Greenspan's declaration that there were "at a minimum, signs of froth in some local markets" would become the "irrational exuberance" of this housing boom gone wrong -- i.e., code for "this will not end well." But it turns out that froth (so light! so airy!) isn't really scaring anyone, least of all Greenspan.

Yesterday, the Fed Chairman presented some good, old-fashioned empirical research that shows that most homeowers are not in fact overextended, and that should home prices dip, the increased equity built up during the boom times should shield most homeowners from severe injury. "The vast majority of homeowners have a sizable equity cushion with which to absorb a potential decline in house prices," he said.

Now, let's not sugar-coat this. Interest-only and piggy-back loan holders? Greenspan thinks they're screwed. But, the rest of us? We shouldn't be embarrassed about sticking our noses in the froth, slurping it up, even, dare we say, adding a little cinammon.
· Most Homeowners Not Overly in Debt, Fed Chief Says [NY Times]
· BarbaraWatch: And What's the Deal with Bubbles? [Curbed]
· Greenspan: Housing Debt Okey Dokey [Curbed]
· Greenspan: Real Estate Is, Or Is Not, Inflated [Curbed]