Alan Greenspan Shocked II

My husband and I recently sold our home. We sold it for 25 percent less than we had contemplated when we first thought about selling it two years ago and 29 per cent less than our “wildest dream” price.

These figures are even larger than the national drop in housing prices since 2006—nearly 20 per cent, according to the Wall Street Journal, which says that many economists anticipate another 10 per cent fall.

Is this a tragedy? Not for us, or for most people who owned a home for a period of time and had traditional mortgages. Certainly, it is tragic for people who took advantage of the bubble but timed it wrong (and surely some of those were taken advantage of, too.)

But apparently Alan Greenspan never considered that housing prices might fall. Could this be true? The Wall Street Journal article on his testimony said about Greenspan: “He answered that he never anticipated home prices could fall so much. ‘I did not forecast a significant decline because we had never had a significant decline in prices,’” he said.

Apparently, Wall Street didn’t either, so, during the bubble, financial gurus made billions of dollars on shaky derivatives whose values were opaque. Now, their bad judgment has transformed a fall in housing prices that is less than enormous into a global credit crisis. And now we, the Main Street folks who were able to handle the actual decline in real estate values, will bear the cost of holding up the system that Wall Street messed up—and this cost truly is unpredictable.