No wonder buyers are paralyzed.

Former Fed Chief Alan Greenspan, who can't seem to leave the stage without a hook around his neck, says U.S. prices will go down further because of the "enormous overhang on the real estate market." He told a European magazine that the central bank tried and failed to slow the "excesses of the real estate sector" by a series of interest rate increases begun in 2004.

Funny, he didn't say anything about needing to slow the housing market then. In fact, it was in February 2004 that Greenspan was quoted as saying that some are paying too much for financing with fixed rate loans. "Recent research within the Federal Reserve suggests that many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade, though this would not have been the case, of course, had interest rates trended sharply upward," said Greenspan.

Those words would haunt him. By July, 2004, the Fed called housing "torrid, as it began a series of interest rate increases. At the time, Greenspan said housing was on solid ground. In October, 2004, he said the housing market bubble bursting was "most unlikely." Greenspan made "froth" a household word in May, 2005, in reference to specific areas of rabid speculation and high price increases that subsequently ground to a halt.

Many blame Greenspan for the burst in housing speculation using adjustable rate mortgage products. It was in 2004 and 2005 that the National Association of Realtors noted that one-third of home purchases were made by non-occupying buyers. Foreclosure analysts note that it is mostly non-owner-occupied homes that are clogging the housing drain.

However, Greenspan remembers it all differently. "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."

Greenspan won't leave the stage because he's a consultant with a new book to sell, and making news means he's still current and worth the speaking and consultation fees he commands. The world pays attention to him as if he is still in charge of the Fed.

Successor Ben Bernanke has his hands full. Not only did Greenspan leave him with a precarious economy to balance, but Greenspan seems intent on circumventing Bernanke's desperate attempts to maintain balance by contradicting most of Bernanke's moves.

In March, 2007, Greenspan rocked world markets with the comment that there was a one in three chance of recession in the U.S. Now, he's revising history and blaming the excesses of the real estate sector for a likely unavoidable recession.

As Bernanke desperately tries to calm rocking investment and housing markets by announcing a 50-basis-point short-term interest rate cut to lower borrowing costs for consumers, Greenspan is making the rounds promoting his new book, The Age of Turbulence: Adventures in a New World. with the proclamation that housing prices are only down about three percent and are "clearly moving lower."

The main differences between the two chiefs is flexibility. When Greenspan oversaw a Fed rate cut to below one percent, the lowest in four decades, there was no danger of inflation. Bernanke doesn't have the same ability to cut rates to the bone, and may not want to even if he had the discretion.

In the hotseat of a congressional hearing on September 20, Bernanke testified, "We took the action to try to get out ahead of the situation and try to forestall potential effects of tighter credit conditions on the broader economy."

If it were a preemptive move, it certainly feels like a reactionary move. "Recent developments in financial markets have increased the uncertainty surrounding the economic outlook," Bernanke stated.

He promised lawmakers, "We will continue to pay very close attention to the inflation rate. It is an important part of our mandate and I agree with you that an economy cannot grow in a healthy, stable way when inflation is out of control, and we will certainly make sure that doesn't happen."

When Greenspan was in the same seat in 2001, the economy was already in recession.

Published: September 24, 2007

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Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.