Greenspan doesn't ask for much...

I can't believe Greenspan is saying everything is OK because "the vast majority of homeowners have an equity surplus." JEEZ. That's a pretty damn low standard considering how much equity the average homeowner put in. Even new homeowners, who are usually the most leveraged, average something like a 20% down-payment. Can you imagine if the average homeowner was in the red? Of course the whole point of a bubble is that it's a bubble till it pops. Homeowners actually have a growing equity surplus BECAUSE it's a bubble. It's like saying there's no danger from a bubble because the bubble is big. Is Greenspan so timid about tweaking the markets that he actually has to say junk like this? He says only 5% of owners are more than 90% leveraged. If that's the best sounding stat he can come up with, we're in some deep shit.
The thing is, even after the bubble pops, history seems to show there won't be really good (cheap) buying opportunities for about 3-6 years (liquidity will vanish, but prices will take time to drop).
That's because it's tough to sell when you have very low or negative equity. Most people don't have that kind of cash (or they wouldn't have borrowed so much in the first place). It's easier to make a mortgage payment than it is to make the lump payment of remaining principal your house sale can't cover.

Tech Tags: economics housing bubble debt greenspan