Greenspan haunting the housing bubble

Kevin Drum draws attention to adjustable rate mortgages that are now skyrocketing after the three-year initial rate freeze is ending (ARMs didn't become popular until several years ago). He makes a similar point to one I made last year, that Allan Greenspan was encouraging people to use ARMs two years ago to prop up the economy, when the rates could only go up. Unsophisticated home buyers are now facing 30-50% increases in mortgage payments. Greenspan long ago stopped deserving the adulation he was given.

So people who can no longer afford their mortgages can just sell their homes and move to a cheaper place, as long as home prices keep rising. If they don't, people won't be able to cover their mortgages through home sales, with foreclosures and bankruptcies being the next step. Get a lot of that happening, and we might see housing prices move down quickly.

Thanks Alan - you're as helpful as you were with the stock market.