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Homeowners' equity called a good cushion
Associated Press
Published September 27, 2005
WASHINGTON - Federal Reserve chairman Alan Greenspan, softening his concern about a possibly overheated housing market, said Monday that many homeowners have enough equity to cushion the shock if prices drop.
Greenspan continued to register concerns about soaring house prices and people who are taking out risky mortgages to buy expensive homes that they otherwise couldn't afford.
But he indicated that most homeowners were in a fairly good position in the event that house prices drop.
"The vast majority of homeowners have a sizable equity cushion with which to absorb a potential decline in house prices," he said. Fewer than 5 percent of home borrowers were highly leveraged, according to one measure he cited.
An end to the housing boom, meanwhile, could have a silver lining, the Fed chairman added.
Greenspan speculated that it probably would be accompanied by a moderation in the growth of consumer spending. That could lead to a boost in Americans' personal savings rate, which has been dismally low, and could curb Americans' appetites for foreign-made goods, helping to narrow the United States' trade deficit.
[Last modified September 27, 2005, 02:45:31]
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