Greenspan Forecasts U.S. House Prices to Stabilize Early Next Year

The Wall Street Journal reported Thursday that U.S. house prices will begin to stabilize in the first half of next year, according to Former Federal Reserve Chairman Alan Greenspan.

"Home prices in the U.S. are likely to start to stabilize or touch bottom sometime in the first half of 2009," Greenspan said in an interview with the daily this week.

However, he warned that even at bottom, "prices could continue to drift lower through 2009 and beyond."

Greenspan also acknowledged that a government backstop for the shareholder-owned, government-sponsored enterprises, or GSEs, was unavoidable.

"There's no credible argument for bailing out Bear Stearns and not the GSEs," he said, referring to the two troubled mortgage giants Fannie Mae and Freddie Mac.

But when asked about his view on the government's response to problems confronting the two mortgage giants, Greenspan offered one word: "Bad."

"They should have wiped out the shareholders, nationalized the institutions with legislation that they are to be reconstituted --with necessary taxpayer support to make them financially viable --as five or 10 individual privately held units," which the government would eventually auction off to private investors, he said.