April 28, 2008

Real Estate Trivia: Alan Greenspan Had A Thesis

Most anyone who has a pulse and has had access to television or the Internet in the last several years knows who Alan Greenspan is. But this piece of information you may not know. Our ex Federal Reserve Chairman (1987-2006) has a little known Ph.D. thesis from New York University. Barron’s, the authoritative financial and stock publication, uncovered the work and ran a piece on it in its April 28th issue.

According to the article, Greenspan takes a look at the impact of a slump in the housing market in his thesis. He makes this statement:

“There is no perpetual motion machine which generates an ever-rising path for the prices of homes,” wrote Greenspan in his dissertation.

Apparently, the 1977 dissertation predicted that someday, there would be a housing bubble burst, but as Barron’s indicates, Greenspan did not anticipate the severity of the impact that such a housing collapse would make - an effect that ties into the economy of America and the downfall of banks (Countrywide).

In fact, a statement made in Greenspan’s thesis indicates that he expected a much milder housing crisis.

The worst he could anticipate was that a sharp “break in prices of existing homes would pull down the prices of new homes to the level of construction costs or below, inducing a sharp contraction in building.” Back then, there were no home-equity lines of credit, derivatives or subprime mortgages. Mortgages were largely concentrated at savings and loans. Credit was harder to come by, too, because conventional mortgage rates were about 8.5% and headed significantly higher. Still, the thesis shows that the former Fed boss was focused on housing very early in his career.

And with that, let’s take a look at a few of the just-listed properties on the market in Westchester. (All but one are under $700,000.)

6352 W. 85th St./2bd, 1bth/$625,000

8907 De Haviland Ave./3bd, 1bth/$679,000

7517 Stewart Ave./2bd, 1bth/$699,000

6906 W. 84th Pl./3bd, 1bth/$745,000

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