Former Federal Reserve Chairman Alan Greenspan said on Wednesday U.S. house prices appeared to have bottomed out but were still fragile and that the country would not be out of crisis until prices stabilized.
The collapse in the residential property market contributed to a deep recession and triggered a world financial crisis. While the economy is recovering, worries linger about continued weakness in the housing and labor markets.
We will not be out of this crisis until home prices truly stabilize in the United States. They appear to have stabilized but they are very fragile, Greenspan, who headed the Fed from 1987 to 2006 said in a television interview.
Eventually housing will come back, it can't get any lower, said Greenspan in a conversation with Mexico's former Central Bank Governor Guillermo Ortiz.
Ortiz, who left his position after President Felipe Calderon declined to nominate him for another term last December, debuted a new television program on Wednesday where he will sit down with international economic heavyweights like the President of the European Central Bank Jean-Claude Trichet and Brazil's central banker Henrique Meirelles.
Greenspan, the program's first invited guest, chatted with Ortiz like an old friend and said he was definitely optimistic about the U.S. economy in the short-run but was very worried about long-term fiscal problems.
We have to raise taxes and lower benefits ... and there is extreme reluctance in this country to do either.
On Wednesday, data showed sales of newly built U.S. homes fell for a fourth month to a record low in February, but a rise in new orders for durable goods offered assurance the economic recovery was on course.
(Reporting by Mica Rosenberg; Editing by Jan Dahinten)