" . . . Although we certainly cannot rule out home price declines, especially in some local markets, these declines, were they to occur, likely would not have substantial macroeconomic implications.
Well, hindsight is always 20/20, but one can make a very good case that housing prices up until just about the very moment of Greenspan's infamous prediction were bubblicious, indeed.
Here's the evidence*.
This graph shows year over year rate of change in home prices. First, I'll suggest that a 12% YoY increase in anything, anywhere, any time is unsustainable. Hence the late 80's - early 90's housing decline, which I have labeled a crash. But that crash was not much - a brief excursion into negative territory followed by a few years of relative stability. After the mid-90's things got interesting - for a decade, or so. I've placed a lower trend line (red) connecting the bottoms, and a parallel (red) line more-or-less cross the tops. This data doesn't fit this channel neatly, though, so I've also place a purple line that fits better across the tops.
The ultimate peak is then at the expanding channel top or an overshoot, depending on how you chose to think of it. Then in '06, the RoC line crashed through the lower trend channel boundary. That looks like a sharp V recovery, but we'll have to see how sustainable it is. With unemployment remaining stubbornly high, lousy paying jobs replacing better-paying jobs, and increasing wealth and income disparity, it's hard to imagine what could drive a robust recovery. I suspect the recent drop back below zero will be an important part of the story for several more years. The backlog of foreclosures has gotten worse, not better, and until that clears, housing prices will remain stagnant, at best.
Back to the bubble - I'm going to suggest that when the YoY % change in the price of anything is in double digits and increasing, that is indisputable evidence that there is a bubble in that item. No other confirmation is needed. Even the decline in the '01-02 recession only brought the RoC down to about 8% - and that was brief. By 2005, it was exceedingly clear that there was a housing bubble. Greenspan is either a fool or a tool - quite possibly both.
There is also a lesson here about trends. When the channel is broken in a convincing way, that trend is done. Forever. Whenever it is spoken of in the future, it will be as an item from the past.
* Steve has a post containing the original version of this graph, and points us to a post by Tyler Durden at Zero Hedge that has several more. Those posts aren't about the housing bubble, per se, but rather about how Wall St. is sucking money out of ordinary peoples' pockets, and thus the economy in general.
These are examples of more rentier activity, and detrimental to society.