HOUSING BUBBLE WATCH….The housing meltdown continues apace:

The supply of unsold U.S. homes ballooned to an 18-year high in August as demand for existing homes fell to a five-year low, according to a report by the National Assn. of Realtors….Also today, a separate report indicated that home prices were falling at an increasing rate. The closely watched S&P/Case-Shiller home prices index, which tracks results in metropolitan areas and is considered a leading measure of U.S. single-family home prices, showed an annual decline of 4.5% for the 12 months ended in July, representing the biggest drop since 1991.

….Sales are expected to continue their descent, further weighing down prices….”August’s sales do not reflect the full impact of the credit crunch, which hit financial markets in mid-month, since most sales were financed with loans approved weeks beforehand,” said Patrick Newport, an economist with research firm Global Insight.

Alan Greenspan says there’s nothing he could have done about the housing bubble. Monetary levers are too crude to do any good, and the least worst option is to let the bubble collapse on its own and then pick up the pieces afterward.

Maybe so. But that still doesn’t explain why Greenspan cheered on the bubble back in 2004. Watch him squirm over that here.

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