The U.S. economy won’t regain its strength until the price of houses stops falling. And that day hasn’t yet arrived.”The crisis cannot end fully until home prices in the U.S. are at least stabilizing,” says Alan Greenspan, who continues to dissect housing data with as much interest as he did when he was Federal Reserve chairman.For the two-thirds of American families who own their homes, a house is their biggest asset. The lower house prices go, the less wealthy they are and the less they can or will spend and borrow. For home builders, the lower home prices go, the fewer new homes they will build and the fewer workers they will hire. And for many American banks and other financial institutions, mortgages, mortgage-backed securities and financial instruments that rest on mortgages remain a huge headache. The lower house prices go, the less these loans and investments are worth and the weaker the foundations of the financial system are. Although sales of houses seem to be perking up, a good sign, home prices aren’t.
By David Wessel. June 25, 2009 WSJ

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