Greenspan's 'No Housing Bubble' Prediction, 5 Years Later

This week marks the fifth anniversary of then-Federal Reserve Chairman Alan Greenspan's observation that there was no housing bubble to worry about:

"Although a 'bubble' in home prices for the nation as a whole does not appear likely, there do appear to be, at a minimum, signs of froth in some local markets where home prices seem to have risen to unsustainable levels.... 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."

Some froth, eh?

Home prices are nationally down 18 percent from that day in 2005 and 30 percent from their 2006 peak with total homeowner equity dropping by a stunning 50 percent. That's more than $2 trillion in homeowner equity down the toilet.

How could Greenspan have gotten it so wrong?