Greenspan admits housing buble in some sectors

Alan Greenspan, chairman of the Federal Reserve, admitted for the first time that some sectors of the country may face drops in housing prices during the next few years.

WASHINGTON, May 20 - Alan Greenspan, chairman of the Federal Reserve, suggested on Friday that the red-hot housing market is becoming a little too exuberant for its own good.

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Alan Greenspan, chairman of the Federal Reserve, spoke at the Economic Club of New York at the Hilton New York hotel on Friday.

Text: Greenspan's Remarks

"Without calling the overall national issue a bubble, it's pretty clear that it's an unsustainable underlying pattern," Mr. Greenspan told the Economic Club of New York at the Hilton New York hotel in Midtown.

Mr. Greenspan emphasized that he sees no sign of a nationwide housing bubble, but he acknowledged concerns over "froth" in the market and pointed to a big increase in speculation in homes - particularly in second homes. As a result, he said, there are "a lot of local bubbles" around the country.

The comments of the Fed chairman were the closest he has come to acknowledging the possibility that housing prices may be poised for a fall in some parts of the country.

The issue is sensitive for the Federal Reserve, because its policy of keeping interest rates low has helped propel housing prices upward even when the rest of the economy was dragging.

But the housing issue highlights an unusual quandary for the central bank: even though it has raised short-term interest rates eight times since last June, long-term interest rates and mortgage rates are actually lower than they were one year ago.

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