Home prices not overinflated, says Fed Chairman Alan Greenspan.

Federal Reserve Chairman Alan Greenspan discounted the possibility of a "housing bubble" artificially inflating home prices, during recent testimony to the Joint Economic Committee of Congress. Federal Reserve Chairman Alan Greenspan and other market watchers see no evidence of a bubble--especially since real estate is less liquid than stocks, and supplies are lean due to land shortages and the cost of government permits. The financially and emotionally intensive nature of real estate transactions discourage speculative trading in homes, according to the Fed chairman. Greenspan added that although housing prices could fall, he expected the declines would be limited to certain markets.

Soaring appreciation--which hit annual gains of 30 percent in New York City--will eventually fizzle, but this doesn't mean homeowners are headed for a dramatic price plunge, says Economy.com housing economist Celia Chen. In fact, Chen expects the economy to remain robust, with some areas seeing price growth merely stabilize rather than fall