Greenspan Sees Housing Recovery in First Half of 2009

By Jake Lee

Oct. 10 (Bloomberg) -- Former U.S. Federal Reserve Chairman Alan Greenspan wrote in an article for Emerging Markets newspaper that the U.S. housing market will recover in the first half of 2009.

``The recent slowing in the rate of decline in U.S. home prices is the first positive note in this now yearlong trauma,'' Greenspan wrote in the article for Emerging Markets, a publication issued for this weekend's Group of Seven and International Monetary Fund meetings in Washington.

``More conclusive signs of pending home price stability are likely to become visible in the first half of 2009,'' he wrote.

The credit-market freeze will eventually thaw as ``frightened investors take tentative steps towards reengagement with risk,'' the former Fed chairman said, without specifying a time frame. He praised the actions of governments in buying up toxic assets and recapitalizing banks.

Treasury Secretary Henry Paulson is pursuing a Congress- approved $700 billion rescue plan and the government may buy stakes in several banks within weeks. Iceland's government seized the island's top three banks this week after the banking system imploded. The U.K. government agreed to invest 50 billion pounds ($87 billion) Oct. 8 to boost capital in the nation's banks to unlock credit markets.

To contact the reporters on this story: Jake Lee in Hong Kong at jlee127@bloomberg.net.