WASHINGTON (AFP) - The United States is "most unlikely" to suffer a housing bubble despite an extraordinary rise in prices, Federal Reserve chairman Alan Greenspan revealed.
"Overall, while local economies may experience significant speculative price imbalances, a national severe price distortion seems most unlikely in the United States given its size and diversity," he said Tuesday.
Some analysts feared an exploding housing bubble could release a shockwave of financial ruin for over-extended homeowners, the central bank boss told a bankers' meeting here.
Household debt had climbed to a record 1.2 times of disposable income, they noted.
"Those concerns cannot readily be dismissed," Greenspan said.
But the statistics appeared to exaggerate the real level of strain in people's bank accounts.
Household debt had been growing faster than income for half a century as ever-rising incomes allowed people to buy richer assets, partly paid for with debt, Greenspan said.
The pace of rising debt had been brisker in the past two years because of the heated housing market.
Some of the new debt had been taken out by former renters buying homes, he noted.
And despite the higher debt-to-income ratio, people's net worth was now more than five times their income, Greenspan said.
"Taking into account this higher level of assets, all in all, the household sector seems to be in reasonably good financial shape with only modest evidence of an increased level of household financial strain."
Some households, Greenspan agreed, were "stretched to their limits."
Persistently high bankruptcy rates were a concern, too, because they indicated pockets of distress in the household sector.
"But the vast majority appear to be able to calibrate their borrowing and spending to minimize financial difficulties," he said.
As a result, debt was unlikely to become destabilizing in the United States, Greenspan said.
"A significant decline in consumer incomes or house prices could quickly alter the outlook; nonetheless, both scenarios appear unlikely in the quarters immediately ahead."
Housing market speculation was naturally curbed, in any case, by the expense and difficulty of moving house, he said.
In August, sales of new homes jumped 9.4 percent. The median, or middle-of-the-range, price of a new home sold in August climbed 9.7 percent from a year earlier to 208,900 dollars.