Mr Greenspan says the frenetic pace will simmer down

For five years the housing market in the US has thrived, with prices increasing by 7% during the past year.

However, the second half of 2002 saw a sharp slowdown in value of property, relative to previous years.

"With home price increases now subsiding, and mortgage interest rates no longer declining at last year's impressive pace, some slowdown in the rate of mortgage debt expansion is to be expected," Mr Greenspan said.

The buoyancy of the market is more likely to be dampened by rising interest rates, than declines in home values, he cautioned.

Mortgage bonanza

Mr Greenspan, who has overseen the cutting of US interest rates to a 41-year low of 1.25%, was speaking in Florida to a conference of the Independent Community Bankers of America.

US HOUSING BOOM 2002 House prices increased by 7% Home owners withdrew $200bn by refinancing their mortgages at lower rates Home owners made $350bn in profit by selling homes Home owners took $130bn by increasing mortgages

He added that the pace at which home owners are re-mortgaging their homes to take advantage of low mortgage rates and free up capital is also slowing.

"The frenetic pace of home equity extraction last year is likely to appreciably simmer down in 2003."

Home owners used the value of their homes to withdraw $700bn in cash last year, he added.

No 'bursting bubble'

However, Mr Greenspan warned against drawing any comparisons between the housing market and the turbulent stock markets.

A sharp decline, the consequences of a bursting bubble, however, seems most unlikely Alan Greenspan US Federal Reserve

He argued that selling a home was more costly and that conditions varied from area to area.

"A sharp decline, the consequences of a bursting bubble," he said, "seems most unlikely".

The housing market has given a patchy performance in early 2003.