Today, perhaps the closest thing the government has to a sage turned his thoughts to the housing market and its five-year boom.

In a speech to bankers in Florida, Federal Reserve Board Chairman Alan Greenspan said that after home prices climbed 7% last year and by one-third the previous four years, it's unreasonable to expect such price increases to continue.

Greenspan said home prices could decline in some regional markets, although he doesn't see a national "supply overhang" in new homes. And he doesn't equate the housing market to a "bubble." He does expect mortgage activity for buying, refinancing, and equity extraction to slow considerably this year, though, and that could dampen consumer spending.

Median prices for new and existing homes declined in January from December, but were higher than the year before. Mortgage rates aren't declining as they had been, and interest rates aren't expected to go much lower than current 41-year lows. But the most likely sedative to the housing market, Greenspan said, will eventually be rising interest rates. The Fed meets on March 18, and a rate change is not expected.

In a nutshell, Greenspan expects the housing market to "simmer down." Given how hot it has been for five years, "simmer down" may be an understatement, if history is a guide.

Holding Greenspan accountable
On Dec. 5, 1996, Greenspan immortalized the phrase "irrational exuberance" in describing the U.S. equity markets. At the time, the S&P 500 traded at 23 times earnings. By March 2000, the S&P had nearly doubled, and traded near a record 34 times earnings. Then it finally began to fall.

So, was Greenspan correct when he spoke the phrase, or just lucky four years later?

The S&P 500 was valued at 745 on Dec. 4, 1996. Today, it's at 830. Excluding dividends, that's a cumulative gain of only 11% in the six years and three months since Greenspan's comment. History says Greenspan was right, even though he droned his famous two words years before the great bull market roared loudest.