Shares of home builders and real estate companies fell broadly Friday after Federal Reserve Chairman Alan Greenspan (search) warned that buying power fueled by rising prices for assets such as homes could disappear if investors turn cautious.

The Dow Jones U.S. home construction index (search) slid by as much as 2 percent to its lowest level in more than two months. The Morgan Stanley Capital Index of U.S. REITs, a broad measure of REIT stocks, fell 1.2 percent.

In remarks prepared for delivery to the annual central U.S. central bank chairman at the end of January 2006.

He said that "newly abundant liquidity can readily disappear" if investors grow wary for some reason and demand a higher risk premium for lending.

While most of Greenspan's comments seemed directed at the U.S. housing market, his comments also grabbed the attention of commercial real estate investors, said Mark Zandi, chief economist at Economy.com.

"What he's basically saying here is that history has not been kind to overly aggressive investors who have driven risk premiums down and that describes real estate investors today," Zandi said.

Although the fundamentals of most commercial real estate, such as office property have recently begun to improve, the prices they have commanded have been setting records for about three years, as a flood of capital chases these assets.

"He's (Greenspan) indicating that what's going on in the real estate markets is overdone and there's a good chance that prices will correct," Zandi said. "That's implicit in what he's saying. That's what's got investors worried today."

On Friday, real estate stocks were some of the biggest losers.

Top decliners included D.R. Horton Inc (DHI), the largest U.S. home builder which ended down 2.3 percent at $34.40; Toll Brothers Inc (TOL), off 2.89 percent at $46.71; and Lennar Corp (LEN), down 1.45 percent at $58.41, all on the New York Stock Exchange.

Real estate developer and services shares also moved lower, with CB Richard Ellis Group Inc (CBG), the biggest U.S. commercial real estate services provider, finishing down 5.36 percent at $43.30. Brokerage fees from real estate sales have propelled CB Richard's share price up 163 percent since its initial public offering in June 2004.

Rival Jones Lang LaSalle Inc (JLL) fell almost 2 percent to $46.22.

Economists also interpreted Greenspan's remarks as indicating the Fed will not take a hiatus any time soon from its campaign of gradual interest rate increases.

Some worry that this may lead to higher interest rates for home mortgages and stall home building activity, which has thrived in recent years amid historically low home loan rates.

At one point in the market's session, the home building index hit its lowest level since June 14. Since hitting a lifetime high on July 20, the group has fallen 15.7 percent amid concern that the boom in the stocks may have peaked.