November 8, 2023
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Americans are sitting on a tremendous amount of equity in their homes. It's a question of when they tap into it
Analyst Meredith Whitney is known for her call that anticipated the 2008 financial crisis. Now she is predicting that the housing market is due for some dramatic changes starting in 2024.
Prices will start to go down and the supply of homes for sale will go up, she said Tuesday, reversing current dynamics that make the home-buying process difficult for many Americas.
The reason: a "silver tsunami" of baby boomers who are expected to start downsizing.
Citing AARP estimates, Whitney says 51% of people over the age of 50 — a group that owns more than 70% of US homes — are set to downsize to smaller homes. That would bring more than 30 million units of housing onto the market.
"You'll see a supply-demand dynamic shift," Whitney, founder and CEO of Whitney Advisory Group, told Yahoo Finance’s Invest Conference on Tuesday.
Whitney sees the shift beginning late next year into 2025 and said it's a multi-decade cycle.
"Americans are sitting on a tremendous amount of equity in their homes. It's a question of when they tap into it," Whitney said.
With so many older Americans sitting on all that cash, when they look to downsize they’re unlikely to be affected much by higher mortgage rates of around 8%, she said.
"I think it's rate agnostic because older people have lower mortgages, if any mortgage at all."
But she said there is a risk associated with that shift: There may not be enough younger buyers. And sellers may just decide to sell at lower prices so they can pocket their gains.
"That's why prices have got to come down to be commensurate with rates," she said. "There's a mismatch here."
Whitney also shared some thoughts Tuesday about the banking system, another subject she knows well. Of the new capital requirements recently proposed by the Federal Reserve and other regulators, she said: "There’s a lot wrong with it."
Whitney argued that the new rules will force consumer lending out of traditional banks into unregulated areas and hurt overall credit availability. Banks have made similar arguments and are fighting the proposal.
"It seems absolutely ham-fisted, and if they're really focused on protecting the system and protecting the US consumer, this is not the way to go about it," Whitney said.
What she worries most about is communities that will be deprived of access to credit.
"I think that's what regulators should focus on," she said.
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