Meredith Whitney, considered the “Oracle of Wall Street” for successfully declaring the financial crisis, says real estate prices are more likely to fall significantly, and the explanations for this lie within the habits of young people.
“There are men who are staying single longer… and then you have what I call a growing crisis of young American men… They are twice as likely as women to live at home. “So one in five young men live at home with their parents, and these are not young men who go to college and come home for the holidays, but young, adult men who choose to live at home,” Whitney told CNBC this morning.
The result could have a profound impact on the true estate market, she said.
“I think home prices will decline over several years/decades based solely on supply/demand dynamics,” Whitney said. “So there was an imbalance between demand and supply: more demand, less supply. And I think that will reverse.” This implies that supply will then exceed demand, which is why she expects property prices to fall for years to return.
Whitney’s opinion is predicated partially on demographic changes. The majority of the apartments are owned by people and households over 40 years old, she said. But the variety of household formations is at its lowest level in greater than a century, creating a requirement problem, she said today.
Still, many experts have predicted that property prices will only proceed to rise from here. Mortgage rates hit a two-decade high last 12 months and folks were still buying homes – and since there just aren’t enough homes, demand is outstripping supply, keeping home prices high. However, Whitney calls it something different because there are changes happening within the housing world and apparently also amongst young male adults. It isn’t clear what data she is referring to here or in the data above.
Whitney argued that lower-than-ever rates of interest were “driving up inflation, particularly housing inflation,” which was driving so many individuals out of the market. “If you’re single, the chances of you being able to afford a home are lower than if you’re a dual-income family,” Whitney said. She then goes on to say that homeowners have way more wealth than non-homeowners.
Whitney has long talked a few “silver tsunami” that can hit the true estate market as baby boomers age and their homes develop into available. “You’re going to see a dynamic shift in supply and demand,” the founder and CEO of Whitney Advisory Group said previously, echoing her claims today.
“Normally you would think that when interest rates go up, house prices would go down, and that hasn’t happened in the last two years,” she said. “I think property prices will normalize because as more inventory and supply comes onto the market, the actual sales price will be lower than it is today. So I would say 20% lower than today.”
House prices rose 6% in January; Many people imagine they’ll proceed to rise. Goldman Sachs in January predicted home prices would rise 5% this 12 months and three.7% next 12 months. Capital Economics forecast a 5% increase in house prices in March. CoreLogic this month forecast a 3.1% increase this 12 months (from February 2024 to February 2025).
Late last 12 months, Whitney said 51% of individuals over 50 will move into smaller homes, citing an AARP report at a conference, which might bring greater than 30 million housing units to the market. Greater supply, or reasonably supply exceeding demand, would trigger a decline in property prices.
However, this idea of a “silver tsunami” has been largely debunked. A recent evaluation from Freddie Mac found that the nine million homes that can hit the market over the following decade as baby boomers age won’t really disrupt the market, firstly because younger generations will likely be coming onto the market at the identical time – meaning the demand for living space will proceed to rise. “Some have warned of a ‘silver tsunami’ as aging baby boomers look to sell their homes and flood the market with inventory,” Freddie Mac’s report said. “But as this analysis shows, the tsunami is more like a flood, bringing with it a gradual exit, largely offset by new entrants to the market.” Furthermore, Eric Finnigan, vice chairman of demographics at John Burns Research and Consulting, recently said Assets that baby boomers won’t crash the market because they’re driving it. His team found that it takes about 4 deaths to place a house up on the market (because a partner might keep it or it could be passed on to children). The variety of homes on the market as a result of deaths is rising and can proceed to rise, but “it’s not a deluge,” Finnigan said. “It’s not a tidal wave of houses being put up for sale because of all these dying baby boomers.”
