Home Prices May Fall 20% As The Housing Market Thaws — And Help Get Baby Boomers Moving, Research Legend Says

By Theron Mohamed, Business Insider, November 20, 2024

• Meredith Whitney expects home prices to fall 10% to 20% as the frozen housing market starts thawing.
• The veteran researcher said baby boomers weren’t selling, restricting the number of homes available.
• Prices rose in September, but existing-home sales fell, and the share of first-time buyers stayed low.

Home prices are poised to fall by up to a fifth as the frozen housing market thaws — and that could help baby boomers to sell at last and younger people to become homeowners, Meredith Whitney said.

“It’s got to be a two-step process,” the CEO of Meredith Whitney Advisory Group told the Financial Sense Newshour podcast in an episode released Saturday.

“You have to have rates come down, but you also have to have home prices come down,” she said about revitalizing the housing market. “One doesn’t work on its own.”

Homebuyer headaches

Housing transactions have stagnated in recent years as soaring prices and steeper mortgage interest rates have fueled an affordability crisis.

Homeowners who locked in cheap mortgages are reluctant to sell and give them up. Prospective buyers are similarly unwilling to pay top dollar for a worse house than they imagined and take on a larger monthly mortgage payment.

Some relief has come from the Federal Reserve cutting its benchmark rate by 75 basis points since September to as low as 4.5%. The central bank raised the rate from virtually zero to as high as 5.5% between March 2022 and July 2023.

Even so, the median existing-home price jumped 3% to $404,500 in the 12 months to September, according to the latest National Association of Realtors data.

Existing-home sales fell 3.5% over the same period, and first-time buyers were responsible for 26% of sales in September, in line with lows hit in August this year and November 2021.

Price declines and baby boomers

Whitney was dubbed the “Oracle of Wall Street” after correctly predicting the 2008 financial crisis, which was precipitated by the collapse of a massive housing bubble.

She predicted on the recent podcast episode that house prices would fall by 10% to 20% and urged the government to “sit back and let that happen” because that would only lower them to 2020 or 2021 levels. Many homeowners have built huge amounts of home equity over time, she added.

As for why younger millennials and Gen Z are struggling to get on the housing ladder, Whitney pointed to homeowners in their 60s and 70s staying put.

“The problem is the baby boomers own 60% of the housing stock,” she said, referring to single-family, owner-occupied homes. “They’re not moving.”

“The older people aren’t selling; they have no place to go,” she continued, adding that they “can’t afford to move.” She highlighted increases in property taxes, homeowners insurance, and homeowners-association fees as one source of financial strain, especially for those on fixed incomes.

In a CNBC interview last week, Whitney described the situation as a “generational schism” and warned there would be a “real standoff between sellers and buyers” until more inventory became available.

Several economists have predicted a “silver tsunami” as baby boomers sell their homes to downsize or move into care homes, increasing the available supply of single-family homes and reducing prices.

But in a recent survey, 54% of older Americans said they intended to remain in their current homes for life, while only 15% said they planned to sell in the next five years.

Source: Theron Mohamed, November 20, 2024, Business Insider