Meredith Whitney, a financial analyst who was once called “the Oracle of Wall Street” for predicting the financial crisis of 2008, warned that generational shift in the U.S. will lead to a significant house price correction within the country’s housing market.
In a recent interview with Insider, Whitney—who in 2009 left brokerage and investment bank Oppenheimer (OPY) and founded her own research firm Meredith Whitney Advisory—said that house prices are destined to fall as the balance between supply and demand changes in the future.
“It’s just a matter of time,” Whitney said, predicting home prices will definitely drop from their recent highs. “Again, it’s not something that happens in one fell swoop, but it’ll be interesting to see the repercussions of that,” she added.
Historically low house supplies in the U.S. have contributed to bringing prices to skyrocketing heights since the beginning of the pandemic, when demand surged and mortgage rates were relatively low.
The crisis of affordability which followed the peak reached by house prices in June 2022 and a rise in mortgage rates temporarily slowed down demand until the end of this summer, allowing prices to slightly tumble and create the conditions for what experts called a housing market “correction.”
But with persisting low inventory, house prices have not dropped significantly and have even started picking back up in many areas across the country since late August. As of August 31, the latest data available on Zillow, the average value of a U.S. home was $349,770. This is 0.4 percent up on the average one year ago.
This stalling situation between demand and supply will change in the coming year, Whitney said, as Baby Boomers—the generation born between 1955 and 1964 and which represents a big portion of homeowners in the U.S.—put their homes on the market in an effort to downsize and save money. According to the U.S. Census 2021 data, the latest available, only 10 percent of American homeowners were under the age of 35.
This will flood the market with a number of available homes which buyers haven’t seen in over a decade in the U.S., where prices have grown by 42 percent since March 2020 alone. In turn, house prices will drop significantly, finally offering aspiring homebuyers a solid chance to buy a property.
“I’m always data-driven, so it’s just the math,” Whitney told the newspaper. “If you look at the percentage of homeowners that are 50 and up, that’s a staggering amount. And if you look at it historically, 50 percent of those over 50 typically sell and downsize, and that’s expense-driven.”
She added: “Even if you discount that down to a very conservative number, it’s just—from a mathematics standpoint—it puts a lot of housing inventory on the market.”
Whitney hasn’t specified by how much she expects house prices to decline by the end of the decade, but said that they will weaken more significantly in states like Pennsylvania, Connecticut, New Jersey and Illinois. She added that this correction won’t lead to a crash of the market.
Newsweek contacted Whitney for comment by email on Monday.