According to Meredith Whitney, the “Oracle of Wall Street,” who once predicted the Great Financial Crisis, Baby Boomers own more homes than Millennials and Gen Xers, creating a “generational boom” in the housing world. made a difference”.
Boomers aren’t selling, and that’s a problem. “They’re not selling because they’re aging in place, because they can’t afford to go anywhere else,” Whitney said in an interview last week. CNBC. “Until they sell, you’re going to have this real deadlock between sellers and buyers.”
So what will it take? Well, home prices have to fall. Whitney said prices needed to drop by about 20 percent. But this drop in prices will only take us back to the price levels of three or four years ago, before the pandemic and the related housing boom. Plus, people will still have a lot of equity in their homes, Whitney explained, so it won’t be a housing crash.
Right now, it doesn’t make sense for many people to sell their home because they either have a low mortgage rate or they own their home. Forgoing it would likely mean a much higher mortgage rate, and a much more expensive home. Given the willingness of older generations to sell, that leaves fewer homes for younger generations to buy. Those that are for sale are, in some cases, unaffordable because prices continue to rise as supply is tight—and mortgage rates are higher than people are used to.
In some cases, people list their homes at very high prices and sell if they get an offer, or stay if it doesn’t meet their expectations, Whitney said. Sales are depressed, especially at the mid- and lower-end of the market, while luxury is driven by all-cash offers, he added. “The regular market has got some give,” Whitney said. “I think you’re going to start seeing home prices come down.”
“For housing to be affordable, it has to be,” he added. Whitney said he wrote a letter to the winner of the presidential election, telling him to let home prices fall, and that it wouldn’t be the end of the world, because “demand could be excessive.” (He did not provide any other details on the letter).
In an interview with good luck Earlier this year, Whitney said she’s seeing a 30 percent drop in home prices because young, single men are living at home, playing video games.
“Unless you’re building a house, there’s no reason to buy a house,” he told me at the time.
This is only part of his prediction. Another trend that could drive down home prices is the so-called silver tsunami, which refers to the baby boomers and the millions of homes that will flood the market over the next decade as they age and downsize. Home ownership rates will decrease. Whitney said the two together would mean more supply, less demand and falling prices. But it won’t be a housing crash in his mind. Instead, it would be almost a reversal of rising prices due to the pandemic and once-absolutely low mortgage rates.
But here’s the thing: Home prices almost never go down. And in our current housing cycle, the housing shortage, to the tune of millions, is fueling this trend. If the situation reverses itself as Whitney predicts (with supply outstripping demand), it is possible that home prices will fall. But others in the industry have dismissed the phenomenon of a silver tsunami, suggesting that the incoming supply, freed up by baby boomers, will not be too much and that the younger generation will want homes. Are and need them, will be fulfilled by it.
