Baby boomers own more homes than millennials and Gen Z, creating a “generational divide” in the housing world, according to Meredith Whitney, the “Wall Street oracle,” who once predicted the Great Financial Crisis.
Boomers aren’t selling, and that’s a problem. “They’re not selling because they’re getting older, because they can’t afford to go anywhere else,” Whitney said last week. interview with CNBC. “Until they sell, there will be a real confrontation between sellers and buyers.”
So what will it take? Well, house prices are bound to fall; Prices need to fall by about 20%, Whitney said. But this decline in prices will only take us to the price levels that existed three or four years ago, before the pandemic and the corresponding housing boom. Plus, people will still have plenty of equity in their homes, Whitney explained, so it won’t be a housing crash.
At this point, it doesn’t make sense for many people to sell their homes because they are either tied up with a low mortgage rate or because they own their home sincere. It would likely mean giving up much higher Mortgage rateAnd a much more expensive house. Given the reluctance to sell from older generations, this leaves fewer homes for younger generations to buy; Those that are for sale, in some cases, are unaffordable because prices continue to rise due to limited supply – and mortgage rates are higher than people are used to.
In some cases, people list their homes at exorbitant prices and sell them if they get an offer, or stay in them if it doesn’t meet their expectations, Whitney said. She added that sales are low, especially in the middle and lower levels of the market, while luxury is carried by all-cash offers. “Something has to happen in a normal market,” Whitney said. “I think you’ll start to see home prices come down.”
“For homes to be affordable, this has to happen,” she added. Whitney said she wrote a letter to everyone who won the presidential election, telling them they should let home prices fall, and it wouldn’t be the end of the world, because “demand may be overstated.” (No other details about the message were provided.)
In an interview with luck Earlier this year, Whitney said she expected home prices to fall by 30%, in part because young men and single men were staying at home and playing video games.
“Unless you’re raising a family, there’s no reason to buy a house,” she told me at the time.
This is just one part of her forecast. Another phenomenon that could lead to a decline in home prices is the so-called silver tsunami, which refers to the baby boom generation and the supposed millions of homes that will flood the market in the next decade as they age, downsize, and their home ownership rates decline. The two together mean increased supply, decreased demand and lower prices, Whitney said. But in her opinion, it would not be a housing collapse. Instead, she argues, it would be a reversal of pandemic-fueled high prices and ultra-low mortgage rates.
But here’s the thing: Home prices never go down. And in our current housing cycle, the shortage of homes, running into the millions, is fueling this trend. If the situation reverses as Whitney predicts (with supply exceeding demand), it may be plausible that housing prices will fall. But others in the industry have dismissed the silver tsunami, noting that the coming supply, freed up by baby boomers, will not be overwhelming and will be offset by younger generations who want and need homes.
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