Meredith Whitney, deemed the “Oracle of Wall Street” for successfully calling the financial crisis, says home prices are likely to fall substantially, and the reasons have to do with habits picked up by young guys.
“You have men staying single longer…and then you have what I call a growing crisis of the young American male…they’re twice as likely to live at home than women. So one out of five young men live at home with their parents, and these aren’t young men going to college and coming home for holiday breaks, these are young, grown men choosing to live at home,” Whitney told CNBC this morning.
The outcome could have profound effects on the housing market, she said.
“I think you’re going to start to see housing prices begin a multi-year/decade decline, just due to supply/demand dynamics,” Whitney said. “So you’ve had a demand, supply imbalance: more demand, less supply. And I think that’s going to invert.” So what that means is supply will then outweigh demand, which is why she sees home prices falling for years.
Whitney’s take is based in part on demographic shifts. The bulk of housing is owned by people and households over the age of 40, she said. But household formations are the lowest they’ve been in more than a century, which translates into a demand problem, she said today.
Yet many experts have predicted that home prices will only continue to go up from here. Mortgage rates reached a two-decade high last year, and people were still buying homes—and because there simply aren’t enough homes, demand outweighs supply, keeping home prices high. Whitney, however, is calling it differently as shifts within the housing world, and apparently among young male adults, occur. It’s not clear what data she is referring to here or in the information above.
Whitney argued that lower-than-ever interest rates “ballooned inflation, and particularly housing inflation,” which has priced so many people out of the market. “If you’re single, the chances that you’re going to be able to afford a home on your own is less likely than if you’re a dual-income family,” Whitney said. Then she goes on to say that homeowners hold much more wealth than non-homeowners.
Whitney has long discussed a “silver tsunami” set to strike the housing market as baby boomers age and their homes are freed up. “You’ll see a supply-demand dynamic shift,” the founder and CEO of Whitney Advisory Group previously said, echoing her claims today.
“Normally you would think as rates go up, home prices would go down, and that hasn’t happened over the last two years,” she said. “I think home prices will normalize because as more inventory, more supply comes on the market, you’ll see a true clearing price that is lower than it is today. So I would say 20% lower than it is today.”
Home prices rose 6% in January; a lot of people think they’ll keep going up. In January, Goldman Sachs predicted home prices will rise 5% this year and 3.7% next year. In March, Capital Economics predicted home prices will rise 5% this year. This month, CoreLogic predicted they’ll increase by 3.1% this year (from February 2024 to February 2025).
Toward the end of last year, Whitney said 51% of people over the age of 50 are set to downsize to smaller homes, citing an AARP report at a conference, and it would bring more than 30 million housing units to the market. More supply, or better said, supply that outweighs demand, would trigger a drop in home prices.
However, this concept of a “silver tsunami” has been widely refuted. A recent analysis from Freddie Mac revealed that the 9 million homes set to come onto the market in the next decade as baby boomers age aren’t going to really disrupt the market. For one reason, younger generations will enter at the same time—meaning housing demand will continue to rise. “Some have warned of a ‘silver tsunami’ as aging boomers look to sell their homes, flooding the market with inventory,” the Freddie Mac report read. “But as this analysis demonstrates, the tsunami is more like a tide, bringing a gradual exit that will mostly be offset by new entrants.”
Additionally, Eric Finnigan, vice president of demographics for John Burns Research and Consulting, recently told Fortune that baby boomers aren’t going to crash the market because they’re powering it. His team found it takes about four deaths to equate to one home listed for sale (because a partner might hold onto it, or it may be passed down to children). The number of homes listed for sale due to deaths is rising, and it will continue to, but “it’s not a deluge,” Finnigan said. “It’s not a tidal wave of homes being listed for sale because of all these dying baby boomers.”
While inflation is cooling in the US, the housing market shows no sign of lowering its prices. Bankrate reported that the average 30-year mortgage rate is currently at 6.93%.
There is a lot of blame going around regarding who is responsible for these high home prices. It’s common for younger generations to blame boomers, or baby boomers, for overvaluing their homes. But one millennial called out their own generation.
A millennial claimed that their generation is responsible for high housing prices.
In an anonymous Reddit post, a person who identified themself as a millennial stated that fellow millennials and other “new homeowners” are to blame for housing costs.
They do contend that some responsibility belongs to boomers for expecting millennials to pay such outrageous prices.
“It’s funny to see my grandparents, parents, aunts, uncles, and extended family, who had average jobs (teacher, machinist, salon or even corporate roles) think that their duplex house on a half acre is worth 500K-1M or more,” they said. “Yet they are acutely aware they would never be able to afford a house like that on their current or former salary.”
However, for the most part, this person argued that the blame rests squarely on millennials’ shoulders. “How did this happen?” they asked. “It’s us. We are agreeing to pay these dumb prices.”
They theorized that there are several different factors that could be causing this issue. One is millennials’ familiarity with “taking out impossible loans to pay back,” something that comes from notorious student loans. Another possibility is “quick home appreciations during the ‘08 bubble.” “Or,” they added, “maybe this is the first time we’re seeing generational wealth being accumulated and passed down from boomers.”
The millennial had some interesting suggestions for reversing the problems in the housing market.
The person had some striking ideas for finding a solution to the problem. “If millennials and new homeowners collectively withheld their desire to take out that meaty mortgage, prices would drop,” they said. “So we have to toughen up and find more creative ways to find shelter and save for retirement.”
Their thoughts on how to do this raised a few eyebrows. “This may mean staying with parents, [finding a] super cheap… rental, or even sleeping in [the] car,” they wrote.
Ultimately, they said, “Reality check is we have to stop paying the dumb prices by being creative with shelter. And maybe we can get prices to come down … for the next generation.”
Commenters were not happy with the person’s suggestions.
Fellow Redditors who commented on the post were incredulous. “So what [am I] supposed to do? Be homeless?” asked one. That certainly seemed to be their suggestion.
Another person chimed in and said, “Ah, so it’s the millennials’ faults for buying shelter, and not the boomers for price [gouging] us. I suppose you think the price of healthcare is consumers’ fault for not just dying instead?”
“Dude, it’s not us,” one person insisted emphatically.
The generational blame game only distracts from a real solution.
It certainly does seem strange to suggest that people live in their cars rather than buy homes in the hopes that prices will go down. While a possible argument could be made for refusing to buy homes at such high prices, one must also take into account the fact that shelter is a basic necessity.
Regardless, one thing that seems to have even more staying power than high home prices is the ongoing feud and blame game between millennials and boomers. Unfortunately, that blame does nothing but distract from the fact that the true problem is a lack of affordable housing.
Whether that has to do with zoning and state regulations, developer incentives, or simply real estate greed, that’s for economists to debate. Instead of battling to be “right” perhaps boomers and millennials should join forces so true change can happen that benefits everyone.
Mary-Faith Martinez is a writer for YourTango who covers entertainment, news and human interest topics.
The impending departure of baby boomers from the housing market will undoubtedly leave a mark, but the winners in this scenario appear to be Gen Z, while millennials struggle.
NY Post composite
In the US housing market, one generation looms large: the baby boomers.
With a staggering $19 trillion worth of real estate under its belt, claiming 41.6% of the real-estate wealth in the country, boomers have shaped the landscape, creating a housing shortage and driving home prices to unprecedented heights.
However, as this generation ages, a pivotal question emerges: What happens when boomers pass away?
According to projections from the Census Bureau, by 2040, the population of 80-plus-year-olds is expected to more than double.
And as boomers leave their homes due to various reasons, a potential “silver tsunami” of available homes could flood the market.
Some economists predict that this influx might lower prices, creating opportunities for younger generations, particularly Gen Z.
Gen Z, poised to enter their prime homebuying years around 2030, could reap the benefits of this changing tide. With many boomers downsizing in later life, the surplus inventory might include starter homes that are in high demand, but scarce in today’s market.
While millennials may experience some benefits, they are likely to be well past the typical age for first-time homebuyers. Economic challenges and the need for substantial updates to aging boomer houses could hinder their prospects.
Despite efforts to forecast the real estate market’s moves, the one certainty lies in demographic patterns.
Historical data indicates that boomers will start aging out of their homes around 2030.
Zillow estimated that more than 20 million homes would hit the market over the following two decades as a result.
These homes will “boost the supply of housing on a magnitude comparable to the fluctuations that new home construction experienced in the 2000s boom-bust cycle,” the report, written by Issi Romem, said.
But the predicted “silver tsunami” may not be as tumultuous as some anticipate, with experts suggesting a gradual and manageable shift in the market.
Gary Engelhardt, a professor of economics at Syracuse University, suggests that the boomer sell-off will contribute to an excess supply of about 250,000 homes annually until 2032.
However, this figure is relatively small compared to the total sales of existing homes.
“In the next 15 years, this stuff’s really going to start happening,” Engelhardt told Insider.
In this changing landscape, Gen Z emerges as the generation in the driver’s seat.
Unlike millennials, who faced economic challenges and intense competition from boomers, Gen Zers stand to benefit from a more favorable market. Their reduced competition from boomers and a smaller cohort size could ease the pressure on the housing market.
As of 2022, a staggering 79% of baby boomers owned the homes they lived in, compared with 52% of millennials and more than 26% of adult Gen Zers, according to a Redfin analysis.
“I don’t know that millennials will be that generation who benefits” from boomers’ departure, Jessica Lautz, the deputy chief economist and vice president of research at the National Association of Realtors, told Insider.
Thirty percent of 25-year-olds owned their home in 2022, compared with a 27% rate for Gen Xers at the same point in their lives, according to Redfin.
Millennials, meanwhile, were still struggling to catch up with their parents.
Redfin found that 62% of 40-year-olds owned their home in 2022, down from a 69% rate for boomers at the same age.
The oldest Gen Zers will be in their 30s in 2030, within the prime years for first-time buyers, Odeta Kushi, the deputy chief economist for the title company First American, told the outlet.
While some speculate that the homes left behind by boomers may need updates to appeal to younger buyers, the potential benefits for Gen Z in terms of supply and demand dynamics are evident.
As the torch is passed to the younger generations, demographic projections hint at a brighter future for Gen Z and, eventually, Gen Alpha.
The housing market’s transformation may not be a silver bullet for the broader housing crisis, but it presents a unique opportunity for the fortunate and savvy younger siblings of the millennial generation.
Sorry, millennials.
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