Whitney is best known for predicting Citigroup would have to raise capital, sell assets on Oct. 31, 2007. CEO Chuck Prince quit two days later
One surprise coming out of the Fed rate hike campaign is that house prices have been hardly impacted at all.
Prices surged when COVID took so much inventory off the market, but even as the country and the housing market normalized and mortgage rates went as high as 8%, growth returned to around 5% to 6% per year — without any correction.
Meredith Whitney, known for her prescient calls as a bank-sector analyst, expects that to change.
Whitney is best known for predicting Citigroup would have to raise capital, sell assets or cut its dividend on Oct. 31, 2007.
Then CEO Chuck Prince quit two days later, and Citi ended up doing all three. (Her subsequent call of widespread municipal bond defaults missed the mark.)
She is out with a new research paper, called “The crisis of the young American male and the long-term impact on housing demand,” and she appeared on CNBC and The Julia La Roche Show to promote her demographic-focused prediction.
Whitney told CNBC that the clearing price of homes will be some 20% lower than it is today.
As the baby boomers age, they will downsize — some 45 million homes that will come on the market, she estimates.
That’s huge supply given that the peak number of existing-home transactions was 7 million, and that the current rate of sales is just over 4 million.
“You have a supply glut that is inevitably going to hit the market,” she said.
And missing from Whitney’s analysis is the recent impact of a surge in immigration.
The Congressional Budget Office estimated that net immigration was 2.6 million in 2022 and 3.3 million in 2023, far higher than the 900,000 average between 2010 and 2019.
Immigration could help limit the impact of both seniors selling and young men living at home.
MarketWatch 3 April 2024
Chuck Prince, the former chairman and chief executive of Citigroup.
As Mr Prince departs, however, it should be noted that his statement was not, as history will record it, idiotic.
His offence was not that he misunderstood or misstated how banks have operated over the past few years but that he blurted out the truth rather too openly.
Note that he did not say “if” the music stops but “when”.
He recognised then – as did others – that the period of extraordinarily easy money that had prevailed since 2002 was bound to end.
That brings us to the crux of Mr Prince’s remark: “As long as the music is playing, you’ve got to get up and dance.”
In other words, as long as conditions in financial markets are alluring, banks have no choice but to plunge in – even if they realise that dangers lie ahead.
John Gapper, FT November 14 2007
https://www.internetional.se/citiskulder.htm#dancing
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