Meredith Whitney, who previously forecasted the financial crisis in the mid-2000s, sees downside for the housing market, driven by changes in behavior among younger men. She sees the beginning of a multiyear decline in housing prices as the lower levels of household formation among men negatively impact demand. 

On the supply side, she sees more homes for sale due to the aging demographics of homeowners. Whitney’s perspective deviates from the consensus, which sees home prices as remaining elevated due to a lack of supply, coupled with a bulge in demand as Millennials enter their peak consumption years over the next decade. This year, most Wall Street banks are forecasting a mid-single digits increase in home prices. 

Another factor impacting housing supply is that the vast majority of mortgages were made at much lower rates. While many asset prices have declined due to the impact of high rates, home prices are an exception. Whitney contends that “normally you would think as rates go up, home prices would go down, and that hasn’t happened over the last two years. I think home prices will normalize because as more inventory and supply come 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.” 

Finsum: The consensus view is that home prices will continue rising due to low supply and demographic-driven demand. Meredith Whitney, well-regarded for predicting the financial crisis, is bearish on the asset class.