Tuesday, March 16, 2010

Meredith Whitney: Housing market will double-dip

Financial analyst Meredith Whitney forecasts a second fall in the housing market:
The US housing market will face another retreat while mortgage-backed securities and Treasurys are likely to go through a "material" correction, Meredith Whitney, CEO of Meredith Whitney Advisory Group, told CNBC Tuesday.

"The housing market surely will double dip," Whitney told "Worldwide Exchange."

Government programs to support housing have been "murky" and when the modifications caused by them come to an end, a lot of supply may come to the market and that's when the real-estate market is likely to go down, she explained.


  1. Well, I'm pretty convinced. Whitney has a good t5rack record and a lot of credibility with me. So her saying "there surely will be a double dip" is significant. One thing that I don't understand is this

    "But now that the securitization market is effectively closed, the prices of mortgages for consumers have not risen to compensate banks for that loss of revenue"

    Why haven't they risen? Is demand just too low? Or have banks just stopped lending to anyone without top notch credit and 20%+ downpayments, keeping rates low?

  2. Is demand for credit low or are banks not lending?

    A hint: If banks were refusing to lend to meet demand, then industry would be issuing corporate paper to gain access to credit. They aren't, which means demand for credit is low.

    Commercial loans dropping: http://research.stlouisfed.org/fred2/series/BUSLOANS?cid=49
    Consumer loans dropping: http://research.stlouisfed.org/fred2/series/CONSUMER?cid=49
    Commercial paper bottomed: http://research.stlouisfed.org/fred2/series/COMPOUT?cid=48
    Corporate cash up: http://research.stlouisfed.org/fred2/series/WDDSL?cid=48

  3. "But now that the securitization market is effectively closed, the prices of mortgages for consumers have not risen to compensate banks for that loss of revenue"

    Income in the banks generated from MBS's have not risen to offset last year's losses because no one is issuing or being approved for mortgages.

  4. I agree with you. I too believe the trends lie the same as you mentioned.
    Keep posting.

    PLote Homes

  5. Anonymous said...
    "I love her!"

    She's 40. Here's a younger cutie, who's probably smarter too.

  6. From Wikipedia:

    "In the second half of 2009, Whitney's bearish views caused her stock recommendations to underperform both the banking sector and many of her less bearish peers. As of December 7, 2009, her recommendations had an average return of -29.54% vs a positive performance for stocks covered of +4.58%. Her sell recommendations on Capital One and Wells Fargo were particularly poor, leading to negative returns of -190.37% and -83.11% respectively."

    I still like her, but she needs to be careful with her bear calls. Right now they are looking a bit long in the tooth.

  7. Its a bit silly to site performance over a timeframe of "the second half of 2009" or take 2 specific stock calls and cite them. Not blaming you, you just took the wikipedia entry, but that's just not a representative sample for performance.