Baby-boomers control the housing market, and their enormous equity will maintain them in place: Whitney

Meredith Whitney Advisory Group CEO, whose prediction of the great financial crisis has earned him the nickname “Oracle of Wall Street”, underlined in a Financial time An editorial that more than 54% of houses belong to the elderly, compared to 44% in 2008.

She added that 79% of the elderly have their homes and that three quarters of them have no mortgage, which means that they have a huge amount of equity that can help cover upward accession, such as insurance.

“This has made it easier to keep their homes by explaining some of these equity built,” said Whitney. “And growth in such funding will be a major theme for the American economy over the next three to four years.”

The cheapest and fastest consumer debt form is now credit lines on equity, demonstrating how many dwellings has become a financial resource, and the elderly represent 41% of the domestic capital that turned into circulation, she said.

Other debt products and new credit forms are also available for owners who wish to withdraw money from their properties. The result is that housing stocks will remain limited because baby boomers are less inclined to reduce houses for small houses and have the financial means to stay in place.

“This means that the housing market will continue to be very different from before. There will be no quick solutions,” warned Whitney. “Even if mortgage rates at 30 years are decreasing, do not expect the sales of existing houses to take materially.

This is bad news for millennials and genres trying to enter the housing market. In fact, the housing market has become so unaffordable for these buyers, the number of house buyers for the first time has decreased to a historic hollow.

In May, Whitney also noted that many baby boomers could not afford to move and borrowed against their homes to stay where they are.

Admittedly, boomers have collectively 75 billions of dollars in wealth. But it is not distributed uniformly, and Whitney estimated that one in 10 elders can afford assisted life facilities.

“Seniors experience the pay check check,” she told Bloomberg TV.

Baby-boomers trail on the housing market is only one of the many. While President Donald Trump’s prices and the repression of immigration struck house manufacturers, the offer of new houses slows down.

Meanwhile, economic anxiety and the prices of houses still extinct weigh at the request of potential buyers, even if mortgage rates decrease, and this spreads to owners, who are increasingly withdrawing market announcements.

The low housing market even threatens to lower the overall economy. ED Leamer economist, who died in February, published an article in 2007 which said that residential investment is the best indicator of a recession in the opposite direction.

In the second quarter, residential investment dropped by 4.7%, accelerating compared to the 1.3% drop in the first quarter.

In July, the chief economist of Moody’s Analytics, Mark Zandi, distinguished the housing market for concerns, climbing in a “red rocket” while sales of houses, construction of houses and housing prices were tightened by high mortgage rates.

At the same time, residential construction permits – a key indicator of the construction of houses – fell, and Zandi warned earlier this month that they are “the most critical economic variable to predict recession”.

This data is a major factor in the first economic indicator of Moody, which estimates that the chances of a recession in the next 12 months are now at 48%.

Even if it is less than 50%, Zandi stressed that the probability has never been so high before without the economy ultimately slipping into a slowdown.

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