Meredith Whitney, known as the Oracle of Wall Street, warns of a U.S. housing crisis driven by demographics, frozen inventory, and rising affordability challenges.
Meredith Whitney, often called the “Oracle of Wall Street” for predicting the 2008 financial crisis, is once again raising alarms. This time, her focus is on the U.S. housing market, where she sees a serious demographic challenge creating long-term issues.
Home Sales at a 25-Year Low
“Existing home sales are tracking under 4 million on an annualized basis and that’s the worst in over 25 years,” Whitney said in a recent interview with MarketWatch. “Buyers are looking for steep discounts and sellers are not willing to make those discounts.”
This mismatch is creating a standstill in the housing market.
The Demographic Dilemma
The heart of the problem, Whitney explained, lies in demographics. “Roughly 60% of homes are owned by people over 55 and for many of them, downsizing isn’t realistic. Lower-cost alternatives are scarce and the financial hurdles of moving are steep.”
She added: “So either these folks have no mortgage or a small mortgage and the capital gains that they have to take and the costs that are required to move are prohibitive.”
Baby boomers, she noted, may not be as wealthy as many assume, especially when faced with capital gains taxes that haven’t been updated in decades. The IRS currently allows an exclusion of $250,000 in gains for individuals (or $500,000 for joint filers) when selling a primary residence. But, as Whitney pointed out, that threshold was set back in 1997 — “when home prices were far lower.”
“Given the fact that 60% of homes are owned by seniors, that is the clear issue with affordable housing, because there’s just an inventory lock,” Whitney said.
A ‘Frozen’ Housing Market
Federal Reserve Chair Jerome Powell has also acknowledged the problem. Last September, he admitted the housing market is “in part frozen,” with many homeowners unwilling to sell because they are locked in at lower mortgage rates.
The result? Persistently high home prices, combined with elevated interest rates, making homeownership increasingly out of reach.
According to Realtor.com, “a typical household would need to earn $118,530 annually to afford a median-priced home of $402,500 in the U.S. — more than 52% higher than the current median household income of about $77,700.”
Real Estate as an Inflation Hedge
Even as challenges mount, real estate remains a hedge against inflation. As the article notes: “When inflation goes up, property values often climb as well, reflecting the higher costs of materials, labor and land. Meanwhile, rental income tends to rise, providing landlords with a revenue stream that adjusts with inflation.”
For those priced out of buying an entire home, crowdfunding platforms like Arrived offer a way in. Backed by investors including Jeff Bezos, Arrived allows people to “invest in shares of rental homes with as little as $100, all without the hassle of mowing lawns, fixing leaky faucets or handling difficult tenants.”
Investors simply choose properties, purchase shares, and collect rental income distributions.
Another route is First National Realty Partners (FNRP), where accredited investors can buy into grocery-anchored commercial properties leased by national chains such as Whole Foods and Walmart. With minimum investments of $50,000, participants gain exposure to stable income streams without the burden of landlord responsibilities.
Gold: A Time-Tested Safe Haven
Beyond real estate, investors are also turning to gold. The precious metal has long been seen as a safe haven in uncertain times. Ray Dalio, founder of Bridgewater Associates, emphasized: “People don’t have, typically, an adequate amount of gold in their portfolio. When bad times come, gold is a very effective diversifier.”
Over the past year, gold prices have surged more than 35%.
One increasingly popular option is a gold IRA, which allows individuals to hold physical gold or gold-related assets in a retirement account. As the article explains, this approach “combines the tax advantages of an IRA with the protective benefits of investing in gold,” potentially hedging retirement savings against economic instability.
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