Trouble ahead for US housing, warns 'Oracle of Wall Street' who predicted 2008 crash. Here’s how some can still profit

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Meredith Whitney earned her “Oracle of Wall Street” nickname by predicting the 2008 fiscal situation earlier it hit. Now, astir 2 decades later, she sees caller occupation brewing — this time, successful the U.S. lodging market.

“The lodging marketplace is gummed up with existing location income connected way successful 2025 to beryllium their slowest successful much than 25 years,” Whitney wrote successful a portion for the Financial Times (1). “The adjacent fewer years whitethorn not beryllium overmuch better.”

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The occupation is tied to demographic shifts. Whitney reports that implicit 54% of homes successful the U.S. are owned by seniors — 10% much than successful 2008. Most of them ain their homes outright, meaning they’re mortgage-free. According to spot brokerage level Redfin, 78% of seniors privation to stay successful their existent location alternatively than downsize (2).

In an interrogation with Marketwatch earlier this year, Whitney said, “Either these folks person nary mortgage, oregon a tiny mortgage, and the superior gains that they person to instrumentality and the costs that are required to determination are prohibitive (3).”

Here’s however this is affecting boomers and America’s lodging supply.

Whitney added that the imaginable taxation wound from selling your location means babe boomers whitethorn not beryllium arsenic affluent arsenic they think.

After selling your superior residence, the IRS allows you to deduct up to $250,000 from the home’s selling terms (or $500,000 for associated filers) to trim your superior gains liability (4). Given that this threshold was acceptable successful 1997, it’s not astir arsenic adjuvant present arsenic it was erstwhile location prices were acold lower.

Whitney is not the lone 1 raising reddish flags.

Last September, Federal Reserve seat Jerome Powell said that the lodging marketplace is “in portion frozen” with galore homeowners reluctant to merchantability due to the fact that they’re locked successful astatine little owe rates (5). These rates day backmost to the pandemic, which were betwixt 0% and 0.25% according to Brookings (6).

The result? Persistently precocious prices combined with elevated involvement rates, which tin render homeownership harder than ever to achieve.

According to Realtor.com, the emblematic U.S. household earned astir 46% little than what’s recommended to spend a $439,950 home, which was the median database terms for an American location arsenic of July (7). In December, the median terms of a location had dropped to $415,000, meaning that prices had improved — but not by overmuch (8).