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Sagging home sales underline the difficulties faced by the housing market.
Existing home sales fell by 0.7% in May compared with the same month last year, according to the National Association of Realtors, following the slowest April for 16 years.
Meredith Whitney thinks the housing market is set for “its worst year in decades.”
The CEO of investment research firm Meredith Whitney Advisory Group and senior advisor at Boston Consulting Group told Yahoo Finance that 2023 and 2024 were both bad years, but it’s now looking even worse with about 4 million sales of existing homes expected.
Whitney thinks the actual number may be significantly below that figure. “That poses a real problem for the general economy,” she said.
Estimates for how much spending on housing, including residential investments and the purchase of services, contributes to GDP ranged between 16 and 18% last year, per the National Association of Realtors and US Congress documents.
Whitney said that when a family moved house, they’re also buying products at retailers such as Home Depot and often paying for renovations too.
As a result, she said a slow housing market had “ripple effects across the board.”
The Federal Reserve was in a tough spot, Whitney added. Chair Jerome Powell said on Tuesday that rate cuts would be put on hold despite President Donald Trump’s demands for immediate cuts.
For Whitney, the market isn’t going to benefit from this.
“You have wage inflation and real inflation from goods, and then you have a slowdown in the economy,” she said. “So we don’t expect the housing market to improve that much at all, if at all. We think it’s going to weaken throughout the year.”
There’s also a real generational divide, Whitney said, adding that about 60% of existing homes are owned by people over the age of 60, whereas many potential first-time buyers are saddled with student loan debt and spend more of their discretionary income on rent.
“It’s been cheaper to rent than it has been to own homes because of escalating property insurance and property taxes,” she said.
National Association of Realtors chief economist Lawrence Yun said subdued sales were largely due to persistently high mortgage rates.
“Lower interest rates will attract more buyers and sellers to the housing market. Increasing participation in the housing market will increase the mobility of the workforce and drive economic growth,” he said.
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