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Meredith Whitney Getting Very Bearish: U.s. House Prices To Fall A Further 25%

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Home Prices Could Fall by Another 25%: Whitney

Published: Thursday, 10 Sep 2009 | 8:29 AM ET Text Size By: CNBC.com

Home prices in the US could fall by another 25 percent because of high unemployment and another leg down will come for stocks, banking analyst Meredith Whitney told CNBC Thursday.

"No bank underwrote a loan with 10 percent unemployment on the horizon," Whitney said. "I think there is no doubt that home prices will go down dramatically from here, it's just a question of when."

Local governments and states are chronically under-funded and "most states are under water," adding to the problem of low private consumption, she said.

"If you look at the drivers for unemployment I don't see that reversing very soon," Whitney said.

If consumers were to decide to spend, "that would be a game-changer," but it would be an unnatural thing to do in a recession, she said.

"A lot of themes are constant, which is the US consumer and the small business doesn't have any credit, credit is still contracting," Whitney said.

Consumer debt and consumer credit have dropped according to the latest figures which also show that people have been spending more from their debit cards than from their credit cards.

"Obviously that doesn't bode well for spending," Whitney said.

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She said another leg down was coming for stocks but that Goldman Sachs [GS 172.476 2.206 (+1.3%) ] still has "gas in the tank" and she kept her 'buy' on its stock.

"Goldman is taking a lot of the place that Lehman left," she said.

But banks are not going to see their earnings rise too much from now on, she warned.

"Banks are taking advantage of what the government is doing by artificially inflating asset prices so they can ride a steep yield curve and they're going to have a third quarter that reflects that," Whitney said.

Their shares are unlikely to be uplifted by these results as it happened in mid-July, because then they were under-valued, she added.

http://www.cnbc.com/id/32773345

The stock market doesn't seem to like her latest prediction. ;)

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http://www.cnbc.com/id/32773345

The stock market doesn't seem to like her latest prediction. ;)

She's played it very well tbh.

Must have known this was on the cards a long time ago - and how much worse it's going to get, so to stay on the TV without looking like a loony to most folks while still being accurate is a good trick.

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She's played it very well tbh.

Must have known this was on the cards a long time ago - and how much worse it's going to get, so to stay on the TV without looking like a loony to most folks while still being accurate is a good trick.

Agreed. She's one of the only economic analysts worth listening to at the moment. Sticking to her guns, unlike a few others we could mention.

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She's played it very well tbh.

Must have known this was on the cards a long time ago - and how much worse it's going to get, so to stay on the TV without looking like a loony to most folks while still being accurate is a good trick.

Better hair than your Debt Revolting Rockchick too...

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