Baby boomers now own a majority of U.S. homes and have the financial means to stay where they are, keeping the housing market stuck for the foreseeable future, according to\u00a0top Wall Street analyst\u00a0Meredith\u00a0Whitney.<\/p>\n
The CEO of Meredith<\/a> Whitney Advisory Group, whose prediction of the Great Financial Crisis earned her the moniker \u201cOracle\u00a0of Wall Street,\u201d pointed out in a Financial Times op-ed<\/a> that more than 54% of homes are owned by seniors, up from 44% in 2008.<\/p>\n She added that 79% of seniors own their homes, and three-fourths of them don\u2019t have a mortgage, meaning they have an enormous amount of equity that can help cover rising homeownership costs, such as insurance.<\/p>\n \u201cThis has made it easier for seniors to hold on to their homes by tapping into some of this built-up equity,\u201d Whitney explained. \u201cAnd growth in such funding will be a major theme for the US economy in the next three to four years.\u201d<\/p>\n The cheapest and fastest-growing form of consumer debt is now home equity lines of credit, demonstrating how much housing has become a financial resource, and seniors account for 41% of revolving home equity credit outstanding, she said.<\/p>\n Other debt products and new forms of credit are also available to homeowners who want to squeeze some cash out of their properties. The upshot is that housing inventory will remain limited as boomers are less inclined to downsize to smaller homes and have the financial means to stay put.<\/p>\n \u201cThat means the housing market will continue to be very different from before. There will be no quick fixes,\u201d Whitney warned. \u201cEven as 30-year mortgage rates decline, don\u2019t expect existing home sales to pick up materially. Seniors control the proverbial chessboard, and with so many options, they aren\u2019t moving anytime soon.\u201d<\/p>\n That\u2019s bad news for millennials and Gen Zers trying to enter the housing market<\/a>. \u00a0In fact, the housing market has become so unaffordable for these buyers, the number of first-time home buyers\u00a0shrank to a historic low<\/a>.<\/p>\n In May, Whitney also noted that many boomers can\u2019t afford to move out<\/a> and have been borrowing against their homes to stay where they are.<\/p>\n To be sure, boomers collectively have\u00a0$75 trillion of wealth<\/a>. But that\u2019s not distributed evenly, and Whitney estimated that just one in 10 seniors can afford assisted-living facilities.<\/p>\n \u201cSeniors are living paycheck to paycheck,\u201d she told Bloomberg TV<\/a>.\u00a0<\/p>\n The drag from boomers on the housing market is just one of several. As President Donald Trump\u2019s tariffs and immigration crackdown hit homebuilders, the supply of new homes is slowing.<\/p>\n Meanwhile, economic anxiety<\/a> and still-elevated home prices are weighing on demand from prospective homebuyers, even as mortgage rates dip, and that\u2019s spilling over to homeowners, who are increasingly pulling listings off the market.<\/p>\n The weak housing market even threatens to bring down the overall economy. The economist\u00a0Ed Leamer,\u00a0who passed away in February<\/a>, famously published a paper in 2007 that said residential investment is the best leading indicator of an oncoming recession.<\/p>\n In\u00a0the second quarter<\/a>, residential investment tumbled 4.7%, accelerating from the first quarter\u2019s 1.3% decline.<\/p>\n In July, Moody\u2019s Analytics chief economist Mark Zandi singled out the housing market for concern, escalating it to a \u201cred flare\u201d<\/a>\u00a0as home sales, homebuilding, and house prices were getting squeezed by high mortgage rates.<\/p>\n At the same time, residential building permits\u2014a key indicator of home construction\u2014have been falling, and Zandi warned earlier this month that they are \u201cthe\u00a0most critical economic variable for predicting recessions.\u201d<\/a><\/p>\n