After making a name for herself for forecasting the 2008 subprime mortgage crisis, Meredith Whitney has a new view on what the Federal Reserve should do amid a pricey and stale real estate market.
"Rates could come down, but it's going to take the Fed to lower rates dramatically. And I think probably 75, 100 basis points," the Meredith Whitney Advisory Group CEO said in an exclusive interview on "The Claman Countdown," Monday.
"We're not going to get there with 50 basis points," she added. "[It’s] way more than [a full percentage point] to get the housing market moving."
The Federal Reserve is widely expected to lay the groundwork for a September interest-rate cut at the conclusion of its meeting this Wednesday, offering some reprieve to Americans who have been squeezed by sky-high borrowing costs.
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Lower interest rates could ding savers, but borrowers would likely face smaller debt payments on everything from credit cards to mortgages to student loans.
Higher rates have helped push the average rate on 30-year mortgages above 7% for the first time in years. Borrowing costs for everything from home equity lines of credit, auto loans and credit cards have also spiked.
"Just paying principal and interest has more than doubled, and the qualifying income for first-time homeowners has gone up dramatically," Whitney pointed out. "So today, it stands [at] over $90,000, and that's 61% higher than the median income. You can see why first-time buying is out of reach."
In fact, housing affordability is as bad today as it was during the peak of the 2008 housing bubble, thanks to the astronomical rise in mortgage rates.
"You've got the highest cash purchase rate in over 10 years. But the fact is, if you need a mortgage, you're really boxed out of the market," the CEO said. "For the first time in over 15 years, consumers are struggling, and they're starting to tap the equity in their homes."
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Untapped equity potential for homeowners serves as a "lifeline" in the current economic climate, according to the market expert.
"You can see that people really need excess liquidity. Home Depot even said in their last quarterly call that business was slow because their consumers couldn't tap the equity within their homes, over $30 trillion of equity in homes. So that's a lifeline for the U.S. economy," Whitney explained, "that one of the administrations, whoever gets into the White House, is going to be aggressive [on]."
FOX Business’ Megan Henney contributed to this report.
source https://www.foxbusiness.com/media/expert-who-predicted-2008-mortgage-crisis-reveals-housing-lifeline-market-doesnt-get-moving
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