The US economy faces a perilous second half as a new set of problems hits real estate and thwarts any chance for a strong recovery, banking analyst Meredith Whitney told CNBC.
cnbc.com
Meredith Whitney
While stopping short of predicting a full-blown double dip in the broad economy, Whitney said one is certainly in store for the housing market.
“People doubt there’s a double-dip in housing,” she said. “It’s amazing.”
The primary reason she cited for another leg down in housing is that banks are getting more aggressive foreclosing on delinquent borrowers. That in turn will push more inventory into the market, pressuring prices and ensuring that economic growth will be tepid at best.
“Banks are actually accelerating their foreclosure programs, accelerating their short-sale programs. People who have been paying their mortgage now have to start paying rent,” Whitney said. “You’ll see a real leg down in supply displacement when you foreclose and you have to sell.”
Consumer behavior has exhibited traits Whitney said she’s never seen before.
Primary among the anomalies has been the trend of homeowners not paying their mortgages and instead paying down other bills and increasing their personal spending.
Elsewhere, problems from state and local governments also will weigh on the national economy, particularly in the way that they are “cutting jobs in a material way for the first time on record.”
“They’re squeezed from all sides and there’s really nowhere to turn,” she said.
Whitney also said financial regulation reform and policy-making that is not friendly to the middle class will hurt growth.
“The populist incumbents argue that we’ve got to get money to redistribute wealth,” she said. “This squeezes the middle class further down the food chain. The unintended consequences of this are maddening.”
