Meredith Whitney, CEO of Meredith Whitney Advisory Group, appeared on CNBC earlier on today and made a case for a double-dip scenario for US housing market.
The catalyst, according to Whitney, is the Fed’s pulling back on purchasing the MBS issued by the agencies (Freddie and Fennie). Fed has been buying most of the MBS that came to the market. "The Fed has been supporting the housing market, a third of the Fed's balance sheet is tied to mortgages," she said. "If the Fed pulls back, that's a really big deal... because there's no substitute buyer."
Banks, on the other hand, has been playing safe, "The banks aren't issuing anything (in terms of mortgages) to hold, they're issuing everything to dump on" Fannie Mae, Freddie Mac and Ginnie Mae, Whitney added: "I don't think there's much the Fed can do to get banks to start lending again. That's a structural problem, the model is broken."
That leaves the housing market on shaky ground, when the modifications caused by them come to an end, a lot of supply may come to the market and that's when the real-estate market is likely to go down, Whitney explained.
The catalyst, according to Whitney, is the Fed’s pulling back on purchasing the MBS issued by the agencies (Freddie and Fennie). Fed has been buying most of the MBS that came to the market. "The Fed has been supporting the housing market, a third of the Fed's balance sheet is tied to mortgages," she said. "If the Fed pulls back, that's a really big deal... because there's no substitute buyer."
Banks, on the other hand, has been playing safe, "The banks aren't issuing anything (in terms of mortgages) to hold, they're issuing everything to dump on" Fannie Mae, Freddie Mac and Ginnie Mae, Whitney added: "I don't think there's much the Fed can do to get banks to start lending again. That's a structural problem, the model is broken."
That leaves the housing market on shaky ground, when the modifications caused by them come to an end, a lot of supply may come to the market and that's when the real-estate market is likely to go down, Whitney explained.
