Home prices and sales levels are rebounding. Mortgage rates are stabilizing. We’re in a housing recovery, right?

Not according to Wall Street’s prognosticating Queen of Darkness, banking analyst Meredith Whitney. The ubiquitous president and founder of Meredith Whitney Advisory Group LLC told CNBC Thursday that U.S. home prices would plummet again – as much as another 25 percent – as persistent unemployment problems deepen the foreclosure crisis.

 

“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… If you look at the drivers for unemployment, I don’t see that reversing very soon.”

But analysts who specialize in housing say Whitney is more concerned with her dark reputation than the facts in this case. The next-most pessimistic predictor, Moody’s, only projects an average decline of 10 percent in home values before the economy’s recovery is complete.

“A 25% decline from here sounds very steep,” David Blitzer, chairman of the Standard & Poors/Case-Shiller housing-price index, told the Wall Street Journal. “To say that we’re only halfway through this sounds pessimistic.”

Whitney, who currently has only one “buy” recommendation out on a bank (Goldman Sachs), has made her reputation on pessimistic forecasts. In 2007, at the beginning of the downturn, she accurately predicted that Citigroup Inc. would have to cut its dividend to stay solid. It did, Citigroup’s CEO resigned, and Whitney cultivated a reputation as Wall Street’s fearless oracle.

Two weeks ago in a phone interview with Bloomberg Television, she predicted that the number of U.S. bank failures would jump 400 percent before the fallout of bad loans was finished. “There will be over 300 bank closures,” she said. “The small-business owner on Main Street continues to see liquidity come away.”

The Journal Thursday speculated that Whitney’s housing forecast might actually help bring about the opposite effect: “It might be welcome news for potential buyers looking for a bargain,” the paper said. If so, those bargain hunters could further stimulate new-purchase levels, restoring a pricing bottom and spurring growth.

That’s why, according to another Journal columnist, “Investors should take heed as the media trumpet Ms. Whitney’s latest proclamation.”

 

 

09/11/2009 BY: ADAM WEINSTEIN   http://www.dsnews.com/articles/whitney-stirs-controversy-with-prediction-of-25-drop-in-home-prices-2009-09-11