In one of Meredith Whitney's most recent and damning interviews (watch the video) on the economy, housing market, and banking system she forecasts 13% unemployment, 50% home value declines from the peak, the bursting of the homeownership bubble, and a prolonged banking and credit crisis.
Whitney, a banking analyist, has been one of the foremost experts on predicting the current crisis and recently said during a CNBC interview, "The banks are not prepared for double digit unemployment. I think you can see 13% unemployment. It's the unemployment that will come to haunt banks and require many banks to come back for capital."
Harvard University professor Elizabeth Warren, the Congressionally-appointed panel chair overseeing the Troubled Asset Relief Program (TARP), said that, "We've already blown past the worst-case scenario on unemployment".
According to the oversight's report, the more adverse economic scenario planned for an average unemployment rate of 8.9% in 2009. Currently, the unemployment rate in June is 9.5%.
According to Whitney, "the stress test were not so stressful".
In terms of the housing market Whitney said, "There is an easy way to look at real estate. You had homeownership at 64% forever until 1994, now you have homeownership at just over 67%, that's going to go back. Fewer people are buying homes, it's a supply and demand issue, there is more supply than there is demand, that usually means prices are going to go down."
In the absence of a real fiscal housing stimulus plan, home values will continue to fall for the next 2-3 years based on the supply and demand imbalance and the banking system will continue to crater.
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