The collapse of Lehman Brothers Holdings Inc (LEH.N) and takeover of Merrill Lynch & Co Inc (MER.N) will cause liquidity in the credit market to shrink, resulting in lower home prices, prominent U.S. banking analyst Meredith Whitney said.
expects fewer mortgages to be available for prospective homeowners, as she sees no hope for the return of the mortgage securitization business
"All this creates a recipe for meaningfully lower U.S. house prices," Whitney said.
The magnitude of houseprice declines in the next few years could likely exceed expectations of both the markets and the companies, she wrote in a note issued late Monday.
Similar to how the securitization market volumes have plummeted since the credit crisis hit, housing prices will likely go through a severe correction, the magnitude of which will be beyond that of market expectations, Whitney said.
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