Meredith Whitney Says She Expects `Double Dip' Recession in U.S. Housing

The U.S. housing market will experience a second recession, forcing banks to post additional loan-loss reserves, analyst Meredith Whitney said.

“Most investors are not baking in a double-dip in housing,” Whitney, founder of New York-based Meredith Whitney Advisory Group, said today in an interview on CNBC. “You’re going to see banks post additional reserves associated with this double-dip in housing, and that means weak performance going forward.”

U.S. home prices fell more than 30 percent from their peak in 2006 through the first quarter of 2009, prompting banks to take writedowns on mortgage loans. Housing starts have increased 24 percent since the low in April 2009 as mortgage rates remained near record lows and the U.S. government offered tax credits to homebuyers.

Whitney said she didn’t foresee the trend of some homeowners paying off credit cards and other debt instead of making mortgage payments, as they await better terms on mortgage modification programs.

Job cuts by state and local governments will also contribute to a “rough second half” for the U.S. economy, she said.

Financial reform will slow the velocity of money and cause “de-banking” as more Americans lose access to some banking services, making it “more expensive to be poor in this country,” Whitney said.

To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net.

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