Most baby boomers can't afford assisted living and are weighing on the housing market by staying in their homes, ‘Oracle of Wall Street' says
Baby boomers are dragging on the housing market because most can't afford to move out of their homes, according to Meredith Whitney, the 'Oracle of Wall Street' who predicted the Great Financial Crisis.
In an interview on Bloomberg TV on Wednesday, she said many cash-strapped Americans have been borrowing against their homes, and 44% of home-equity loans are being taken out by seniors, "which is counterintuitive. It's crazy, right?"
That's contrary to the typical narrative of baby boomers sitting on vast amounts of wealth accumulated over their lifetimes, which spanned unprecedented economic expansions and stock market booms.
As a result, seniors with a lot of money have an edge in the tight housing market, accounting for 42% of all homebuyers, while millennials account for 29% despite the younger generation being in the prime buying years.
But while most buyers are boomers, it doesn't mean most boomers have a giant pile of cash.
"I divide it into different cohorts," Whitney said. "So the senior which everyone thinks 'the boomers have all this money'—that's a small portion. Seniors are living paycheck to paycheck."
To be sure, boomers collectively have $75 trillion of wealth. But that's not distributed evenly, and Whitney estimated that just one in 10 seniors can afford assisted-living facilities.
As a result, many are forced to stay put and age in place, she added. (Stubbornly high mortgage rates also have created a "lock-in" effect where homeowners who got in the market when rates were low are now reluctant to buy a new home at today's elevated borrowing costs.)
"This is one of the problems with the housing inventory," Whitney told Bloomberg. "They're staying in their houses longer because they can't afford to move out."
Meanwhile, she expects the economy to slow amid President Donald Trump's trade war, especially in the retail and hospitality sectors, and predicted the unemployment rate will climb to 6% by this fall, up from the current level of 4.2%.
That's still well below the 10% high that the jobless rate hit during the Great Financial Crisis, and Whitney doesn't see parallels between today's economy the one during the crisis.
Part of the reason is because banks are much better capitalized now than they were back then, when sub-prime mortgages were weighing on banks' balance sheets.
But she does see a "mild, medium" recession that Wall Street has yet to price in.
"The big banks will not be involved now, but the consumer is already struggling and is going to struggle further. And that will translate into job losses," Whitney said.
This story was originally featured on Fortune.com
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Fast Company
a minute ago
- Fast Company
Intel's CEO just revealed why more layoffs are coming. His memo shows the grim impact of course correction
In the midst of an ongoing turnaround effort, Intel Corp. reported $12.9 billion in revenue as part of its second-quarter financial results on Thursday, matching year-over-year (YOY). The sum beat Wall Street forecasts, according to consensus estimates cited by CNBC, but it wasn't enough to offset news about higher losses, additional layoffs, and the scaling back of Intel's foundry business. The chip manufacturer saw its stock price (Nasdaq: INTC) briefly rise as the market closed, but shares have since tumbled about 8% in after-hours and premarket trading, as of this writing. What did Intel report? Let's start with the money: Intel reported a $2.9 billion loss (67 cents per share), compared to $1.6 billion (38 cents per share) YOY. At the same time, CEO Lip-Bu Tan announced that Intel intends to lay off around 15% of its workers, leaving it with about 75,000 employees worldwide by the end of 2025. This news follows layoffs of 15% and 20% of Intel's headcount last year and in April, respectively. Intel's foundry business is also getting a shakeup after investing 'too much, too soon—without adequate demand,' Tan stated. He continued, 'In the process, our factory footprint became needlessly fragmented and underutilized. We must correct our course. Going forward, we will follow a systematic approach to growing our factory footprint that's fully aligned with the needs of our customers. We will be judicious and disciplined as we allocate capital—because that's what great foundries do.' Pulling back on projects, or abandoning them altogether A large part of this course correction involves slowing or completely eliminating already planned projects. According to Tan, initiatives in Germany and Poland will no longer occur, while Costa Rica's assembly and test operations will be integrated into Intel's Vietnam and Malaysia sites. In the United States, Intel is 'slowing construction' of planned factories in Ohio 'to ensure our spending is aligned with demand—while maintaining flexibility to accelerate based on new customer wins,' Tan added.
Fast Company
a minute ago
- Fast Company
How can companies handle today's growing energy needs?
The Fast Company Executive Board is a private, fee-based network of influential leaders, experts, executives, and entrepreneurs who share their insights with our audience. BY Listen to this Article More info 0:00 / 5:18 Why does AI need so much energy? Why does an AI server farm require so much more energy than other server farms? A typical server farm stores and sends content that already exists, like online retail stores or streaming services. Because the servers simply need to deliver you the content, it doesn't require a ton of energy. A typical server farm needs about seven kilowatts of power. An AI server, however, has to perform thousands, millions, billions of complex calculations to create and deliver content. This requires a great deal of energy—anywhere between 30 and 100 kilowatts. The newer hyperscale AI server farms might use as much as 100 megawatts. For perspective, that's enough energy to power 80,000 homes. It's a massive increase in energy use. Energy grids have a finite capacity because they're built to support the neighborhood where they exist. There may be one or multiple power inputs, some storage capacity, and an infrastructure to distribute that power across the homes and businesses in the area. That's the grid, and there isn't a lot of excess power capacity. So when a company wants to build a new data farm, they have to increase the capacity within that grid or do something outside of the grid. THE ENERGY SOURCES THAT ORGANIZATIONS CAN ACCESS Many of the large tech companies are now looking at building their own onsite power units because their local grids simply don't have the capacity to support their additional energy needs. Green energy, like wind and solar, is often one of the first options considered for these new facilities. Companies look at these sources because they can be installed in many different locations and provide renewable energy with no carbon emissions. The problem with wind and solar is they're intermittent—power only generates when the sun is shining or the wind is blowing. Companies would also have to build additional infrastructure and energy storage to accommodate these energy sources, which create additional costs and complexity. Biomass is another green energy option. Organic material from forestry, agricultural waste, and even industrial wood waste from construction or manufacturing gets diverted from landfills, processed into biomass, then converted into electricity. Biomass can be stored, and it can ramp up to meet energy needs as necessary, with no significant drawbacks. THE DRAW(BACKS) OF NUCLEAR POWER Some large tech companies are starting to look at nuclear as a way to meet their energy needs. But I'm not talking about the huge reactors from the '60s and '70s. What we're looking at now is promising technology like molten salt reactors. They're much smaller and have quite a bit more safety built into them—and one small reactor can produce enough energy to support a single new AI server farm. The big challenge for nuclear power is its public perception and the politics around that. The fear and resistance is reasonable, considering we've had catastrophes in the past as a result of this power. That particular energy source is nuclear fission, which comes with risks, including radioactive waste. While mini or micro reactors can minimize risk, they're still using nuclear fission. So when a company wants to put in a mini reactor, there are both social and political hurdles they'll have to clear in order to get that in place. A better option we can hope for is nuclear fusion, which replicates the process that powers the stars and offers the promise of virtually limitless energy. Fusion involves forcing atomic nuclei to combine under extreme heat and pressure, which differs fundamentally from nuclear fission's process of splitting atoms. There are many compelling advantages to nuclear fusion energy. In theory, it produces no greenhouse gas emissions during operation, generates only minimal radioactive waste, and relies on abundant fuel sources such as deuterium—derived from water—and lithium. While long considered a distant dream, recent breakthroughs have dramatically reshaped the outlook for fusion, bringing it closer to reality. BRIDGING THE GAP So until we have nuclear fusion and a truly abundant clean energy future, we must turn to wind, solar, biomass, hydro, thermal, and green hydrogen energy, as well as micronuclear reactors, to bridge the gap. Start with existing local options, and ask these key questions: • Is there excess capacity? • Can capacity and supporting infrastructure be reasonably increased? • What natural resources are available? • Does the area have thermal or hydro options? • Can solar or wind be installed? Are there local sources of biomass? • Does the new site have high enough energy needs, timeline, and budget to justify an investment in nuclear? The world is demanding more energy. When it's hot outside, you want your home cool. When it's cold, you want your house warm. When you ask ChatGPT a question, you want an answer. So we need to keep producing more energy. The choices we make to accomplish these things are critical to balancing our growing energy demand with the impacts of producing that energy. The super-early-rate deadline for Fast Company's Most Innovative Companies Awards is this Friday, July 25, at 11:59 p.m. PT. Apply today.
Bloomberg
a minute ago
- Bloomberg
US Core Capital Goods Orders Slide Amid Tariff Uncertainty
Orders for business equipment placed with US factories unexpectedly declined 0.7% in June after an upwardly revised 2% gain in May. Bookings for all durable goods — items meant to last at least three years and including orders for commercial aircraft and military equipment — fell 9.3%. Michael McKee reports on Bloomberg Television. (Source: Bloomberg)
