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Meredith Whitney earned her “Oracle of Wall Street” nickname by calling the 2008 financial crisis before it hit. Now, nearly two decades later, she sees fresh trouble brewing in the U.S. housing market.
“Existing home sales are tracking under 4 million on an annualized basis and that’s the worst in over 25 years. Buyers are looking for steep discounts and sellers are not willing to make those discounts,” Whitney said in a recent interview with MarketWatch [1].
The problem, she explained, has to do with demographics. Roughly 60% of homes are owned by people over 55 and for many of them, downsizing isn’t realistic. Lower-cost alternatives are scarce and the financial hurdles of moving are steep.
“So either these folks have no mortgage or a small mortgage and the capital gains that they have to take and the costs that are required to move are prohibitive,” she noted, adding that baby boomers may not be as wealthy as many think.
That tax bite is no small thing. If you sell your primary residence, the IRS lets you exclude up to $250,000 in capital gains ($500,000 for joint filers) [2]. But that threshold was set back in 1997 — when home prices were far lower.
“Given the fact that 60% of homes are owned by seniors, that is the clear issue with affordable housing, because there’s just an inventory lock,” Whitney remarked.
She’s not the only one raising red flags. Last September, Federal Reserve chair Jerome Powell admitted the housing market is “in part frozen,” with many homeowners reluctant to sell because they’re locked in at lower mortgage rates [3].
The consequence? Persistently high prices on inventory that does exist. Combined with elevated interest rates, that makes homeownership harder than ever to achieve.
According to Realtor.com, a typical household would need to earn $118,530 annually to afford a median-priced home of $402,500 in the U.S. — more than 52% higher than the current median household income of about $77,700 [4].
At the end of the day, the rise in home prices also reflects the steady march of inflation over time. When inflation goes up, property values often climb as well, reflecting the higher costs of materials, labor and land. Meanwhile, rental income tends to rise, providing landlords with a revenue stream that adjusts with inflation.
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That’s why real estate has long been considered a go-to investment for those looking to hedge against inflation.
While purchasing an entire home may feel out of reach due to elevated prices and mortgage rates, it’s now easier than ever to start investing in real estate thanks to crowdfunding platforms like Arrived.
Backed by world class investors like Jeff Bezos, Arrived allows you to invest in shares of rental homes with as little as $100, all without the hassle of mowing lawns, fixing leaky faucets or handling difficult tenants.
The process is simple: browse a curated selection of homes that have been vetted for their appreciation and income potential. Once you find a property you like, select the number of shares you’d like to purchase and then sit back as you start receiving any positive rental income distributions from your investment.
Another option is First National Realty Partners (FNRP), which allows accredited investors to diversify their portfolio through grocery-anchored commercial properties without taking on the responsibilities of being a landlord.
With a minimum investment of $50,000, investors can own a share of properties leased by national brands like Whole Foods, Kroger and Walmart, which provide essential goods to their communities. Thanks to Triple Net (NNN) leases, accredited investors are able to invest in these properties without worrying about tenant costs cutting into their potential returns.
Simply answer a few questions — including how much you would like to invest — to start browsing their full list of available properties.
Read more: Rich, young Americans are ditching stocks — here are the alternative assets they’re banking on instead
Real estate isn’t the only asset investors lean on to guard against inflation. Gold has served as a store of value for centuries — and its appeal remains as strong as ever.
Unlike fiat currencies, the yellow metal can’t be printed at will by central banks. It’s also not tied to the fortunes of any single country or economy, making it the go-to safe haven when economic or geopolitical storms hit.
Ray Dalio, founder of the world’s largest hedge fund, Bridgewater Associates, has repeatedly highlighted gold’s importance in a resilient portfolio.
“People don’t have, typically, an adequate amount of gold in their portfolio,” Dalio told CNBC in February. “When bad times come, gold is a very effective diversifier.”
Over the past 12 months, the price of the precious metal has surged by more than 35%.
One way to invest in gold that also provides significant tax advantages is to open a gold IRA with the help of Thor Metals.
Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, which combines the tax advantages of an IRA with the protective benefits of investing in gold, making it an attractive option for those looking to potentially hedge their retirement funds against economic uncertainties.
To learn more, you can get a free information guide that includes details on how to get up to $20,000 in free metals on qualifying purchases.
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[1]. MarketWatch. “Meredith Whitney famously called the 2008 financial crisis. Here’s the new problem with the U.S. economy, she says”
[2]. IRS. “Topic no. 701, Sale of your home”
[3]. Federal Reserve. “Transcript of Chair Powell’s Press Conference September 18, 2024”
[4]. Realtor.com. “How Much You Need To Earn in Every State To Buy a Home”
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
