• Leading researcher Meredith Whitney shared the trends she has her eye on this year.
• Consumer spending could surge, sparking a rebound for beaten-down retailers.
• In real-estate, a key trend that Whitney had highlighted is now no longer likely.

Nearly two decades after her prescient warnings about the financial crisis, Meredith Whitney remains one of the more widely followed research analysts in markets.

Although no one's calls are always correct, Whitney is known for bold, outside-the-box thinking that gets gears turning — like why young people could get a leg up in the housing market, or why remote workers secretly working two jobs were at risk of getting caught.

Business Insider recently caught up with the "Oracle of Wall Street," who shared in an interview the three under-the-radar economic trends she's watching most closely in 2025.

1. Consumer spending reaccelerates

After countless hours of studying the US economy, Whitney's highest-conviction call this year is that consumer spending will strengthen across income strata and keep growth humming.

"The takeaways are clearly that consumer spending strength is going to broaden this year, so that means it will accelerate," Whitney said.

In recent years, Whitney's research suggests that spending has been disproportionately driven by higher-income consumers and the mid-20s to late-30s cohort, whom she affectionately calls "avocado toasters." Whitney noted last May that their young people's spending far exceeds that of baby boomers, and she now estimates their discretionary spending is five to six times higher.

Contrary to what some might suggest, these whippersnappers may not be being irresponsible. Instead, Gen Zers and millennials have been largely shut out of the housing market due to high mortgage rates and may be making up for it with retail therapy — or simply because they can.

"The avocado toasters who don't own homes — this is the 24- to 38-year-olds who don't own homes — have more discretionary spend, because it's gotten so expensive over the last three years to own a home with rising homeowners' insurance, property taxes, homeowners' association fees," Whitney said.

Besides being unburdened by expensive mortgage payments, many young people are finding creative ways to team up and save money. Whitney pointed out that password sharing is the norm for younger generations, and even those who don't snag log-ins for streaming services or YouTube TV can stay on their parents' phone plans for $10 a month instead of $50 or more.

Other consumers are in a much different spot. Lower-income consumers have felt the highest inflation in a generation most acutely. In fact, Whitney said last spring that households making between $50,000 and $70,000 a year could only afford to save 0.3% of their post-tax income.

"What has been clear is that the 52% that have been living paycheck to paycheck — over 50% of the households — are really struggling," Whitney said.

Consumers could make a financial comeback this year if inflation fades and interest rates inch down, Whitney said. And while some economic observers are anxious that Trump's tariffs could cause prices to reaccelerate, Whitney didn't cite that as a major near-term risk.

2. Dollar-store sales boom

A long-awaited rebound for consumers, including those in the lower-income bracket, could spark a turnaround for beleaguered dollar stores and other struggling retailers, Whitney said.

"The dollar stores and all the discounters — and I'll throw Target into the mix; it's neither — will have a great 2025 and beyond," Whitney said. "They've been beat up for a number of reasons, but one of them has been that their primary customer really had a hard landing after COVID stimulus checks ended."

As Whitney noted, pandemic-era government aid and inflation were major tailwinds for dollar stores. Consumers of all income types flocked to Dollar Tree and Dollar General for their rock-bottom prices, pushing their shares to record levels. Dollar Tree's stock even doubled in the five months from late September 2021 to mid-April 2022.

But ever since, Dollar Tree and Dollar General have been dead money, with shares down 57% and 72%, respectively, from all-time highs. Inflation has become a major headwind by eating into profits on dirt-cheap products. Dollar Tree's earnings have been hammered, and Dollar General's operating income growth has been negative for seven straight quarters.

Dollar Tree and Dollar General's standing among investors went from bad to worse early last fall after alarming earnings reports. Both companies lost about a third of their market value as they slashed full-year guidance, blaming consumer spending weakness among income cohorts.

Whitney said she became bullish about dollar stores shortly after, and it's not because she was bargain-hunting. Instead, her research indicates that consumers may get more breathing room.

Since last summer, Whitney said property owners have increasingly taken out lines of credit from their home equity, which is a relatively cheap way to borrow money. Consumers can take this cash and use it to pay down their credit-card statement and other costlier bills, she added. Armed with money in their pocket and lower card balances, households can spend more freely.

"What I expected was this to have almost like a trickle-down effect," Whitney said. "It's happened a lot faster than I would've thought. So if you look at the same-store sales year on year, they've already picked up dramatically with the dollar stores and with Target. And when the retailers report, I think the investors will be surprised by how strong the results are."

3. Older homeowners stay in place

Whitney's most surprising take is one that's the opposite of what she believed a year ago.

The Oracle of Wall Street had spoken for years about a so-called "silver tsunami," reasoning that older homeowners would flood the housing market by listing their homes en masse. This would send property values plunging and allow younger buyers to swoop in at steep discounts.

But after examining more data, Whitney recently said that her theory is no longer likely.

Although the US population is still steadily aging, the researcher now expects older people to "age in place" instead of moving to ranchers, retirement communities, or nursing homes, which can be very expensive. Only about one in eight seniors can afford assisted living without tapping into their assets, Whitney noted, citing a 2023 Harvard study on housing older adults in the US.

Her change of mind comes as older property owners are seemingly deciding not to move. Instead, seniors are taking out lines of credit to renovate their homes. That could mean putting bedrooms in on the ground floor, adding walk-in tubs, or installing movable stairs, Whitney said.

If grandpas and grandmas across the country stay put, there will be fewer houses for younger buyers to choose from. That could be disastrous, if new home inventory wasn't rising like it is.

"Their best chance of owning a home is with new homes — not existing," Whitney said of younger homebuyers.

Millennials and Gen-Zers might not get the revenge over owners that Whitney thought was possible last year, but they'll likely be better off than in the least affordable market of their lives.

• Meredith Whitney expects home prices to fall by 10% to 20% as the frozen housing market starts thawing.
• The veteran researcher said baby boomers aren't selling, restricting the number of homes available.
• Prices rose in September but existing-home sales fell and the share of first-time buyers remained low.

Home prices are poised to fall by up to a fifth as the frozen housing market thaws — and that could help baby boomers sell at last and younger people to become homeowners, Meredith Whitney says.

"It's got to be a two-step process," the CEO of Meredith Whitney Advisory Group told the Financial Sense Newshour podcast in an episode released Saturday.

"You have to have rates come down, but you also have to have home prices come down," she said about revitalizing the housing market. "One doesn't work on its own."

Homebuyer headaches

Housing transactions have stagnated in recent years as soaring prices and steeper mortgage interest rates have fueled an affordability crisis.

Homeowners who locked in cheap mortgages are reluctant to sell and give them up. Prospective buyers are similarly unwilling to pay top dollar for a worse house than they imagined and take on a larger monthly mortgage payment.

Some relief has come from the Federal Reserve cutting its benchmark rate by 75 basis points since September to as low as 4.5%. The central bank raised the rate from virtually zero to as high as 5.5% between March 2022 and July 2023.

Even so, the median existing-home price jumped 3% to $404,500 in the 12 months to September, per the latest National Association of Realtors data.

Existing-home sales fell 3.5% over the same period, and first-time buyers were responsible for 26% of sales in September, in line with lows hit in August this year and November 2021.

Price declines and baby boomers

Whitney was dubbed the "Oracle of Wall Street" after correctly predicting the 2008 financial crisis, which was precipitated by the collapse of a massive housing bubble.

She predicted house prices would fall by 10% to 20% from here, and urged the government to "sit back and let that happen" because that would only lower them to 2020 or 2021 levels. Homeowners would likely despair a sharp drop in the value of their homes, but many have built huge amounts of home equity over time, she said.

As for why younger millennials and Gen Z are struggling to get on the housing ladder, Whitney pointed to homeowners in their sixties and seventies staying put.

"The problem is the baby boomers own 60% of the housing stock," she said, referring to single-family, owner-occupied homes. "They're not moving."

"The older people aren't selling; they have no place to go," she continued, adding that they "can't afford to move." She highlighted increases in property taxes, homeowners' insurance, and homeowners' association fees as one source of financial strain, especially for those on fixed incomes.

Whitney described the situation as a "generational schism" in a CNBC interview last week and warned there will be a "real standoff between sellers and buyers" until more inventory becomes available.

Several economists have predicted a "silver tsunami" as baby boomers sell their homes to downsize or move into care homes, increasing the available supply of single-family homes and reducing prices.

However, a recent survey found that 54% of older Americans intend to remain in their current homes for life, while only 15% said they planned to sell in the next five years.