Your Daily Dose Of Not Doctor Doom, But She Sure Does Sound Like Him

Banking sector analyst Meredith Whitney is basically predicting a second recession.

Home prices in the US could fall by another 25 percent because of high unemployment and another leg down will come for stocks, banking analyst Meredith Whitney told CNBC Thursday.

No bank underwrote a loan with 10 percent unemployment on the horizon," Whitney said. "I think there is no doubt that home prices will go down dramatically from here, it's just a question of when."

Local governments and states are chronically under-funded and "most states are under water," adding to the problem of low private consumption, she said.

"If you look at the drivers for unemployment I don't see that reversing very soon," Whitney said.

If consumers were to decide to spend, "that would be a game-changer," but it would be an unnatural thing to do in a recession, she said.

"A lot of themes are constant, which is the US consumer and the small business doesn't have any credit, credit is still contracting," Whitney said.

Consumer debt and consumer credit have dropped according to the latest figures which also show that people have been spending more from their debit cards than from their credit cards.

"Obviously that doesn't bode well for spending," Whitney said.

Another 25% drop in home prices would basically turn this into a full blown depression, and it would be lethal for the economy. If Whitney is anywhere close to right, we're looking at a truly ugly 2010 and 2011.

Then again, I've been saying we're facing that anyway. If we really are that far from the bottom of the housing market (and yesterday's foreclosures number bear that out) then we're in serious trouble all the way around.

All the folks who have bought houses now expecting the market to go back up are in for a devastating shock, most likely.