Housing Double Dip

Meredith Whitney is predicting a double-dip housing depression in 2010-2011.

The US housing market will face another retreat while mortgage-backed securities and Treasurys are likely to go through a "material" correction, Meredith Whitney, CEO of Meredith Whitney Advisory Group, told CNBC Tuesday.

"The housing market surely will double dip," Whitney told "Worldwide Exchange."

Government programs to support housing have been "murky" and when the modifications caused by them come to an end, a lot of supply may come to the market and that's when the real-estate market is likely to go down, she explained.

Hopes that an improvement in liquidity and continuing investment from China in US assets will prop up mortgage-backed securities (MBS) and Treasurys are exaggerated, Whitney also said.

"The asset classes of MBS and Treasurys are priced for a material correction in my opinion," she said. "The only buyers of agency MBS are the Fed and banks so you see how precarious that market is."

"If the Fed pulls back, that's a really big deal... because there's no substitute buyer."

And that may be the chain reaction that knocks the economy back down into recessionary territory.  After all, the banks are busy playing the same credit default swap games again and using them to put away record profits again this year.

So what happens when the housing market goes through another major collapse?  It'll make 2008 look like a picnic.