Housing prices will fall more than 30 percent before the market recovers and banks will continue their reluctance to lend until the credit crisis clears up, Oppenheimer analyst Meredith Whitney said on CNBC.

AP

In a wide-ranging interview, Whitney said the housing deterioration will be worse than even the doom-and-gloom predictions that already have circulated regarding the market.

Video: Click Here to Watch Whitney's Interview

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"There's one obvious area where the bad news isn't all out yet, and that's with home prices ... Home prices are going to fall much more than people expect," she said.

"I think it's going to be well worse than 33 percent, and here's why:  If you look at the futures market, it's indicating a range right around between 2002-2003 levels, when home ownership rates were actually higher, but fewer people can qualify for a mortgage because you've got to put 20 percent down, and that's a lot of money for people," she continued. "Furthermore, then you've got to find a bank to lend to you, because, Countrywide's not lending to you."

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While a number of factors have generated the troubles for real estate, the industry is getting no help from banks, who have largely used Federal Reserve liquidity-raising efforts not to lend money but rather to bolster their damaged balance sheets.

The Fed went on a nine-month rate-cutting spree beginning in September 2007 aimed at easing monetary practices, but banks have not responded and in fact have cut lending dramatically. Whitney said banks originated $900 billion loans last year, but just $100 billion so far in 2008.

She said it's been part of a trend that she called "weak hands to strong hands."

"If you don't need capital you can get capital. If you need capital, you're not going to get capital," she said.

The banking and housing industries will only recover, Whitney said, when banks start feeling comfortable enough to lend again.

The lack of capital, she said, is the primary reason why more banks have  not consolidated

"No one has capital (and) no one wants to sell when your stock's down 80 percent," she said. But more importantly, everyone's just holding on."

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