Source: Seeking Alpha —
Thesis
In 2008 the housing market crashed the global economy. Could it happen again? And how soon? While I don’t want to play the role of Mr. Doom, in this article I would like to highlight a few notable developments that could prove to turn out enormously important for the stock market. Personally, I see the beginnings of a major downturn in the housing market, as: mortgage rates have surged over the past few months, home sales are plunging, housing inventory is accumulating, and house price appreciation is slowing. Until now, investors in the stock market have largely ignored the cracks in the housing market. But if the situation worsens further, the dangers that a crashing housing market poses will be too pressing to be ignored.
During the past decade, supported by record-low mortgage rates and quantitative easing, housing prices in the U.S. have appreciated at a rate that rivals the pre-2008 run up. And sentiment was bullish, if not bubbly. Only recently Redfin agent Shauna Pendleton commented on the unsustainably high expectations of home buyers/flippers:
They priced (their house sales) too high because their neighbor’s home sold for an exorbitant price a few months ago, and expected to receive multiple offers the first weekend because they heard stories about that happening.
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