Tuesday, 23 January 2018

US stocks hit record again but housing market could “come down hard”

US stocks rose to record highs again on Monday, with the S&P 500 gaining 0.8 percent.

However, after the S&P 500’s index of homebuilders increased 75 percent last year, about four times as much as the stock market as a whole, money manager James Stack is getting nervous.

According to Bloomberg, Stack predicted the housing crash in 2005 and now says: “It is 2005 all over again in terms of the valuation extreme, the psychological excess and the denial.”

“If we see mortgage rates at more historical levels, house prices can’t stay where they are,” Stack said, adding that the market is likely to “come down hard” with the next recession.

However, Bloomberg also noted: “Bill McBride, who runs the Calculated Risk blog and also called the crash, doesn’t think home prices are inflated this time around.”

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