When James Stack, investment manager for high-net-worth clients, talks, people listen. Stack is the lone wolf who predicted the housing market crash in 2008 and last year’s housing slowdown. He’s standing solo again with more bad news for the 2019 real estate market.
“Housing could be heading for its worst year since the last housing crash. Expect sales to continue on a downward trend in the next twelve plus months.” Stack added, “And there is a significant downside risk to housing prices if a recession takes hold.”
Stack’s lone wolf persona raised its head in January 2018 by warning that rising mortgage interest rates would expose the then veiled affordability problem and that “the risk that today’s highly inflated housing market will again end badly.”
In January 2019, Stack is warning of coming distress in property markets and the broader economy as well. Data supports Stack’s cautioning. Home purchase contracts fell 7.7% in November 2018, according to the National Association of REALTORS® (NAR) Index. The Consumer Confidence Index from the University of Michigan held steady in December 2018 despite stock market volatility that will likely be reflected in this month’s index. A gauge in US manufacturing plunged the most since 2008, only one day after Apple cut its sales outlook which prompted worries about a global growth slowdown.
Even despite good unemployment figures and mortgage interest rates dropping from 4.94% in November 2018 to 4.51% now, Stack believes the damage to the housing market has already been done. He said, “Even if mortgage rates level off or ease slightly (not likely as all industry experts point to rates between 5.0% – 5.5% in 2019), we are unlikely to see any kind of psychological turnaround. Homebuyers have woken up to the fact that affordability is a major issue. Can they afford the house?”