The US housing market by many measures is stuck in the mud, and fresh data suggests an alarming parallel to the run-up to the 2008 crash.

David Rosenberg, a veteran economist and the founder of Rosenberg Research known for calling the dot-com and housing crashes, said he's watching one warning sign in real estate was also present leading up to the housing crisis. It's the falling annual rate of home sales, which recently dropped below levels recorded in early 2008, just as the housing collapse was kicking off, he wrote on Wednesday.

Home sales have stalled in recent months as mortgage rates have climbed. As buyers have been sidelined, the "lock-in effect" of low pandemic-era rates has kept many sellers from listing their homes.

The result is an anemic market characterized by low levels of transaction activity.

The annualized pace of existing home sales fell nearly 2% to 4.06 million in July, according to data from the National Association of Realtors. That's compared to the annualized pace of 4.89 million existing home sales in January 2008, according to NAR data. At the time, it marked the lowest pace of annual existing home sales the US had seen in nine years.

The market, meanwhile, has around 4.6 months of unsold housing inventory, and rising levels of housing stock threaten to weigh further on prices. The last time demand and supply were this pressured, median home prices dropped around 2%, Rosenberg estimated.

"It's funny how inflation is on everyone's brain at a time when every measure of real estate prices is now in the process of cracking," Rosenberg wrote.

Lower home prices could precede wider economic weakness, he said, pointing to the effects on the wealth effect among homeowners who have watched their property prices steadily appreciate, particularly in the last few years as the pandemic upended the usual levers for supply and demand.

Similar to the risk of a falling stock market, waning home prices could cause consumers to pull back on their spending as they wrestle with the psychological impacts of seeing their wealth on paper decline.

"Do not underestimate the effect this will have on the fabled 'wealth effect' on spending in the coming months and quarter — a huge offset to what the stock market is doing (assuming it continues to do what it has been doing)," he added of the economic impact.

Prices on average are still high. The median sale price for an existing home rose 2% year-over-year in July, NAR data shows, though there are certain pockets of the real estate market that are seeing prices fall as demand slumps and inventory piles up.

Rosenberg told Business Insider last year that he expected the housing sector to see its worst downturn since the Great Financial Crisis. Speaking on the "Excess Returns" podcast recently, he said he believes the AI boom is the main reason the US hasn't fallen into a recession yet.

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Jennifer Sor

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Jennifer Sor is a senior reporter at Business Insider. She covers financial markets and the economy, with a focus on retail investing, job trends, and the pursuit of wealth. She regularly speaks to famed forecasters and top investors in markets, and her work has been featured in outlets such as Forbes, Bloomberg Opinion's "Money Stuff," and SiriusXM Business Radio.  She also appears regularly on television and radio to speak about markets and the US economy.Prior to her time at Business Insider, Jennifer covered tech and business news at the San Francisco Chronicle and Los Angeles Business Journal. She graduated from the University of California, Santa Barbara with a bachelor's degree in economics and English.Have an interesting story to share? Please reach out to her at [email protected] or @jennreports.81 on the encrypted messaging app Signal.  

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