I disagree. Stocks will not benefit and here is why: The stock market has already directly benefited from the lending bubble. The excessive borrowing has not only allowed excessive consumption, but also equity investments that lifted the stock market over the past 3 years.

And in the end, the majority of SD buyers are still regular people that will hold until the bitter end and they can get out for what they paid for it.

People are attached to their homes, not their stocks. When the ARM adjusts, the only place there is money to grab is from the 401(k), the Roth, etc. Lots of equity investments will be liquidated to save the house. The house will be the last thing a family wants to part with.

I personally know a family who recently liquitated Roth IRA’s to buy land for building a house.