Perhaps you've heard this argument: Corporate cost cuts have swelled profits beyond analyst expectations! And profits are what drive the market higher! Well, sure. But eventually, the top line has to grow, too -- and that could be one heckuva problem.

What goes up must come down?
First off, it's true: As of a few weeks ago, more than 70% of S&P 500 companies that had reported second-quarter earnings beat their estimates -- surpassing the 61% average. Nice. But there is such thing as a future, and the next several quarters could see a nasty transition, as companies go from beating the Street to pounding the pavement in search of business.

Here are a few reasons why consumers and the housing market shouldn't expect green shoots just yet:

  • According to Deutsche Bank (NYSE:DB) analysts, the percentage of negative equity mortgages may escalate to 48% by 2011, versus 26% as of March. Negative equity is a big deal. In fact, a recent study by economist Stan Liebowitz found that it trumps unemployment, poor credit, loan resets, and other factors in precipitating foreclosure activity. While only 12% of homes in Liebowitz' research sample had negative equity, they accounted for 47% of all foreclosures.
  • Remember interest-only home loans? They're coming home to roost, as their reset monthly payments increase by as much as 75%. And that's trouble with a capital "T" for all you folks in River City. The value of active interest-only home loans sits at roughly $900 billion, according to First American CoreLogic, or nearly 9% of total outstanding mortgage debt. By year-end 2011, more than half of those loans will have reset. To heck with The Music Man, Fools -- I hear Billy Joel singing something about movin' out.
  • Finally, the Federal Housing Administration (FHA) -- whose presence in the mortgage market has swelled since 2006 -- is insuring 3.5%-down loans. With help from the soon-to-expire $8,000 tax credit for new homeowners, potential buyers can snatch up a $228,000 home with essentially no out-of-pocket contribution. In light of rising FHA delinquency rates, economic commentator Barry Ritholtz likens the phenomenon to "drinking yourself sober."

Just a party pooper?
Look, the market as a whole might not be wildly overvalued, and individual companies may soon see better days -- Caterpillar (NYSE:CAT) and Nucor (NYSE:NUE), for instance, could enjoy a net benefit from global stimulus, even as private projects remain on hold. Alternatively, shares of Petrobas (NYSE:PBR) and Transocean (NYSE:RIG) still look like decent buys on possible future oil supply constraints. 

But all those who have piled into shares of Fannie Mae (NYSE:FNM), Freddie Mac (NYSE:FRE), and other speculative names, on the expectation that housing and consumer spending won't see another dip, should think twice. Remember, things look up and up and up -- until they don't.

Other Foolish takes on the big picture: