"I guess the only silver lining is that it didn't fall even more," said Stuart Hoffman, chief economist for PNC Financial. "I think it's way too soon to say the housing market has hit bottom, especially with the continued problems in subprime mortgages. The availability of financing is tighter for anything that's not a prime loan, and even with prime loans, mortgage rates are up. The inventory overhang is huge."The slump in housing has not hit the broad economy but as people realize the equity in their home is no longer as large will they pull back and stop spending? My guess is that they will. With a negative savings rate and exploding consumer debt, history shows us that consumer spending will follow suit. Last quarter growth was nearly flat. A housing report such as this does not bode well for future economic growth.
I have been saying that I believe that the U.S. economy is headed for a recession late this year. If that happens there is no Republican presidential candidate that will be able to win the White House. That is the only silver lining in what may be a bumpy road ahead.