Housing Recovery Foundation is Starting to Crack

The nascent rebound in the housing market took another step back with the release of today's Existing Home Sales report. The National Association of Realtors said the existing homes plunged 17%, which is the biggest decline since records began being kept in 1968. The annual rate of sales fell to 5.45 million units, down from the 6.54 million unit annual pace in the prior month.

The number of previously owned unsold homes on the market decreased 6.6 percent to 3.29 million, the lowest level since March 2006. At the current sales pace, it would take 7.2 months to sell those houses, compared with 6.5 months at the end of November.

It should be noted that the weak housing data comes despite record low interest rates, foreclosure forbearance and a government that is the mortgage market.

Once the life support is pulled from the housing market-most likely by this summer--there will be a significant decrease in real estate activity. And if the trend in bank lending continues, there will be a substantial reduction in the funds available to purchase a home.

That puts into question not only the recovery in the real estate market but also in the overall economy as well.