As the housing market continues to slide though the mortgage morass, the growing economic impact is generating more talk of a housing industry-spawned recession.

The National Association of Realtors has steadily revised price estimates down as mortgage market woes and swelling inventories continue to add to the glut of listings.

The latest outlook calls for a 1.7 percent decline in the median price of existing-homes this year, compared to the previous forecast of a 1.2 percent decline, marking the first full year decline in existing home prices since NAR has been tracking the data.

NAR has lowered forecasts for existing home sales for eight-straight months.

New home sales were off by more than 10 percent in July and new single-family home starts fell 7.3 percent for the same period, according to the National Association of Home Builders.

In the University of California-Los Angeles Anderson Forecast "Turbulence", economists forecast "... the housing induced sluggishness in the U.S. economy to last into early 2008. For 2007, real GDP (Gross Domestic Product) growth is expected to be less than 2 percent ... roughly on par with the near-recessionary environment of 2002."

One major economic blip now, say, the failure of a major mortgage lender or two, some natural disaster, or some financial disaster, could put the economy in a tailspin.

UCLA Anderson Forecast senior economist David Shulman says if the forecast is dead on, the period from second quarter 2006 through first quarter 2008 will mark a "historically anomalous" long period of below-trend growth.

Even though growth is just above the traditional definition of a recession -- two consecutive quarters of decline in the GDP -- and the Anderson economists say the economy is "certainly close" to a recession, Shulman insists a recession is not imminent.

Shulman says that means the markets shouldn't expect a rate cut from the Federal Reserve before the fourth quarter. He also said the recovery in the housing market will more closely resemble an "L" not a "V."

The weakness in the housing sector has already spilled into the rest of the economy, especially consumption spending which had a growing dependence on equity gains. Retail sales stalled in April and auto sales have been weak.

The cost of housing itself creates some of the squeeze.

Even with the housing slow down, the U.S. Census reports more and more of Americans' income is going to housing.

Half of all renters and more than one-third of all mortgage holders, both up from 2005, spent at least 30 percent of the gross income on housing in 2006.

In California, 51.8 percent of homeowners spend more than 30 percent on housing, compared to the 36.9 percent average.

In a quirky example of how the housing market mash up is affecting spending, the spending that drives the economy, consumers are holding onto plastic and allowing their mortgages to meltdown.

Elizabeth Schomburg, senior vice president of the Family Credit Counseling Service said more and more consumers are arriving for help with impending foreclosures, but their credit card payments are pristine.

"This is the biggest surprise we're seeing," she told Associated Press.

Experts speculate that credit card delinquencies have remained low as foreclosures have surged because it's easier to hold onto credit cards than to borrow against a mortgage or refinance your way out of a bad home loan.

The collapse of the risky business of subprime mortgages and other self-destructive home loans has forced lenders to tighten underwriting standards on mortgages, as well as other credit.

But reliance upon revolving credit for cash on hand could shake out the already open Pandora's Box and put more lenders and credit card holders at risk while further exacerbating the economic slowdown.

Just as mortgages are repackaged as securities so are credit card receivables.

And even if a card holder is current with the plastic, a lender can reduce credit limits, raise the interest rate, cut off credit card use or take the back the card, if a borrower's credit report reveals financial trouble elsewhere, say, with the mortgage.

Some of a potential recession's writing on the wall is in the small print.

And once again, nobody's reading it.

Published: September 13, 2007

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.