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The subprime mess is likely to lead to forced sales, which will increase the stock, pushing prices down further.The big uncertainty is how much, and when, weaker house prices affect consumer spending.
If weaker house prices push the economy towards recession, the awkward truth is that America's policymakers will have much less room to manoeuvre than they did after the stockmarket bubble burst.
The jobless rate is 4.4% and real incomes have been rising even faster than spending.As long as jobs are plentiful and wages rising, the effect of weaker house prices will be muted.
Weaker house prices, they argue, will have a bigger and more immediate impact than the "wealth effect" suggests, because Americans have been paying for their spending binge by borrowing against the rising value of their homes.
Similar(49)
The drop from 0.1percentt in January was mainly a reflection of the weaker housing market.
With luck, signs of a weaker housing market will concentrate minds in Washington, DC as the next decision over the debt ceiling approaches.
Employment in the three-year economic expansion has been slow to recover in some states that are contending with weaker housing markets or industries.
But it is likely to take a different approach because of the weaker housing market and higher unemployment in those towns.
During the first six months to June, profits at Savills fell to £19.2m from £32.5m in the same period a year ago, reflecting weaker housing markets in Britain and Europe.
GARY SHILLING: And bear in mind that obviously the weaker housing starts, the sooner you get there.
Indeed, the stock market suffered on Tuesday from reports that retailers such as Home Depot and Sears Holding were suffering from reduced purchases related to weaker housing.
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