One of the signs of a coming recession, or at least prolonged economic turmoil, is the housing market. When mortgage applications go down, along with housing starts, that is an indication that the economy could be heading for trouble. While it’s not the only warning sign, it is a warning sign. Here is what MarketWatch reports on the housing shock:

"We think the housing shock is about half over," wrote Ethan Harris,
U.S. economist for Lehman Bros. Foreclosures will probably quadruple to
about 1 million in 2008 and 2009, keeping the supply of homes high and
putting downward pressure on prices, Harris said.

As builders try desperately to sell homes (and a new-built home sitting empty in my new subdivision for four months is a good example), potential buyers are wary of the market. Real estate investment isn’t yielding as much these days, and even with various fixes planned by government agencies, foreclosures will still happen.