Prices are slightly lower adding to the loss of 144bp in just the last 2 days! Unfortunately, technical signals suggest that prices will likely erode further to touch support at the 25-day Moving Average. Additionally, the stochastic indicator is bearish, as it shows a negative crossover from overbought levels. We will start out floating, but in tip-toe fashion because a further move lower in prices later today is very possible, especially if stocks gain upside momentum.

The 'Maestro', former Fed Chair Alan Greenspan, is back on the soapbox - but this time with a more positive tone. While he still thinks the chance of a recession (2 consecutive quarters of negative GDP growth) is 50/50, he said that if the US economy did enter one, it would be short and shallow. Moreover, he thinks 2008 could be the bottom in housing. We are glad to see he is thinking the same way we have been. And consider this - if the housing market had a large affordability gapperhaps as much as 30%…the excess will have been reduced quite a bit by the end of this year. Prices declined by 5%-10% in 2007. Add another 5% drop this year and half the excess in affordability is gone. Now think about incomes rising a modest 2.5% per year. Since we qualify at a front ratio of 33% or less, the 2.5% increase in income translates to about 7.5% increase in price. Two years of that wipes out the remaining 15% gap in affordability. There is still a lot of inventory to soak up, so prices won't rocket higher next year, but we should see stabilization and modest price appreciation.