National average house price to drop this year

And, possibly, for the next two years.

I would change that “possibly” to “probably.” And, more and more people are predicting a recession of some sort, even if they refuse to use the “r” word.

While the housing slump has already rattled financial markets, it has so far had only a modest effect on consumer spending and economic growth. But forecasters now believe that its impact will lead to a slowdown over the next year or two.

“For most people, this is not a disaster,” said Nigel Gault, an economist with Global Insight, a research firm in Waltham, Mass. “But it’s enough to cause them to pull back.”

Combine the fact that much of consumer spending this decade has been credit-based, and the primary source for that spending has been home equity loans, and it’s pretty easy to understand how a recession could be just around the corner.

The only question is, how bad of one?

Plus, how mentally equipped is the Fed to deal with this? After all, our current fearless Fed flack, Ben Bernanke, when a Bush advisor in 2005, said:

“Strong fundamentals” were the main force behind the rise in prices. “We’ve never had a decline in housing prices on a nationwide basis.”

Guess what, you credit-inflating junior Greenspan sack of shit? We do now!