The woes in the U.S. housing market continue:

Fannie Mae, the largest lender for buyers of homes, yesterday reported an astounding $3.6-billion loss in its latest quarter. The company's stock is down to a 12-year low and there is talk this morning that a major credit monitoring agency is getting ready to cut Fannie Mae's rating.

According to a report released Wednesday by the U.S. Commerce Department, the median price of a new home dropped by 4.3% from December. We are now at the lowest median selling price for a new home since fall 2004.

Meanwhile, the median price of an existing home dropped 4.6% in January from a year ago. Yes, new home prices are falling quicker than resales, but the inventory of resale homes available in the U.S. keeps rising—there is 10.3 months worth of unsold homes on the market, close to a 20-year record high.

None of the above is news to me. After investing in the real estate market for over 25 years, I have never seen a boom that wasn't followed by a bust. Actually, considering how big the boom for real estate was in the U.S. up until 2005, I'm surprised that the fall- out hasn't actually been worse.

For now, the Dow Jones U.S. Home Construction index looks like it has bottomed out. This index trades at 394 today. I believe that Fed Chairman Bernanke's preference to reduce interest rates rather than deal with any inflationary pressures will be a major boost to the housing market.

As a big believer that the stock market is a leading indicator...

Here is my new, and I believe major, prediction for housing in the United States. If, for 2008, the Dow Jones U.S. Home Construction stays above its early 2008 low of 259, the worst for housing will be behind us. We will continue to get "bad" news from this industry, but the bottom for prices will be in. Right now, the action of general stocks says that this is the stock market bet.

However, and this is important, in the event that the 259 low by the Dow Jones U.S. Home Construction index is broken, the situation for housing in the United States will go from one of recession to depression. (I will keep you posted on how this index fares as the weeks pass.) Regardless, I still see one or more major U.S. homebuilders filing for bankruptcy in 2008, early 2009.