Another week and another set of data on the underlying weakness in the housing market:

Home Sales Hit Slowest Pace in 4 Years

Housing sales are falling, prices are falling, and inventories are rising. This does not bode well for the holders of the CDX’s and relatives down the chain from these fundamentals. Although Bear’s bail-out may have bandaged the bleeding of it’s former juggernaut (aka beta-rider), the no-name funds chasing the same strategy will not be as lucky.

The interesting question outstanding for me is when and how the rating agencies react to the latest mess. It seems almost unconscionable that there was not a wave of downgrades leading up to this latest crisis, but harkening back to the go-go days of the Independent Power Producers in the pre-Enron implosion era reminds one of the reactionary nature of that privately funded group of “watch dogs”. It took Enron going-in for the rest of the crew to get downgraded and the after effect took years to play out (with CPN shareholders who bought in right before the filing feeling happy with the recent ~$3/share result).

Thus, it may be some time before the agencies react, holders are forced to sell and mark, and the rest of the world sees the result of over-priced and hype-driven strategies…or maybe somehow this time will be different. If so, I just hope somehow it isn’t for the worse.