How bad is the housing market?

More grim news about the U.S. housing market today.

• Home prices slumped 4.5% in the third quarter from a year earlier, matching the second quarter’s record decline. And if that doesn’t make you want to deleverage the real estate exposure in your portfolio, consider this: The S&P/Case-Shiller National Home Price Index also fell 1.7 in the third quarter alone, marking the largest quarterly decline in the index's 21-year history.

• That certainly doesn’t sound good, but the news that made me want to run for the hills came from a report released today by the U.S. Conference of Mayors and the Council for the New American City. The study, prepared by forecasting firm Global Insight Inc., predicts that the value of U.S. homes will fall by $1.2 trillion, and that "at least" 1.4 million homeowners will lose their properties to foreclosure in 2008.

Meanwhile, back in Greenspanland things look pretty rosy. According to press reports, former Federal Reserve Chairman Alan Greenspan said that he had "no particular regrets" and that the faltering U.S. housing market is not a result of his policies.

"The housing bubble is a not a reflection of what we did, as it is a global phenomenon," Mr. Greenspan told an audience in Oslo last week.

Right, free money had nothing to do with this asset bubble. Do I look as credulus as Larry King? Earlier this month, Joseph Stiglitz, a Nobel Prize-winning economist, said Nov. 16 that there is a 50% probability that the U.S. will tumble into a recession after the ``mess'' left by Mr. Greenspan. Defending his record in a statement the same day, Mr. Greenspan said that the criticisms were "inaccurate or incomplete." On the housing front, Mr. Greenspan said that investors are realizing that the drop in U.S. house prices has yet to abate after the ``shocker'' of the subprime mortgage market slump. ``Markets are becoming aware of the fact that the decline in house prices is not stopping,'' said Mr. Greenspan. ``The sub-prime was a shocker because no one expected it. It was the weakest link in the international financial sector.''