This past week the White House downgraded their assessment of the economy when they contracted their GDP projection for 2010 from 3.2% to 2% and increased their original unemployment outlook from below 8% to 9.8%.

There are two concerns with unemployment.  The first is the actual percent, and the second is the duration.  What the White House is predicting, and keep in mind they have been behind the curve on this recession for the past two years, is that 2010 is going to be worse than 2009 in terms of sustained high unemployment.  Unemployment is expected to average "only" 9.3% for 2009.

What this means for the housing market is that we are going to see continued record setting foreclosure rates for another 12 months, maybe longer.  Already, in July, according to RealtyTrac, foreclosure filings were at a record high, and were up 32% from last year.

Additionally, a recent report published by Fitch Ratings showed that consumers are already on the brink.  According to their study, the "cure rate"  for delinquent mortgages plunged to just 6.6% when compared to 45% from the years of 2000-2006.  What this communicates is that once a homeowner falls behind on their mortgage payment, there is only a 6.6% chance they are going to get caught up.  And considering the MBA is reporting that a record 13.16% of all mortgages are at least 30 days late or in foreclosure, it paints a very worrisome picture for the housing market.

Yes, demand for housing has rebounded from the bottom thanks to a Fed $1.25 trillion funny money policy.  But it appears that foreclosures are going to rise at a greater rate than the demand for them.  This means we will be looking at at least another year of continued price deterioration in the housing market.  And this assumes that the Fed doesn't begin to contract their monetary policy yet.