When Will Housing Recover? Let's Talk About Oil.

We're approaching the one-year anniversary of Bear Stearns' decision to throw its two subprime hedge funds into bankruptcy, a move that cost investors about $20 billion. A few weeks after that Countrywide co-founder and CEO Angelo Mozilo, during an earnings conference call, likened U.S. housing market conditions to that of the Great Depression.

Twelve months have passed since the mortgage industry began its freefall, taking along with it the housing market, the nonprime lending industry, construction jobs, Wall Street jobs, mortgages jobs and anything related to housing finance. The only bright spot for the industry is the servicing side of the business and foreclosures (that is, if you make money off of foreclosures). It's not a pretty picture. And the chief question many are asking (those who still have jobs) is this: When will the industry recover?

Coming up with answers isn't easy. Currently, there is a 12-month supply of new and existing homes for sale (give or take a month or two). Consumers are feeling anxious. White- and blue-collar jobs are disappearing. The domestic auto industry is shedding workers because their reliance on the SUV market turned out to be a Trojan horse: car makers got hooked on the fat profit margins of larger vehicles without paying attention to warnings that cheap gasoline would not last forever.

Banks, S&Ls, mortgage companies and investment bankers are all cutting workers because the loan market is in the doldrums and writedowns on mortgages assets (subprime and other wise) are not over, at least not yet. We're at $250 billion in "hits" and counting.

All things being equal, contrarians (of which I'm one) might say, this could be a good time to actually enter the mortgage business. But there is an economic problem that continues to plague not only housing/mortgages but the overall economy: rising oil prices. As I write this column oil is coming off a week in which it entered the nosebleed territory: $140 a barrel with investment bankers and others predicting $150 within a few weeks.

High oil prices make consumers feel bad and for good reason: the more they pay at the pump, the less they have to spend on everything: clothing, food, entertainment, going out to eat, utilities, savings, take your pick. The less consumers save, the less money that will be available for a down payment. Some first-time homebuyers might look around, thinking the market has bottomed, but when gasoline hits $4.50 ...