Has anybody else noticed that the housing market foundation is starting to crack again? Despite a ton of artificial government intervention, e.g. low interest rates and tax credits, new and existing home sales indicate trouble ahead for home prices and the economy.

Today we had the release of Existing Home Sales, (which represent 90% of the market), for the month of February. Purchases dropped 0.6 percent to a 5.02 million annual rate, the lowest level in eight months and also dipped for the third month in a row.

The number of previously-owned homes on the market jumped nearly 10 percent to 3.59 million. At the current sales pace it would take 8.6 months to clear the market. The supply of homes was 7.8 months at the end of the prior month. Therefore, not only is the nominal supply of homes for sale increasing but also the amount of time it would take to clear the inventory. Sales rose 2.4% in the Northeast, so the weather can't be used as an excuse.

The first-time buyer's tax credit is set to expire for homeowners that can close by the end of June but only covers contracts that are signed by the end of April. And the Fed will conclude its buying of $1.25 trillion in Mortgage Backed Securities in one week and will also stop buying $175 billion worth of GSE debt.

The continued lack of significant private-sector job growth along with the likely hood of higher consumer borrowing costs should exacerbate the recent renewed weakness in housing. Lower home prices will increase foreclosures and further erode bank capital. The removal of government stimulus in the housing market and its resulting effect on GDP growth is one of the primary reasons why I believe a double-dip recession is a significant risk in the second half of 2010.