When we thought things just couldn’t get worse for the consumer confidence and housing sectors, as well as the exchange traded funds (ETFs) that track these sectors, this past week has proved us wrong.

Real Estate. Despite falling mortgage interest rates, sales of new and existing homes continue to fall indicating that there is no hope in the near future of stabilization of the credit markets and an economic recovery.  In fact, existing home sales posted a 5.3% drop and new home sales dropped a whopping 10.2% in January.  Additionally, the supply of homes on the market has risen to 13.3 months.  To make it even worse, the median price of an existing home fell to $170,300, a drop of 14.8% year-on-year, states Mark Rogers of the Barrons.

Take a look at the performance of the iShares Dow Jones U.S. Real Estate (IYR), which is down 39.5% year to date and 15.3% in the last week.

Consumers. To add to the housing woes, consumer confidence and sentiment continues to be at or near record lows. Consumers are just not spending and are holding onto their wallets. In fact, the Consumer Board’s consumer confidence index in February of this year, fell to 25.0 from 37.4 in January, a 40-year record low.  One reason that confidence is at these low rates is the continuing rise in unemployment rates; more than half of the employed work force is fearful of an immediate layoff.  To further support this argument, take a look at the retail sector, which is generally a good indicator of consumer confidence.

The Retail HOLDRs (RTH) is down 16% year to date and 7.6% in the last week.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.