This week a series of events have transpired that may have significant rippling impacts on the housing market. Wall Street giant Bear Stearns has had two investment funds it manages nearly collapse. These funds invested primarily in sub-prime loans and were heavily leveraged to boot. After being pressured by lenders to the funds including Merrill Lynch, Lehman Brothers and Deutsche Bank, Bear has agreed to lend as much as $3.2 billion to the funds to salvage them and comfort investors.

What are the possible ripples? That owners of such securities across Wall Street will be forced to recognize paper losses as they "mark-to-market" their positions. This in turn would limit appetite for purchasing more scrutinized mortgages from originators, generally commercial banks. That, in turn, would cause commercial banks to reduce their mortgage lending since they could no longer "lay-off" the risk. This systemic reduction in credit would make it more difficult at the margin, to obtain mortgage financing and thus decrease overall demand for housing. No matter how you slice it, this is not good news. It is very unclear yet if this is important news.