The US housing crisis looks sets to deepen after S&P’s/Case-Shiller Home Price index showed that home prices in 20 US cities fell almost 13% in February from a year earlier. This from AP:

“Month-to-month, it gets consistently worse,” said David Blitzer, chairman of the index committee at S&P, noting that February also marked the sixth straight month that all 20 cities experienced declines. “The slope is one direction. There is no sign of a bottom.”

“If you expect a ‘muddle through’ economic recovery to persist over the next 12 months – and I do – then the Fed will have to stay on guard as housing attempts to establish a bottom,” says Eric Roseman in The Offshore A-Letter.

“This doesn’t imply the dollar must fall further. But it does suggest commodities and gold will continue to rally because most central banks will continue to print credit while they try to look concerned about inflation.”

Bill Bonner in The Daily Reckoning says, “The last two big bubbles – in residential housing and the financial industry – are deflating. Prices are going down for both assets. But inflation-sensitive commodities, most notably oil and gold, have soared. And now prices seem be working their up all along the chain… from the oil wells, to the shipping containers, to the Chinese sweatshops, to the shelves of Wal-Mart.

“What this means to central bankers is that they have to watch it. They can’t cut rates so freely… not while consumer prices are rising. Instead, the pressure will be on the other side – to raise rates.

“To the man on the street it means that he has to prepare to pay higher prices for everything.”