US foreclosure filings have more than doubled in 2Q from a year ago, reports Bloomberg.

According to RealtyTrac, 1 in every 171 households was foreclosed on, received a default notice or was warned of a pending auction in the quarter. That’s up a massive 121 percent from a year earlier – and 14 percent just from 1Q.

The housing housing market has yet to bottomed out, says Louis Basenese. But this doesn’t mean you shouldn’t consider a play in real estate.

A true contrarian investor is always looking to own shares of companies that are out of favor with the investing public. And no sector has been more discarded than real estate…

I suggest a low-risk, low-hassle, low-cost approach. Leave active management behind and consider the Vanguard REIT Index (VGSIX). It will give you the broadest real estate exposure possible for an almost negligible expense ratio of 0.2%.

Public Storage and Equity Residential Properties are among its top five holdings. Both have returned over 12% this year. The fund also maintains consistent dividend strength, yielding more than 5% right now.

And here’s another little portfolio-boosting secret: This year’s big losers are often next year’s Wall Street darlings. Historical data bears that out. And so will holding a part of your portfolio in real estate.

Of course, the crisis in the US housing market has a massive knock-on effect on the wider economy. We could be heading for serious fallout in other areas of mortgage markets, according to Bill Bonner…

With no house price gains to spend, consumers will have to cut back. When they do, retail sales will fall… and so will the demand for goods and services all up and down the line. So far, we’ve seen a big drop in demand for automobiles – especially SUVs. GM shares are down 75%. We’ve seen a drop in driving too. And unemployment numbers are increasing. But, so far, no big drop in spending. Of course, part of the reason for that is simply that prices have risen so high, consumers need to keep spending every penny – even though they are getting less for their money. But soon, we should see a significant drop in sales, followed by a further drop in economic growth.

Last week, we saw a report telling us that vacancies in retail space were increasing. The United States has ten times more retail space per person than France. When people spend less, much of this space will cease to be commercially viable. Soon, abandoned shopping malls will follow abandoned houses.

“Suburban office space losing occupancy and value,” too, adds the Chicago Tribune.

What this represents to Wall Street is a big drop in the value of its collateral…and its clients’ ability to service their loans. First, the borrowers can’t make the payments. Then, the lenders realize that their collateral is worthless. We’ve seen big hits taken in the subprime mortgage market. But what about other parts of the mortgage market? And what about credit card lending? Student loans? Commercial loans?