It's the bleak mid-winter here in Paris. Snow lies all around.

From the news, the markets are jelled with cold too. The Dow has barely moved. Not a dollar...or a bond...is stirring.

But what still won't keep quiet is the creaking, crunching sound of the housing market. It is sliding - like a glacier - down.

Yesterday came word that New Century Financial Corp. - the nation's second largest provider of sub-prime mortgages - is having a rough time of it. When its mortgages go bad, it has to buy them back. Predictably, it now discovers that it did not set aside enough money to do that. So, when investors got wind of this situation yesterday, they took down the stock by more than one-third.

Which must have been a bad day for the insiders and large shareholders. They should have unloaded that stock on the unsuspecting public long ago. Perhaps they did.

"Refinancing gets tougher," says the Wall Street Journal.

"Lenders battered by late payers," adds the Associated Press.

Dear, dear reader...who would have thought that lending money to people who could not afford to pay it back would lead to problems? Life is just full of surprises, isn't it?

According to the Mortgage Lender Implode-O-Meter, 20 lenders have gone kaput since December 2006.

Meanwhile, the Toll Bros stepped up to the microphone, too. They said their orders for the first quarter of this year have plunged 33%. Revenue is off 19%.

And now we have Desert Storm Three. Phoenix, as hot as it is, seems hard hit by the icy winds from residential neighborhoods caving in. Pulte lost money in the last quarter of '06, largely because of weakness in the desert. Sales in 2006 in the Phoenix area fell 26% over the year before. Locally based builder, Fulton Homes, said its closings were cut in half last year.

And behind it all trot the real estate agents, brokers, and granite counter-top installers. They, too, are astonished by this sudden turnabout. Realtors are said to be giving up after the average agent earned 20% less in '06 than in '05. Prices weren't much lower in most cases, but there were fewer sales...and less commission.

And what's this? One of the biggest financial firms - Merrill Lynch, a company that has boomed with the global liquidity boom - is now warning its customers to watch out. A global liquidity inflation is inevitably followed by a global liquidity deflation, says Merrill, warning its customers to take cover.

Merrill sees higher interest rates, possibly sooner than most expect.

"Fed official...rates may rise," says a headline from the Philadelphia Enquirer.
We don't put much stake in such headlines. But there must come a time when lenders get nervous and yields rise. That is when you will have wished you had cocked your head up and seen our Crash Alert flag flying over the Daily Reckoning headquarters...or paid attention when Merrill Lynch told you to head for high ground.

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.