Those investors who think that the worse of the mortgage, housing, and economic crisis are already behind us should consider the following report.

According to a new report from the Office of Federal Housing Enterprise Oversight the prices of homes sold in the first quarter of 2008 posted a record decline.

Home prices fell 3.1% from the first quarter of 2007, the largest decline in the purchase-only index, which excludes refinancings, since the federal agency began keeping records 17 years ago.

First-quarter prices dropped 1.7% from the fourth quarter, the largest quarterly dip ever.

“It’s not going to be the largest decline on record for long,” said Peter Schiff, president and chief global strategist at Euro Pacific Capital.”Prices are going to keep falling until we get to the equilibrium, which is much, much lower. This is only the beginning.”

The inflation-adjusted price of homes fell 7.7% on a year-over-year basis. At the same time, the prices of other goods and services rose 4.6%, according to OFHEO.

“The nominal price declines aren’t as spectacular as they would be if we didn’t have so much inflation,” Schiff said. “Houses are becoming a less valuable asset relative to the cost of living.”

As housing prices continue to fall financial pressures on banks and other financial institutions will increase. The stock market looks to be considerably overvalued as investors still seem to believe that the Federal Reserve Bank and the US government will somehow fix the problems.

Alas, the Fed and the government are more a part of the problem rather than having long term solutions in hand. The probability of hard times ahead for the US economy and for all but the richest of the general population looks to be high indeed. It’s not a time to be careless with investments. Cash is on it’s way to once again becoming king as the deleveraging process continues.

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