You just know the housing situation has gotten bad if the six-percenters at the National Association of Realtors finally feel the need to reveal the awful truth: Prices are going to fall. The latest verbiage from the world's most vocal housing-bubble cheerleader, NAR economist David Lereah, actually predicts that home prices will drop by 0.7 % in 2007.

Of course, you wouldn't know that to read the headline, which, as usual, paints the fantasy that everything is always good for housing. In other words, it's exactly what you'd expect from a guy who's been shilling housing not only in press releases for his trade group, but in misguided books like the wonderfully timed (from 2005) Are You Missing the Real Estate Boom?, the failed broadside against the skeptics Why the Housing Boom Will Not Bust (from 2006), and the still later "oops-I-better-tweak-my-lousy-thesis" response, All Real Estate is Local. (By the way, this blog post tells a tale of Lereah's real estate investment prowess these days.)

Even the NAR's mealy-mouthed admission on falling prices isn't particularly gutsy or insightful. Prices have been dropping for a while, even though the official accounting techniques for home sales don't net out the ludicrous subsidies that sellers have been throwing in for months.

The briefest look at results from D.R. Horton (NYSE:DHI), Pulte Homes (NYSE:PHM), and Lennar (NYSE:LEN) would have told you where housing was headed. And the credit crunch -- real and feared -- that's whaling on lenders like Countrywide Financial (NYSE:CFC), IndyMac (NYSE:NDE), Impac (NYSE:IMH), Fremont General (NYSE:FMT), and others is both long overdue and well-deserved.

So, while you're giggling at Lereah and the NAR, keep your eye on the industry response to the mess and the media wake-up call. As reported by The Wall Street Journal, the cheerleaders at the Mortgage Bankers Association are crying foul and spending millions to fight back against a "torrent of unfair press and counterproductive policy responses ... "

Can't argue with them on the dumb policy. Bleeding-heart lawmakers are already signing up to reinflate the bubble through various means of flouting the markets' impending return to equilibrium. But the MBA is way off base to cry about the press.

Fools, what bubbles up must eventually come down. It would just be nice if Lereah, the mortgage bankers, and the rest of the crowd would recognize the monster they've made and make real amends. But don't bet on it. Their paychecks depend on the myth of housing as an investment, rather than a sound living choice if purchased at the right price.

Next time they start flapping their lips, I suggest we all "invest" in earplugs.

Comments? Bring them here.

At the time of publication, Seth Jayson had no positions in any company mentioned here. See his latest blog commentary here. View his stock holdings and Fool profile here. Fool rules are here.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.