Sometimes you have to wonder what's coming out of the water cooler at National Association of Realtors (NAR) headquarters.

The past week has seen the trade group issue a slew of misleading press releases, all intended to jump-start a withering housing market and earn those Realtors a 6% commission. The latest is a prediction of a "modest recovery" for existing home sales in 2008. If you believe that, you need to review the NAR's hilarious history of ineptitude in predicting future home sales.

On the heels of the ridiculous kid-on-a-swing campaign, the Realtors, partying in Vegas, claimed that 2007 is a great year for housing, despite copious evidence that home prices are tanking at unprecedented and accelerating rates. The fire sales and lousy margins at homebuilders such as Hovnanian Enterprises (NYSE:HOV), Pulte Homes (NYSE:PHM), and D.R. Horton (NYSE:DHI) provide more proof that prices are crashing.

How can the NAR make such a bogus claim, then? Because by their (unsophisticated) measurements, home prices are still near record levels. That's like saying 2000 was a great year for JDS Uniphase. Memo to the commission-addled non-thinkers at the NAR: We're on the back side of a bubble. It takes a while for home prices to drop, but they are dropping. The folks who bought in at the top, based on the NAR's constant stream of "now is a great time to buy" propaganda are now looking at major, leveraged losses in equity. Many will lose everything in foreclosure and bankruptcy.

As RealtyTrac has quantified, foreclosures are rising at an alarming rate. Third-quarter numbers released earlier this month showed a 100% increase in foreclosure activity. Bubbly markets in California, Nevada, and economically sensitive Ohio are being hit especially hard. And developments that are being hit with foreclosures get worse quickly, as an MSNBC story that came across my cell phone this morning explains. Once the bad renters and squatters move in, crime follows, and the property values for occupied, neighboring homes plummets.

The problem is, this is all likely to get a lot worse before it gets better. As recent earnings- and CEO-killing mortgage-backed securities writedowns from Citigroup (NYSE:C), Merrill Lynch (NYSE:MER), Morgan Stanley (NYSE:MS), and Wachovia (NYSE:WB) have made clear, the market for mortgage debt is in deep trouble. No one wants the junk loans that pushed up housing prices in the first place, and that means there's no more free money to support those ridiculous valuations. With major waves of adjustable-rate mortgages set to reset in the coming months, we'll see mortgage-backed securities get even uglier, foreclosures increase, and home prices continue to fall.

Anyone who tries to tell you that "it's a great time to buy" or that "real estate is local" is operating with blinders on. Things are going to get worse all over. The real bargains won't be in for a while.