Depending on what you read or watch on television — and it’s all over the news — the housing market is either stalling, slumping, or falling. Or, as veteran investment adviser Martin Weiss of the Safe Money Report of Jupiter, Fla., put it last week, “crumbling.”

So what’s new? In brief, judging from a newly created futures contract, a new shocker could be on the way for the nation’s 75.6 million homeowner households — actual price declines from the purchase price.

Though beset by slowing sales, bulging inventories and shrinking values, home prices nationwide have never declined on an annual basis in the post World War II period. Even in July, when existing and new home sales fell 4.1% and 4.3%, respectively, actual home prices still managed to eke out modest increases for the month (less than 1%) from year-earlier levels. So home values went up, not down.

But the ability of the housing market to withstand actual price losses looks like it may be soon coming to an end. In other words, because the housing boom has now evolved into an undeniable housing slump, the latest shocker is that the home bought at whatever price the buyer paid for it may soon begin to fetch a sale price below the original purchase price on an annual basis.

This impending and frightening development is based on a recently launched indicator of the direction of American home prices, which is currently flashing signals that housing prices nationally could finally bite the bullet and begin to actually go down as early as November and fall 6% by May.

As noted by Standard & Poor’s, the indicator — a futures contract traded on the Chicago Mercantile Exchange — is based on the S&P/Case-Shiller Composite Home Price Index, a weighted index of 10 major metropolitan indexes around the country. Embracing such areas as New York, Miami, Chicago, Los Angeles, and Washington, D.C., the futures contract, based on recent prices, shows that traders are pricing in a 2.3% decline in nationwide home prices in November and an additional 1.3% dip by February before reaching the expected 6.3% decrease in May.

Giving credence to such expectations is the recent data on July’s falling home sales, along with earnings reports from the large homebuilders, both of which confirm that purchasing demand has slowed, while more buyers are canceling their orders.

At the current sales pace, inventory levels have reached a record high of 7.3 months. In recent years, a sustained period of historically low mortgage rates and creative mortgage financing gave homebuyers the flexibility to afford higher priced homes. But S&P’s homebuilding analyst, William Mack, notes that equation is changing, with the average 30-year fixed-rate mortgages having climbed in July to 6.76% from 5.7% a year earlier.

If potential buyers aren’t able to finance with lower mortgage rates, they at least want to see lower prices, Mr. Mack points out. The buyers, he adds, are saying, “We think we can get better prices. Why should we lock in now?” And those who are putting deposits down are backing out because they see indications the prices may fall, he says.

So far this year, homebuilding stocks have taken a beating, tumbling about 32%, which has prompted some analysts to recommend “bargain hunting” in certain companies, among them Toll Brothers and Hovnanian. In contrast, Mr. Mack believes that’s premature, arguing further data is needed to determine whether homebuilders are set to experience something deeper than just a typical trough in a cycle.

Given the current trends in housing, S&P’s chief economist, David Wyss, sees investment in residential construction — a major economic catalyst — subject to growing weakness and he predicts it will decline 2.3% this year. An even larger drop of 8.8% is projected next year, which, in turn, he expects to clip 0.5 of a percentage point off annual GDP growth.

In a related development, Raymond James Financial’s chief investment strategist, Jeffrey Saut, says he continues to be troubled by the weakness in the housing sector, especially so for the risk it represents to the economy and the equity markets. The housing data continues to get worse, he notes, and he expects more of the same to be reported for August as the latest figures roll out over the next two weeks.

Mr. Saut says he’s not oblivious to the fact that economic growth remains relatively sound and that the likelihood is that the Fed is near the end of the tightening cycle, which lends support for the equities markets. But he thinks investors should be aware that, historically, housing cycles have been predictive of general economic health and that currently the housing cycle is decelerating at a rate much greater than anticipated; further, that inventories of homes for sale in numerous markets around the country are soaring, while sales of new and existing home continue to slip.

So given these concerns, Mr. Saut says, “We are recommending a more defensive investment posture and a decrease in the allocation to equities.” Or put another way, the illness of the housing market could soon contaminate the stock market.