Although some real estate markets, such as New York City’s, are percolating, it’s clear that the national housing horror show is far from over. If anything, it’s getting gorier.

As one worried trader, who asked not to be identified, put it: “The stock market’s in for more hell from housing; the subprime mortgage debacle seems like it’s still in its early stages.”

Nationally, the number of existing homes for sale shot up to an all-time high of 4.43 million in May, roughly double the normal levels of the late 1990s and early 2000s. Furthermore, unsold new homes on the market now number about 536,000 — about 150,000 more than what’s been considered normal during the past quarter-century.

Raymond James Financial’s chief investment strategist, Jeffrey Saut, seconds the trader’s analysis. “Plainly, the lackadaisical lending standards by the mortgage crowd just a few years ago are now showing up at Wall Street’s doorstep,” he wrote in a market commentary he fired off to clients the other day. He also took note of a couple of other potential land mines for the economy and the stock market, namely much tighter lending standards and the chance the Fed, instead of lowering interest rates, as widely expected, might keep them the same or actually raise them.

Lending credence to Mr. Saut’s market concerns was Monday’s disclosure of Standard & Poor’s intent to downgrade up to $12 billion worth of subprime mortgages. In response, financial stocks got beaten up and the Dow plunged 148 points.

Clearly, the experts have turned out to be dead wrong on housing. Last fall, the National Association of Realtors ran an ad campaign proclaiming, “It’s a great time to buy or sell a home.” It was followed by a slew of rosy economic forecasts suggesting the housing slump was ending and a spirited housing rebound was on the way in this year’s second half.

Recent numbers unmistakably demonstrate just the opposite. In May, for example, new-home sales fell another 1.6%, to an annual rate of 915,000, down almost 16% from a year earlier, and off 34% from the 2005 peak. Existing homes did even worse that month: Sales slumped to a four-year low, while median prices slipped 2.1% versus a year ago. It was the 10th monthly drop in a row, a new record.

As far as subprime mortgages go, the situation is worsening. Beyond the well-publicized problems of Bear Stearns’s two mortgage-based hedge funds, the woes related to shortfalls in subprime mortgages — which had originations of $600 billion last year — have spread overseas. A London-based hedge fund, Caliber Global, with almost $1 billion in assets, was forced to shut its doors due to losses on American subprime mortgages.

According to the Mortgage Bankers Association, the percentage of American mortgages going into foreclosure in the first quarter was the highest in history. If you factor in junk mortgages, the picture is far worse. A hefty 18% of the subprime mortgages made in the first half of last year have already gone delinquent or fallen into foreclosure.

Adding to the subprime woes are investments in collateralized debt obligations, basically a structured bond that owns bundles of loans, which often include shaky and illiquid mortgages. Unfortunately, CDOs are more widely owned than generally realized, according to the associate editor of the Florida-based Safe Money Report newsletter, Michael Larson. Last year, he told me, $503 billion worth of CDOs were sold to investors, a five-fold increase in three years.

Judging from those figures, he says he believes the housing market faces more chaos. Pointing to lackluster home sales, slumping prices, and elevated inventories — along with ballooning delinquencies and foreclosures — Mr. Larson is convinced that “there’s no housing rebound until the back half of 2008.” As such, he says, he would shun beaten-up homebuilding stocks because he believes their direction is still downward.

More significantly, he and a growing number of other pros view the ongoing housing weakness as a major depressant on both the economy and the overall stock market.

A veteran multiregional residential real estate developer in Lake Forest, Ill., Robert Sheridan, also paints a bleak picture. “The housing market is getting darker and darker,” he said. The full effects of the subprime crisis, as they relate to tighter lending standards, have yet to be felt, he adds.

A year from now, he figures, single-family home prices should fall 5% to 10% nationally versus current levels. He sees an even bigger drop, 10% to 20%, in condo prices, with high-end condos — those priced at $750,000 or more — vulnerable to 20% to 40% declines. Mr. Sheridan believes a housing recovery is at least two years off. The bottom line on housing: Call the exterminator. The financial termites are out in full force and lots more are on the way.

dandordan@aol.com