Jeffrey Gundlach

(DoubleLine Capital photo)

The housing meltdown hasn’t ended yet, and it could ultimately spark another financial crisis, says renowned bond fund manager Jeffrey Gundlach, CEO of DoubleLine Capital.“The housing market is dropping . . . and about to go to a new low," he tells CNBC. "I think we're looking at some type of echo in the credit crisis coming up here. That's what I'm afraid of."He notes that the S&P/Case-Shiller Home Price Index is approaching a new trough. The index measuring prices in 20 major cities dropped 3.3 percent in February from a year earlier, the biggest decline since November 2009.At 139.27, the index has almost reached its six-year low of 139.26 set in April 2009. And Gundlach isn’t the only one worried about that development.“There is very little, if any, good news about housing,” David Blitzer, chairman of the Case-Shiller index committee at S&P, said in a statement accompanying the latest report. “The 20-city composite is within a hair’s breadth of a double-dip.”Another ominous sign: the ABX Index of subprime mortgage securities has slid about 20 percent in the past few months, with most of the drop coming in the last three months, Gundlach says.In addition to falling prices, the amount of time it takes to sell a foreclosed property has ballooned to 26 months, Gundlach says. That means it will take longer to get out of the mess, he and others point out.“Housing will continue to lag the recovery until foreclosures abate,” Sal Guatieri, a senior economist at BMO Capital Markets, tells Bloomberg.The amount of non-performing mortgage loans remain huge, Gundlach says, with Bank of America, for example, holding $200 billion of bad loans. “If we start talking about recovery rates that are low on $200 billion, you start to say 'Uh-oh.'”Foreclosure listing firm RealtyTrac Inc. said Thursday that sales of homes in some stage of foreclosure declined in the first three months of the year, but they still accounted for 28 percent of all home sales — a share nearly six times higher than what it would be in a healthy housing market.Foreclosure sales, which include homes purchased after they received a notice of default or were repossessed by lenders, hit the highest share of overall sales in a year during the first quarter."It's an astronomically high number," Rick Sharga, a senior vice president at RealtyTrac, told the Associated Press. "In a normal market, you're looking at the percentage of homes sold in foreclosure to be below 5 percent."The pace at which homes are entering the foreclosure process has slowed in recent months amid bank and court delays. But distressed properties remain a fixture of a housing market still searching for a sustained recovery. The properties, often in need of repair, typically sell at a discount, weakening prices for other types of homes.Meanwhile, housing starts fell 11 percent in April from March, and building permits slid 4 percent."Housing starts are a continuation of the disappointing data that clouds any U.S. recovery,” Douglas Borthwick, managing director of Faros Trading in Stamford, Ct., told Reuters.“Fed Chairman Bernanke has often discussed the use of QE2 in stimulating housing. However, the number shows that simply is not working, nor would raising rates help. Continued weak housing data, in hand with an anemic job market, leaves the U.S. still searching for 'green shoots.'”The Obama administration isn’t much more optimistic. It’s “going to take a long time” to fix the housing debacle, as private financing needs to take over from government-sponsored agencies Fannie Mae and Freddie Mac, Treasury Secretary Tim Geithner said recently at the Council of Foreign Relations, Bloomberg reports.“We’re just at the beginning of trying to figure out how to fix that mess.”