Some housing bubble reports from Wall Street. "Home-building and mortgage-banking company NVR Inc. on Wednesday said first-quarter profit rose 12%, but cautioned it could see margins squeezed as the firm faces pricing pressure in slowing housing markets. Orders in Washington, D.C. fell 12% from the year-ago period on higher cancellation rates, which increased to 17% from 13%."

"'Our market checks continue to point to weak market demand and heavy incentives in [Washington], D.C., NVR's largest market,' said analyst Dan Oppenheim in a recent research note. He expects lower order growth and greater-than-expected margin deterioration."

"In January, NVR said it expected 2006 gross margins would be squeezed by pricing pressure in many of its markets, a forecast it repeated Wednesday."

Checking the press release, the firms new orders declined in Washington DC, as did the average new order price; from $401,400 to $387,600.

A reader found this item. "Comerica Inc. on Wednesday said quarterly profit fell a lower-than-expected 3 percent, but a surprise decline in lending margins caused the regional bank's shares to suffer their biggest loss since 2002."

"CEO Ralph Babb attributed the deposit decline to customers 'investing in their businesses, and because of slower real estate activity in our western market.'"

"'They make loans or pay certain expenses to title and escrow companies in exchange for deposits,' analyst Anthony Davis said. 'The sudden, unanticipated decline in those deposit balances raises questions about the outlook for net interest margin, especially given that the (financial services) business is concentrated in California, which has been the hottest housing market.'"

Another posted this Salon article. "Raghuram G. Rajan believes, in sum, that new developments in technology and finance have made the world better off, but 'they may also create a greater (albeit still small) probability of a catastrophic meltdown.' But he's not too worried."

"One example Rajan used was the housing sector. The great thing about credit derivatives is that they allow the banks to buy protection for the possibility that borrowers will default on loans. Since last September the market for a particular kind of credit derivative, technically described as 'credit default swaps on subprime ARM pools,' has taken off."

"According to Mark Whitehouse of the Wall Street Journal, such derivatives doubled in price between mid-September and December of 2005. So who is doing the buying? According to Whitehouse, the main players are hedge funds that specialize in debt trading."

"'The new credit-default swap 'allows us to express a bearish opinion' on the housing market, says Steve Persky, managing partner at a Los Angeles hedge fund. 'A lot of people debate whether the housing market is overpriced, but, for sure, the credit quality of home borrowers has deteriorated.'"

"The hedge funds are basically betting on the likelihood that there will be a housing sector collapse. They are short-selling the real estate business. But what happens if the defaults do start rolling in, and the sellers of those derivatives have to make good on their obligations with cold, hard cash? Will there be enough liquidity in the system to handle the shock?"

"As Whitehouse reports, the market for credit-default swaps that could be applied to pools of home mortgage loans is new, it's only been around since last June. Any prospective homeowner thinking right now about jumping into the market with a no-money-down, adjustable-rate mortgage might want to think twice. Wall Street is betting against you."