The Union Tribune has this update from San Diego. "Widely seen as a forerunner in national real estate trends, San Diego County is being viewed 'with some trepidation' by lending giant Fannie Mae as its housing market cools. 'Inventories have surged in San Diego and the surrounding areas,' Fannie Mae Chief Economist David Berson said. 'Home price gains...are certainly down from their peak and perhaps will fall.'"

"San Diego is one region that is experiencing low affordability after a rapid and unsustainable rise in home prices, Berson said. 'The strong presence of investors in the housing market makes it subject to price fluctuations, he added. 'We view it with some trepidation. It is one of the areas we are concerned about.'"

"Berson said the condo market here is at risk 'because the supply has gone up dramatically.' There have been 'lots of condo conversions. The investor share probably has been far more active in the condo market.'"

"In the fourth quarter of 2005, about 24 percent of condominium buyers here were investors, estimates John Karevoll, analyst for DataQuick. That fell to about 21 percent in the second quarter of this year."

"In a related report yesterday, there were new signs that the housing industry has lost steam. 'Our reports from builders and census data and reports from public builders all show the market is falling off,' said Michael Carliner, an economist with the National Association of Home Builders. 'Builders don't want to build more than they are selling.'"

From MarketWatch. "The chief of Fannie Mae and Freddie Mac's federal regulator said his office needs more power to oversee the giant companies. 'There is a strong need for legislative reform now,' said Office of Federal Housing Enterprise Oversight Director James Lockhart."

"In a question and answer session Wednesday with senators, Federal Reserve Chairman Ben Bernanke said legislation shouldn't set a hard cap on portfolios and that it's very important Congress pass a bill this year. The administration and the Fed have worried that meltdowns at either Fannie or Freddie could ripple through the U.S. financial system."

From Reuters. "The U.S. government is seriously considering limiting debt issuance by mortgage giants Fannie Mae and Freddie Mac if Congress fails to strengthen supervision of them, Treasury Undersecretary Randal Quarles said on Wednesday. 'If a legislative solution is not achieved, Treasury will have no choice but to consider additional action,' he said."

"Eliminating any systemic risk at Fannie Mae and Freddie Mac would only transfer risk to the banking system, which is itself growing, David Dreman, chairman of Dreman Value Management, said on Wednesday at a Reuters panel. 'There are terms being tossed out there, but I would like to see (that) there's a lot more proof that there is danger. Maybe we should stop our banking system from growing..we might endanger the entire free world,' he said."