Some housing bubble reports from Wall Street and Washington. "Shares of homebuilders declined in midday trading Wednesday, led by Hovnanian Enterprises Inc., after JPMorgan issued a note on the builder raising questions about stock options practices and forecasting weaker earnings per share growth."

"Merrill Lynch issued a bearish note on the homebuilding sector, predicting a slowdown already under way will get worse before it gets better. 'We are neutral on the homebuilders because fundamentals are still too strong to call a bottom,' Merrill analysts wrote. 'In short, housing starts remain too high, margins are declining and rate cuts will provide little benefit from here.'"

"The Mortgage Bankers Association today released its Weekly Mortgage Applications Survey for the week ending August 25. On an unadjusted basis, the Index decreased 2.3 percent compared with the previous week and was down 22.4 percent compared with the same week one year earlier."

"More subprime borrowers are defaulting in the early months of their home loans, a trend that has led to greater fear among investors and lenders of rising delinquencies and losses."

"'If those borrowers are finding themselves in trouble very early on, it may give lenders an indication that the underwriting criteria or quality control are not sufficiently tight,' says Damien Weldon, at LoanPerformance. Based on the year-to-date data, Weldon says early payment defaults on subprime mortgages are expected to increase this year."

"The secondary market, where lenders sell the new loans, could also see more pressure from rising delinquencies. Merrill Lynch analyst Kenneth Bruce wrote in a recent report commenting on H&R Block's announcement that 'if the fixed-income market anticipates further losses, it could begin to pressure spreads on lower rated bonds, thus undermining whole-loan pricing.'"

"Citigroup, Bank of America, and JPMorgan Chase are among the biggest losers in the bond market, where the largest U.S. banks' borrowing costs are the highest in three years. 'We're probably at the top of the mountain for loan quality, and it's going to start falling pretty soon,' said James Hannan, who oversees $3 billion in fixed-income securities."

"Higher borrowing rates have contributed to shrinking lending margins, a measure of profitability for banks. S&P said this month that those margins were at their lowest since 1991."

"Federal Reserve Bank of Dallas President Richard Fisher said inflation has been running higher than he'd like to see, and said the central bank must make sure price pressure remained contained. 'Our current inflation indicators are not presently as well behaved as I would like them to be,' Fisher said."

"He counted himself as unworried by the slowing housing sector. 'The declines are moving housing markets from very high and unsustainable levels toward more normal levels, unwinding some speculative activity,' Fisher said. He added 'not all the consequences of the unwinding of a bull market in housing are bad.' Fisher explained 'as prices cool off, we may finally begin the long process of allowing income to catch up with housing costs."

The Washington Post. "In the latest sign of the cooling home sales market, a luxury home builder in Rockville has begun resorting to the kind of tactic usually reserved for screaming electronics discounters, the Lowest Price Guarantee..from the time a customer signs to 45 days before settlement. The thinking goes, jittery buyers shelling out $500,000 to more than $1 million for one of the builder's single-family houses can rest assured that they're not sinking money into a depreciating asset."

"'That's a very real fear,' said John J. Lavery, for the home builder. 'Obviously, there's been a big correction in the market. Our view is that it's the lowest point in the market cycle now.'"

"Builders offer such enticements because they are reluctant to upset previous buyers by cutting their base prices. But in some places around the country, builders have begun cutting those prices, too. Mid-Atlantic has not reduced its base home offering price, but it has increased incentives to as much as $55,000."

"Lorenzo Wooten Jr. said that even in his Prince George's County neighborhood, he has noticed more houses on the market and longer sales times. Wooten and his wife, Courtney, signed a contract last month to buy a $1.2 million house in Woodmore North. 'I feel pretty comfortable where the Washington, D.C., market is,' said Wooten, 33, a regional manager for Fannie Mae. 'I really don't think that they would have offered this price guarantee if the prices weren't fairly priced currently.'"