The homebuilders have the September confidence numbers out. "Reflecting increasing builder concerns about conditions in the market for new single-family homes, the National Association of Home Builders Housing Market Index declined for an eighth consecutive month to a level of 30 in September. This amounted to a three-point drop from an upwardly revised 33 reading in August, and is the lowest level the index has reached since February of 1991."

"'Builders are adopting an increasingly cautious attitude in their near-term outlook for new-home sales,' said NAHB Chief Economist David Seiders. 'They’re experiencing falling sales, rising sales cancellations, and increasing inventories of unsold units. And although many builders are offering substantial incentives to bolster sales and limit cancellations, many potential buyers now are waiting on the sidelines to see how the market shakes out before proceeding with a home purchase.'"

Some housing bubble news from National Mortgage News. "This coming Wednesday two Senate subcommittees will tackle the sticky issue of 'exotic' mortgages, or as they like to call them, 'nontraditional' loans. At a hearing this past week, payment-option ARMs took it on the chin, sharing some of the blame for home prices soaring into the stratosphere."

"Meanwhile, we're hearing that one large POA funder selling billions of dollars of these loans to Wall Street has been, in the words of one source, 'screwing up' the index on the mortgages, and may be forced to buy back mortgages. The problem, said the source, has been going on for two years."

"Merrill Lynch analyst David Rosenberg on housing: 'We know that the housing boom will inevitably be followed by a bust, and..we know that leaves the consumer exposed to perhaps a long period of balance sheet repair. We believe that home prices have become so far out of whack that it could take several years before prices realign themselves.'"

From MarketWatch. "Credit Suisse analyst Gary Balter told his clients, 'Housing prices and spending usually only begins to be impacted six to nine months after housing peaks and we believe we are not near the worst yet.'"

"The worst of Fannie Mae's regulatory troubles may be behind it, but one longtime skeptic of the mortgage giant thinks it could face bigger problems from trouble in the U.S. housing market. Gilchrist Berg, founder of a $2 billion hedge-fund firm, said in a recent letter to investors that Fannie Mae could lose $22 billion to $29 billion if, as he expects, the housing bubble bursts and foreclosures increase."

"'We are not sure the folks running the show fully embrace the risk of declining house prices,' Berg wrote. If the housing market continues to decline 'a major portion of Fannie Mae's value could be wiped out.'"

The Chicago Tribune. "If you believe the surveys, small-business owners are growing less optimistic as they see the economy slowing. Some business owners are upbeat because they're in industries that stand to benefit from a downturn."

"Lew Freeman, whose Miami-based businesses include forensic accounting and real estate consulting concerns, specializes in helping lenders who are worried about borrowers who look like they're heading for default. Business is up right now because lenders are seeing more signs of trouble as the economy slows and they don't want to wait for an actual default to occur."

From Bloomberg. "Washington Mutual Inc., the largest U.S. savings and loan, is heading to Europe's corporate debt market for cheaper financing in its biggest bond sale. The slowdown may prompt investors to demand a higher yield than they would on covered bonds sold by European companies, said Max Beinhofer, who helps manage 12 billion euros of covered bonds."

"'We expect a risk premium for the U.S. collateral,' said Beinhofer. 'The advantages for European investors of diversification might be offset by the risk of a slowdown in the U.S. housing market.'"

The Globe and Mail. "Craig Alexander, a Toronto-Dominion Bank economist who has been tracking Canada's residential real estate market, said Monday the U.S. housing-led slowdown has become a reality. 'Real estate activity has come down quickly and the economic fallout will be felt over the next several quarters,' he said."

"The housing correction has become the dominant topic of conversation, fuelling talk about a possible U.S. recession. 'For Canada, the timing of the U.S. slowdown is rather unfortunate,' he said."

"The fragile U.S. housing market probably weakened further in August and early September, economists said, looking ahead to the coming week's economic data. Home builders have turned very sour on their industry as inventories of unsold houses soar, canceled orders pile up and prices sink."

"'The situation in the housing market is precarious,' said Brian Bethune and Nigel Gault, economist for Global Insight. 'Emotions could start to play a greater role in builders' decisions, adding downside risk to the numbers.'"

"'Demand and supply conditions have been deteriorating rapidly,' said Jay Feldman, an economist for Credit Suisse. New home sales are off 22% from the peak, while the inventory of unsold new homes is up 22% in the past year. Not surprisingly, prices are flat and probably down significantly considering all the extras builders are throwing in for free to sweeten the deal."

"'Speculators, who drove the market for new homes over the past few years, have now fled, said Drew Matus, an economist for Lehman Bros. 'Home builders are reacting to an increase in cancellations,' he said. A record 1.73 million homes are vacant and awaiting a buyer."

"The pace of the decline in starts and permits so far this year is the largest since the recession of 1991. The reaction of builders to the slowdown has been extreme. The NAHB-Wells Fargo index of builder sentiment has plunged at an unprecedented pace. A year ago, two thirds of builders were upbeat about the market, but now only one third are."