Some housing bubble reports from Wall Street and Washington. "Citigroup on Monday cut its price targets on nine U.S. homebuilders. Citigroup said industry demand had pulled back more sharply than anticipated and that the brokerage was now more conservative about its sales and margin assumptions for all the builders."

From Paul Muolo. "A few days after Merrill Lynch inked a deal to buy subprime giant First Franklin for $1.3 billion, a company analyst issued a report declaring that the 'yield curve has now completely inverted,' while predicting a profit 'recession.'"

The New York Sun. "The ability of the housing market to withstand actual price losses looks like it may be soon coming to an end. In other words, because the housing boom has now evolved into an undeniable housing slump. A futures contract traded on the Chicago Mercantile Exchange, based on the S&P/Case-Shiller Index, shows that traders are pricing in a 2.3% decline in nationwide home prices in November and an additional 1.3% dip by February before reaching the expected 6.3% decrease in May."

"S&P's homebuilding analyst, William Mack, notes that if potential buyers aren't able to finance with lower mortgage rates, they at least want to see lower prices, Mr. Mack points out. The buyers, he adds, are saying, 'We think we can get better prices. Why should we lock in now?' And those who are putting deposits down are backing out because they see indications the prices may fall, he says."

From Business Week. "The U.S. economy should slow in coming months, which should slowly ease inflationary pressures, Federal Reserve Bank of Boston President Cathy Minehan said Monday."

"One 'obvious concern' to the economic outlook, Minehan said, is housing. While she's 'comfortable' with forecasts for a 'moderate downturn' in residential building, Minehan cautioned that recent data, including 'gloomy assessments' by home builders, 'remind me that this assessment could well be optimistic.'"

"'There are clear risks to the baseline housing outlook,' she said, citing the effect of higher mortgage rates on borrowers, particularly sub-prime borrowers."

From Holden Lewis at bankrate.com. "If you have an option ARM, here are (some) warning signs that you are assuming a lot of risk. One: You don't understand how an option ARM works, but you have one anyway."

"You exaggerated your income on your application. A lot of option-ARM borrowers have stated-income loans. If you puffed up your income, you are more likely to default. You regularly have been making minimum payments, not paying down your debt and, in fact, increasing it."

"'It's a monthly toll,' says Bob Moulton, president of a brokerage on Long Island, N.Y. 'I mean, they're angsting over this change happening each month. This is what I'm seeing," Moulton says. 'The worst is if you have that and the home equity (loan) on top of that. You see that going up every month and you're dying.'"

"House prices in your neighborhood are falling. The danger with falling houses prices is that you could end up owing more than the house is worth. 'Basically, what you're going to have on a lot of those pay option ARMs is you're going to see a lot of customers giving the keys back,' says Mark Lefanowicz, president of E-Loan."