Some housing bubble news from Wall Street and Washington. "The Pending Home Sales Index,( see note 1 below) based on contracts signed in August, rose 4.3 percent from July, but is 14.1 percent lower than August 2005."

"David Lereah, NAR's chief economist, said, ''The Pending Home Sales Index shows home sales should be fairly stable over the next two months, although a minor decline is possible,' he said. 'We should be able to draw down the inventory supply early next year to the point where home prices will rise.'"

From Paul Muolo. "Well, it's out; the long-awaited final regulatory guidance on those wild and crazy mortgages that former Federal Reserve chairman Alan Greenspan likes to call 'exotic.' Of particular interest to payment-option ARM servicers is a mandate that the monthly mortgage statement sent to Joe and Mary Sixpack contain an 'explanation' that if they choose the minimum payment, which they do 80% of the time, it would increase their loan balance."

"One veteran investment banker told us that he believes the guidelines will force some regulated depositories out of the market, allowing private-equity firms to step in and buy all of the dozens of nontraditional lenders that are on the auction block."

From Newsweek. "NEWSWEEK's Daniel McGinn asked Century 21 CEO Tom Kunz how he's leading his company as the housing market turns. 'Is it hard for agents to tell would-be sellers their homes are worth less than they think?'"

"A: 'The real price of your home is what somebody is willing to pay for it—that's the bottom line. A lot of times people look at this and say, 'I'm losing all this money,' but until you sell the property you haven't lost anything, even though they saw that paper equity sitting out there. The reality is you have to deal with what you bought it for and what you're going to sell it for at the time you want to sell it—you can't look at what [you] may have missed out on.'"

From Barrons. "Unlike in past housing cycles, when they borrowed heavily from banks, home builders today also use options and off-balance-sheet joint ventures to buy land. 'The home builders are going to abandon a significant amount of their options and attempt to dissolve the joint ventures that no longer meet their return requirements,' Ivy Zelman, an analyst at Credit Suisse, predicts."

"For some companies, the problems of Technical Olympic USA may be a sober warning. Last week the U.S. unit of the Greek construction company announced that, because of softness in the Florida real-estate market, the revised sales and delivery projections of one of its residential joint ventures won't be adequate to support the JV's capital structure. The company is requesting waivers from its lenders regarding potential defaults, among other things."

"The company's senior and junior debt fell to levels implying its equity in the JV and loans and advances to the JV, which total $141 million, could be wiped out. 'This won't be the only company that will affected,' says housing analyst Alex Barron. 'All the other home builders will have writedowns of joint ventures, option deposits and land on their balance sheets.'"

"If home builders walk away from land options, the impact is likely to be widespread. The land owner presumably would shop the property anew, and at a reduced price, particularly if it has associated debt. Jeff Barcy, CEO a San Francisco-based land banker with access to $4 billion of equity capital, cites a deal in which a publicly traded home builder recently walked away from an option to buy land in Florida for $60 million. The parcel recently was resold for $32 million."

"The Florida deal 'definitely put pressure on the broader market, and affects all the deals' in that market, Barcy says. 'Everything is connected in a local market. We're seeing more weakness across the U.S. on a daily basis.'"

From Bloomberg. "The U.S. economy has slowed more dramatically than most economists expected just a few weeks ago. Forecasters at Goldman Sachs Group and AllianceBernstein Holding have cut their growth estimates for the just-ended third quarter. Auto-production cuts and slumping home sales are likely to overwhelm any boost the economy gets from lower gasoline prices, they say."

"'We're decelerating fairly significantly,' says Peter Hooper, a former Federal Reserve official who's now chief economist at Deutsche Bank Securities."

"Growth is getting closer to what Macroeconomic Advisers President Chris Varvares describes as the 'stall speed.' Housing market conditions 'have continued to weaken,'' Stuart Miller, CEO of Miami-based Lennar Corp., the third biggest U.S. homebuilder by market value, told analysts. 'August might have been the weakest month yet.'"

"'The one-two punch of a slowing housing market and the large announced auto-production cuts by GM, Ford and Chrysler is really going to slow the economy,' says Mark Vitner, a senior economist at Wachovia Corp in Charlotte, North Carolina. 'It's going to be a bit of a rough landing.'"