Some housing bubble reports from Wall Street and Washington. "Black & Decker Corp., the biggest U.S. maker of power tools, cut its annual profit forecast for the third time after a U.S. housing slump 'significantly' reduced sales. There may be 'additional pressure on our earnings,' said CEO Nolan Archibald."

"The slowing housing market also caused Illinois Tool Works Inc., the maker of Duo- fast nail guns, to cut its profit forecast. 'It's spreading, and we don't know how far and how wide it's going to spread,' said Marvin Roffman, president of Roffman Miller Associates in Philadelphia, which manages $390 million, including Black & Decker shares. 'Be prepared for more disappointment from Black & Decker and others' who rely on the housing market."

"'Most disappointing, in our view, is Black & Decker expects their disappointing trends will continue well into 2007,' wrote Michael Rehaut, analyst with JP Morgan."

The Wall Street Journal. "New home construction is plummeting. Car sales are weakening. Investors have driven long-term interest rates well below the short-term rates set by the Federal Reserve. All these factors are present today, and all have been precursors of past recessions."

"But the U.S. central bank and much of Wall Street are now betting that the old rules don't apply, and that a recession next year, while possible, is unlikely."

"'This time will be different,' Ed Leamer, who heads the forecasting center at the University of California at Los Angeles's Anderson School of Management, predicts in a report. 'This time the problems in housing will stay in housing.' It's a prediction, he admits, that 'keeps us up at night.'"

"Dean Baker, a co-director of the Center for Economic and Policy Research, said the rise in housing prices was unprecedented. Optimists are 'missing the full impact of the housing downturn. They think it's mostly, if not entirely, completed, and I think we've just seen the beginning.'"

The Associated Press. "In accounting circles, it is known as the 'big bath' when companies try to wash away as much bad news as possible with the hope that charges taken all at once will make their finances look better in the quarters to come. That's something the nation's homebuilders could be up to lately."

"KB Home announced Dec. 8 that it expects to take non-cash charges of between $235 million and $285 million to write down the value of its land holdings and an additional $90 million related to its abandonment of certain land-option contracts."

"Dallas-based D.R. Horton Inc. took a pre-tax charge of $199 million to write down the value of land, options to purchase additional land, and pre-acquisition costs. Luxury homebuilder Toll Brothers Inc. took a pre-tax writedown of $115 million, a big jump from the $1.4 million charge the same quarter last year."

"'We are getting a bit more concerned with investors' passiveness toward these equity-destroying exercises,' Stephen East, an analyst at Susquehanna Financial, said."

From Reuters. "For U.S. consumers and companies, the era of easy access to cash may be ending. 'A weak housing market can tighten credit constraints and raise the overall costs of consumer finance,' said Suzanne Mistretta, an analyst with Derivative Fitch. 'The housing market and financial health of the consumer will be the focus' in 2007."

"Subprime mortgage loan borrowers stand to be the most significantly strained by a housing slowdown, which may mean higher delinquencies and more rating downgrades next year. For consumers and companies, that means borrowing costs may rise and access to capital may dry up."

"Lenders such as New Century Financial Corp and Accredited Home Lenders Holding Co already are tightening lending practices. New Century, for example, is making fewer loans to first-time home buyers with risky attributes such as high loan-to-value ratios and undocumented income."

"Downgrades on subprime mortgage securities are expected to climb to a record 300 by the end of the year, twice as much as last year, and rise even more in 2007, Fitch Ratings said on Thursday."

"'You are starting to see signs of deterioration and evidence that you will see tougher lending standards in the future,' said Mark Kiesel, a portfolio manager."

"Delinquencies rose for all home loans, but most notably for adjustable loans to subprime borrowers who were already stretched before mortgage rates climbed, the Mortgage Bankers Association said."

"'After years of enjoying an ideal environment, the environment for RMBS has turned increasingly challenging,' Fitch analyst Grant Bailey said on Thursday. 'On the subprime side, we expect asset performance to continue to deteriorate.'"

"Some 29,000 construction jobs were lost in November, adding to a 24,000 reduction in October, also suggesting signs of a housing slowdown."

"'The time has come' for an end to easy credit, said Bob Moulton, president of Americana Mortgage Group Inc., a mortgage broker in Manhasset, New York. Moulton, who deals with prime and subprime loans, said lenders who were once aggressive in vying for high interest rate loans have suddenly made themselves scarce."

"The pullback may affect the fifth of the 300 million U.S. population that would qualify as subprime borrowers, according to estimates of Fair Isaac Corp."

"'There's still too much capacity in the market today,' said Jim Konrath, CEO of Accredited Home Lenders in San Diego, California. The drop in home price appreciation has become a poison pill to the industry, Konrath said."

"Until recently, loans 'continued to perform because the buyer always had an out if (he) got in trouble,' said Konrath, who guided Accredited though the industry's last shake-out in the late 1990s. 'As the market started to change, credit was still expanding. The industry didn't react' fast enough, he said."

"Revelations about Fannie Mae's accounting flaws and lobbying push offer proof that the U.S. leading mortgage finance company needs a tough regulator, a leading member of the Senate Banking Committee said on Thursday. 'We need a world-class GSE regulator to assure America's taxpayers that we are not headed for a financial fiasco,' Sen. Chuck Hagel said."

"The companies enjoy a favored place in the capital markets because investors believe the government backing would trigger a bailout if Fannie or Freddie were to fail."

"In his statement Thursday, Hagel pointed to two media stories that Fannie Mae dipped below its required capital level years ago and continues to spend millions of dollars on lobbying work."