Some housing bubble news from Wall Street and Washington. "Centex Corporation has cancelled or intends not to exercise land option contracts related to approximately 37,000 controlled lots given the decline of housing activity in many of its markets. Consequently, the company currently expects option deposit and pre-acquisition walk-away costs to be approximately $150 million this quarter. Additionally, the company plans to record land valuation adjustments of approximately $300 million."

"Tim Eller, Centex CEO, said, 'We are navigating through one of the most challenging housing environments in the past 25 years. We are responding by reducing our land position and inventory, aligning our workforce to the current sales pace, and improving our overall cost structure.'"

From Reuters. "Deutsche Bank analyst Nishu Sood said, 'Centex's preliminary third-quarter results reflect continuing housing market challenges, belying the notion that the housing market has already turned a corner. The company's announcement is a familiar mix of earnings below expectations, orders that continue to fall and ongoing asset impairments,' Sood added."

"In recent months, falling prices and rising cancellations have led home builders to repeatedly slash their forecasts as many buyers either walk away from contracts or press for additional incentives before signing."

The Associated Press. "Home builder KB Home said Tuesday it will book more than $300 million of charges in its fiscal fourth quarter, providing yet another indication the slumping housing market has not yet reached bottom. Los Angeles-based KB Home will record inventory impairments of $255 million for the quarter ended Nov. 30. The impairment lowers the book value of certain holdings, an indication that certain properties cannot be sold for a profit."

"KB will also book a charge of $88 million related to land option contracts it won't pick up, indicating the company believes it cannot develop the land at a profit."

"'The homebuilding industry in the United States is experiencing an increasingly challenging operating environment, which includes an oversupply of inventory, a decline in new home orders and sales prices and an increase in sales incentives required to generate new home orders,' KB said in a Dec. 8 SEC filing, announcing the anticipated charges."

"'This change in market dynamics has caused a decline in the fair value of certain inventory positions and changes in the company's strategy concerning certain projects that no longer meet investment return hurdle rates.'"

From MarketWatch. "Mortgage lender IndyMac Bancorp Inc. said the U.S. housing slowdown will cause a big fourth-quarter earnings shortfall. As more of the Pasadena, Calif.-based firm's borrowers face difficulties affording the higher rates on adjustable-rate mortgages and other esoteric loans, the company is being forced to raise reserves and provisions for losses, which directly impact its bottom line."

"'This shortfall reflects the challenging times being faced by the mortgage and housing industries and the difficult nature of forecasting earnings in our business,' the company said. IndyMac said net interest margin is being squeezed by held-for-sale loans and its thrift investment portfolio in the wake of an inverted yield curve in the bond market."

"The following is a letter to shareholders of Indymac and other Indymac stakeholders from CEO Michael W. Perry, ' Unfortunately, we are starting the year off with some bad news. Last week, as we began to complete our quarterly accounting 'roll-up,' it became clear that our Q4 earnings would be substantially below our forecast."

"I have stated many times before that Indymac is not immune to deteriorating mortgage industry conditions, and it is clear now that during the fourth quarter industry conditions continued to erode."

"The main differences between our prior forecast...an increase in credit costs related to the loan loss provision, secondary market reserve, and marking-to-market delinquent loans held-for-sale. A reduction in net interest margin related to loans held-for-sale and the thrift investment portfolio due to yield curve inversion."

The Financial Times. "'The question is: is this the bottom? Or is there another downward leg to come?' says David Bernstein, chief economist at Fannie Mae. Mr Bernstein thinks demand could weaken again, as investors pull out of the housing market."

"According to the latest data, which admittedly, are several months out of date, the investor share of home purchases remains unusually high, at about 10 per cent. Even if demand does remain stable at current levels, both construction and house prices could face continued weakness because of the large overhang of unsold homes - 6.3 months of sales for new homes in November (more if adjusted for cancellations)."

"Jan Hatzius, chief US economist at Goldman Sachs, says home starts need to fall considerably from their present level to clear the inventory backlog, which Goldman estimates could be as high as 900,000 houses, including vacant homes not presently offered for sale."

"If the bond market decides it has overestimated the likelihood of Fed rate cuts, or reverts to a more normal- term premium (charging more for longer-term debt) bond yields and mortgage rates could jerk upwards, kicking away one of the main props supporting demand for homes. That could set in train a whole new round of housing market declines."

The Telegraph. "The US Federal Reserve will need to slash interest rates three times this year as the housing slump goes from bad to worse and the American consumer begins to buckle, Goldman Sachs has warned. 'Americans have shown a complete lack of self-control. The personal savings rate is at its lowest point ever, and has actually been negative since April 2005.'"

"'We believe that housing will soon become the proverbial 'straw that breaks the camel's back',' said David Kostin, the investment bank's US strategist."

"Goldman Sachs said homeowners had treated windfall gains from rising house prices as if they were 'recurring income,' using home equity withdrawls to subsidize over-stretched lifestyles. This artificial boost to spending has already dropped from 7% to 4% of GDP over the last year, and is likely to halve again in 2007."

From Bloomberg. "Manufacturing growth in New York state slowed more than forecast this month as new orders and sales deteriorated. The Federal Reserve Bank of New York's general economic index fell to 9.1 in January, the lowest in 19 months, from a revised 22.2 in December, the bank said today in New York. A number greater than zero signals expansion."

"At the Dec. 12 meeting, (Fed) policy makers pointed to manufacturing as an 'additional source of downside risk to economic growth in the near term,' according to minutes released on Jan. 3. Still, they 'continue to expect the economy to expand at a rate close to or a little below the economy's long-run sustainable pace.'"

"Growth slowed in the third quarter to a 2 percent annual rate, dragged down by the biggest decline in home building in 15 years."