Some housing reports from Wall Street and Washington. "Amid brightening hopes that the U.S. housing market is stabilizing, some economists are zeroing in on a piece of data that could augur badly for the consensus view: the homeowner vacancy rate."

"That figure has climbed to its highest level since the Census Bureau began tracking it four decades ago. Last week, the bureau said that in the final three months of 2006 there were about 2.1 million vacant homes for sale."

"J.P. Morgan economist Haseeb Ahmed said the overhang of vacant housing stock could erode existing home values as sellers slash prices to move their vacant properties. Economists fear that many vacant homes are owned by speculators who are stuck with investment properties that they can't sell and may be under increasing pressure to drop their prices. 'We are concerned that there could be downward pressure on prices for awhile,' Mr. Ahmed says."

"The homeowner vacancy-rate increase 'does temper your outlook' for new construction, says David Seiders, chief economist at the National Association of Home Builders in Washington. 'There clearly are uncertainties about how this is going to work its way out,' says Mr. Seiders. 'I keep preaching to builders it's not time to ramp up production.'"

"The owner of a vacant home, could be more willing to drop the price to minimize the cost, than a homeowner who lives in the home and doesn't have to sell. Jon Estridge owned a pair of investment homes in Virginia that sat empty for several months last year. When the market slowed, it was difficult not only to find buyers, but also to find tenants who would pay enough rent to cover his mortgages."

"'It eats you alive,' said Mr. Estridge. 'The market is going down, and you are paying a mortgage.'"

"He eventually sold one home last spring, after dropping the price. He bought the property for $395,000 and sold for about $35,000 less. The other home sold for $260,000 in late August after he dropped the price by about $30,000."

"'I think a persuasive case can be made that the reason we are seeing such extraordinarily excessive vacancy is because of the heavy investor demand over the past few years,' said Richard DeKaser, chief economist at National City Corp."

"'This whole thing has been new,' says Mr. Seiders. 'We've never seen this kind of investor activity and we've never seen this kind of (vacancy) resale. It's an extra complication moving forward.'"

From Reuters. "A glut of vacant homes suggests that the U.S. housing market has not yet stabilized and may be poised for another downturn, Merrill Lynch said in a research note released on Monday."

"'Looking at the inventory backlog and still-stretched affordability levels, this story is far from over,' Merrill Lynch economist David Rosenberg wrote."

"A Commerce Department report showing the homeowner vacancy rate rose to 2.7 percent in the fourth quarter, well above the year-earlier level of 2 percent. Goldman Sachs analyst Jan Hatzius noted that the vacancy rate had fluctuated between about 1 percent and 2 percent for the past 50 years."

"'By itself, this would point to a fairly enormous supply overhang and little prospect of a bottom any time soon,' Hatzius wrote in a research note."

From USA Today. "Housing is proving to be one of the biggest wild cards in the economy in 2007 as analysts are deeply divided about whether the worst in the downturn is over or there is much more pain to go."

"Wachovia senior economist Mark Vitner says although recent housing data have been upbeat, they have been skewed by warmer-than-usual weather. 'That brought out a few more buyers and allowed for more building in the Northeast,' he says. Vitner says the warm weather 'pulled sales forward.' Come spring, housing activity will be slower than normal, he says."

"'I haven't met a home builder yet who thinks things have bottomed out,' he says."

"Economist Tucker Hart Adams says the housing market won't stabilize in 2007. The combination of resetting adjustable-rate mortgages, homeowners unable to keep up with payments on so-called exotic mortgages such as interest-only loans, and other debt will lead to higher foreclosure rates and more homes on the market, she says."

"'It's really optimistic to think that it just took a little adjustment and everything is fine,' she says."

National Mortgage News. "Should loan brokers be held accountable for all the early payment defaults that are hammering the nonprime sector? One due diligence expert told us 'bad' brokers should be run out of the industry on a rail. Several wholesalers are scouring their broker-clients for bad actors with the intention of throwing them overboard."

"Just how bad was the loan underwriting at Mortgage Lenders Network? One servicing official who worked there told us the privately held non-depository funded a 'a ton of bad loans.' He said underwriting was so poor that a 27-year old who claimed to be making $14,000 per month was approved for a $500,000 mortgage on a stated-income loan. The mortgage is now in default."

"Capital Alliance Income Trust Ltd., a mortgage REIT, released a shareholder letter to address recent organizational changes and operational challenges that the company faces to restore profitability in 2007, dated February 2, 2007."

"As we enter 2007, approximately 34% of CAIT's mortgage loans are non-performing assets (as measured by mortgage payments delinquencies in excess of 60 days). Due to the partial financing of the mortgage loan portfolio with debt, non-performing mortgage loan balances are currently estimated at approximately 51% of total shareholder equity and approximately 95% of common shareholder equity."

"Until this situation improves, management will focus on curing these delinquencies, in order to restore income and protect shareholder value. Until these ratios improve, operating income and new business initiatives will remain constrained."

"2006's fourth quarter financial results will require additional loan loss expenses (reserves) to account for the mortgage portfolio's identified losses. If the residential housing market continues to soften or if the economy slips into a recession during 2007, additional reserves may be needed."

An update. "Mortgage Lenders Network USA Inc. on Monday filed for Chapter 11 bankruptcy protection, becoming one of the largest casualties among 'subprime' lenders as the U.S. housing market slows."

"The Middletown, Connecticut-based company...had been the 15th-largest U.S. subprime lender, filed for protection from creditors with the U.S. Bankruptcy. It listed more than $100 million of assets and debts, and in excess of 5,000 creditors, court papers show."

"The filing suggests that Mortgage Lenders' attempts to find a suitor had broken down. On Jan. 2, Mortgage Lenders had said it was in 'strategic negotiations' with several Wall Street firms about its loan operations."

"Mortgage Lenders made $3.31 billion of subprime loans in the third quarter of 2006, according to National Mortgage News."