Some housing bubble news from Wall Street and Washington. "Sales of new homes plunged 16.6% in January to a seasonally adjusted annual rate of 937,000, the Commerce Department reported Wednesday. It was the lowest sales pace in four years, and was the biggest percentage decline in 13 years. Sales were down 20.1% compared with January 2006."

"The inventory of unsold homes fell to 536,000 from 537,000, representing a 6.8-month supply at the January sales pace, the highest since a 7.2-month supply in October. The number of completed but unsold homes rose to 175,000, up 47% from a year earlier."

"Regionally, January sales fell a record 37% in the West, 19% in the Northeast, 10% in the South and 8% in the Midwest. Most of the pain has been felt in the largest markets: the West and South. New-home sales are down more than 50% year-on-year in the West, the largest percentage drop in the region since 1981. In the South, sales are down 11% in the past year. Sales are down 2% in the Northeast and are up 1% in the Midwest."

From CNN Money. "The median price of a new home fell 2.1 percent from a year earlier to $239,800. The latest median price is down 6.7 percent from the record high reached in April 2006."

"The prices have seen downward pressure from the glut of completed homes on the market available for sale. The report shows a record 175,000 completed homes for sale in January, the eighth straight month that reading has risen to a record level."

"The median time it takes a completed home to sell now stands at 4.8 months, the longest wait for builders since July 2001, when the nation was in a recession."

From theStreet.com. "At a pace of 937,000 in the month, home sales fell from the revised December rate of 1.12 million, the Commerce Department said Wednesday. The sales were down 20% from a year ago."

"Phillip Neuhart, an economic analyst with Wachovia, cited the buildup of completed homes in inventory as a troubling sign for the housing market. 'There are more homes in the inventory that are actually completed, not under construction anywhere, that are empty,' Neuhart says."

"During January, 32% of the new homes for sale at the end of the month had already been constructed, up from a low-20% range during the housing boom, Neuhart says."

From Reuters. "Fremont General Corp., one of the largest U.S. mortgage lenders for people with poor credit histories, said on Tuesday it will delay releasing fourth-quarter results, and not file its 2006 annual report by the March 1 deadline."

"'Most investors understand that the subprime industry is under siege after 17 interest-rate hikes, an inverted yield curve, and flat home prices that have reduced refinancing options,' said analyst Richard Eckert."

"Anticipating a rise in defaults, Fremont began tightening its lending standards in last year's second quarter. It had expected to see benefits, as measured by the impact on loan loss reserves, by the current quarter. Earlier this month, Fremont stopped offering second mortgages that can help borrowers afford homes when their primary lenders won't cover the entire purchase price."

"'It can take several quarters for tightened lending standards to work their way through the system,' Eckert said."

The LA Times. "Fremont General has beefed up loss reserves and backed away from its riskiest lending practices over the last year. As home prices soften and lenders adopt more stringent standards, consumers who once used 'serial refinancings' to extract cash and get new low 'teaser' rates are finding themselves stuck with loan payments that will soon shoot higher."

"With foreclosure rates on the rise, some analysts warn that woes in the sub-prime industry could spread to the prime market and affect the entire economy. 'More people who already own their homes and can't refinance are likely to lose them,' said analyst Zach Gast. 'Think how that's going to ripple through the economy,' he said. 'It could really affect home prices.'"

"The effects of mortgage layoffs already are being seen in employment data for Southern California. In Orange County, ground zero for the sub-prime industry, year-over-year figures for financial services employment showed job losses beginning last summer for the first time since late 1999 through mid-2000, after the last big industry retrenchment."

"With short-term interest rates back up, big banking firms are charging more for money to loan. Also, they are paying less for loans and forcing the original lenders to buy back huge numbers of new loans that have fallen quickly into default, analyst Matthew Howlett said. Such early-payment defaults occurred at a faster pace in 2006 than ever before."

"'You're relying on people who are willing just to run any time there are fears of credit losses,' he said. 'It's a weakness in the business model.'"

The New York Times. "In a sign of that wariness, Freddie Mac, one of the largest buyers of mortgages, said yesterday that it would tighten lending standards and stop buying certain kinds of risky home loans."

"Even as the market was growing in recent years, the agencies were pulling back; they bought $119.8 billion of subprime bonds in 2006, down from $169.4 billion in 2005 and $175.6 billion in 2004, according to a trade publication."

"But Freddie’s announcement is confirmation to other investors in mortgages that a segment of the market that was once Wall Street’s darling finds itself in the doghouse. 'Freddie is giving its stamp of approval to what the market has already done,' said Dwight Jaffee, a real estate finance professor at the University of California, Berkeley. 'Already consumers were going to be finding these loans harder to get.'"

"'You have to come back to the question: Do you want someone that is in a difficult situation now to get themselves into an even more difficult situation later on because they have postponed a day of reckoning?,' Richard Syron, Freddie’s CEO said."

"Concerns about the deterioration of the subprime market have weighed on financial stocks. Those concerns persisted yesterday amid a sharp sell-off in stock markets around the world."

"The U.S. central bank has some concerns about the domestic subprime mortgage market and is monitoring it closely, Federal Reserve Board Chairman Ben Bernanke told the U.S. House Budget Committee on Wednesday."

"'Our assessment is that there's not much indication that subprime mortgage issues have spread into other mortgage markets,' Bernanke said."

"When asked by one lawmaker whether a liquidity crunch was what roiled Tuesday's global equity market, Bernanke replied: 'No, I don't think so.'"

From MarketWatch. "Bernanke said the economy could even strengthen if the housing market hits bottom and the inventory correction eases in the factory sector. He said worries about the subprime mortgage market was one factor in the unease in financial markets, but said he did not think the trouble in the sector was having a significant impact on the U.S. economy."

"Reacting to increased foreclosures of mortgages in the subprime market, a subcommittee of the House Financial Services Committee will hold a hearing next Tuesday to examine possible predatory lending practices, Rep. Carolyn Maloney announced Wednesday."

"'The trend of increased foreclosures is certainly troubling, and it is important to understand the potential root causes,' said Rep. Maloney in a press release."