Some housing bubble news from Wall Street and Washington. The Telegraph, "Housebuilders Taylor Woodrow and George Wimpey, which are due to complete their £5bn merger next week, have warned that the US housing market remains 'very challenging,' adding to fears that weakening demand for new homes in America could be pointing to the start of a global slowdown."

"The companies also expect the UK housing market to slow in the second half of this year, as successive interest rate rises weigh on house buyers. Taylor Woodrow said today that its US order book was 45 percent lower than at the same time last year, with sales falling due to oversupply and concern about interest rates."

"The housebuilders have been forced to cut prices to encourage cautious buyers, a move that will hit profit margins. Peter Redfern, who will be CEO of the enlarged group, admitted that the US market has worsened over recent months."

"'Sub-prime is a factor as is oversupply but there is less available credit than six months ago and rates are higher than at the beginning of the year,' he explained."

"Taylor Woodrow also warned that there was no immediate end in sight to the US housing slump. Mr Redfern added: 'You won't find anybody among our US competitors or market commentators who will give a firm view on when the market will start to turn.'"

The Washington Post. "Bernard M. Markstein III, senior economist and director of forecasting for the National Association of Home Builders, said the market will rebound in 2008, then start a multi-year recovery."

"'It looks like the decline is slowing, so we may be approaching a bottom,' he said. 'We're not quite there.'"

From Business Week. "Like a mirage in the desert, the bottom of the housing slump seems to fade in and out of sight as the year progresses. Home sales jump, and there—you think you can make it out in the distance. Home sales fall, and it's lost in the haze."

"'There's a lot of competition trying to figure out when things are going to bottom,' says Morningstar analyst Eric Landry. 'But it's unlikely that you're going to figure that out before any one else does.'"

"In the last week of June, at the very end of what are traditionally the strongest three months for home sales, we learned that both existing- and new-home sales remained sluggish in May."

"'Write it off: '07 is going to be a bad year,' Landry says. 'It [the housing bottom] could be a 2008 event, it could be a 2009 event.'"

From MarketWatch. "In past episodes, it's taken years for the housing market to bounce back. In the late 1980s-early 1990s slump, it took four years for new-home sales to reach the previous peak; it took nine years for prices to recover."

"The inventory of previously owned homes rose to a 16-year high in relation to sales in May. The inventory of new homes fell in May, but the overstock still represents more than a seven-month supply, well above the more typical four-month supply."

"'The biggest issue facing housing right now is the unprecedented level of inventory and the fact that prices have to date been sticky, to say the least,' wrote Richard Moody, chief economist for Mission Residential in Austin, Texas. 'Those price declines are nowhere near sufficient to begin clearing inventory levels.'"

"Falling prices give buyers an incentive to wait before they sign, further depressing sales. For sellers, falling prices could be devastating if they are pressured to sell. Delinquent mortgages and foreclosures were rising even before the latest spike in interest rates."

"'Expect no salvation from the housing sector, including residential construction, for some quarters to come,' said Gabriel Stein, an analyst for Lombard Street Research."

"Even the most pessimistic observers say the sun will ultimately come out again, they just don't think dawn is right around the corner. They think supply and demand could go further out of whack, as interest rates rise, adjustable-rate mortgage payments reset, lenders clamp down on marginal borrowers, and foreclosures head higher."

"'Sorry, but these problems go way beyond psychological factors and aren't going away anytime soon,' said Moody."

From Reuters. "U.S. Securities and Exchange Commission Chairman Christopher Cox said on Tuesday that the agency is reviewing valuation methods hedge funds use for their assets, a central issue in the liquidity problems of two hedge funds managed by Bear Stearns Cos. Inc."

"'We are going to further review, using the SEC staff, the valuation and other issues that managers for these funds have,' Cox told the House Financial Services Committee."

"He told reporters after the hearing that the concern that hedge funds and the investment banks that manage them are not marking assets to their proper value is of interest to the SEC's examinations and enforcement departments."

"The fund's main investments, a type of bond known as a collateralized debt obligation (CDO), trade infrequently, making their valuation difficult."

"In response to a question about whether the SEC is generally examining whether the values of hedge fund assets have been inflated, thereby inflating the fees paid to asset managers, Cox said, 'Those are the kinds of problems that are concerns in this area.'"

From Bloomberg. "Bear Stearns Cos. assigned its top mortgage trader to help manage the $1.6 billion bailout of a money-losing hedge fund as it tries to unwind bets on investments tied to home loans."

"Bear Stearns said in yesterday's statement that it 'brought in additional resources with expertise in these asset classes to facilitate the orderly de-leveraging process.'"

"When asked on a conference call with analysts last week how a firm with a reputation for strict risk management could err in a market it dominates, Chief Financial Officer Samuel Molinaro said the asset-management arm is sealed off from the rest of Bear Stearns with a 'Chinese wall.'"

"'Clearly there are controls in place in the asset- management side too,' Molinaro said on the call. 'Obviously we didn't envision market dislocation of this degree.'"

"Merrill Lynch & Co., the world's third-biggest securities firm by market value, has expanded in subprime lending and the business of packaging loans into securities that can be sold to investors. Merrill also is the world's biggest underwriter of collateralized debt obligations, or CDOs."

"'There are risks in some of the structures, in some of the complexities of CDOs, mortgage-backed securities and particularly prime brokerage, but there's no clear sign that there's contagion developing,' CEO Stanley O'Neal said."

"There is no way to 'predict what the event will be that will cause contagion,' O'Neal said. 'The only surefire way to prepare for that is to manage liquidity.'"

The LA Times. "There are signs that the problems with aggressive lending to sub-prime borrowers during the tail end of the housing boom afflicted the prime mortgage market as well."

"Standard & Poor's reported Tuesday that mortgage loans made in 2006 to borrowers who used little or no documentation to verify their incomes are going bad four times as fast as similar loans made in 2004."

"These so-called Alt-A borrowers are considered less risky than sub-prime borrowers because they generally have good credit histories. 'During 2006, lenders became increasingly comfortable with offering higher-risk loans in substantially greater numbers, not only to sub-prime homeowners but also to Alt-A homeowners,' Standard & Poor's analysts said."

"'The most disconcerting trend,' the S&P report said, 'is how quickly the performance of these delinquent borrowers has deteriorated.'"

"Mortgage applications fell for a second straight week as interest rates remained near recent highs, an industry group said on Wednesday."

"James O'Sullivan, economist at UBS Securities, still follows the indexes closely although he has noticed some dichotomies with other aspects of the housing market."

"'Clearly there has been a complete breakdown of the relationship between the purchase index and home sales in recent months, with home sales clearly falling in 2007 even as the purchase index shows it rising,' he said."

"'The main story is the tightening of lending standards, so more applicants are being rejected and they're probably reapplying again,' he said. 'There was also a rush by some people to get their application in before rates headed higher and that has faded again.'"

From CNN Money. "It's called 'hitting the number,'or inflating a home's value,- and real estate appraisers who don't do it often enough can find it hard to make a living."

"In prepared testimony Tuesday before a Senate subcommittee on mortgage industry abuses, Alan Hummel, spokesman for the Appraisal Institute said 'Appraisers face pressure from various parties involved in mortgage transactions. They are told to doctor their appraisals or else never see work from those parties again.'"

"'If the appraisal comes in below, they can't get the deal done,' said Evans. That's when the mortgage brokers and real estate agents may hit the warpath. 'They have to go out and beat up the appraisers,' said Mike Evans, a fellow of the American Society of Appraisers. who said he's been threatened himself, 'and find one they can twist.'"

"The National Association of Mortgage Brokers (NAMB) addressed the issue last year, changing its bylaws to prohibit pressure on any other players in the transaction, including appraisers. 'NAMB opposes any effort by a mortgage originator to pressure or influence the work of an appraiser,' NAMB director Denise Leonard testified Tuesday."

"As long as prices were quickly appreciating up, many of these problems didn't surface but with the housing slump, they're bubbling up."

"The remedy to most appraisal fraud, as far as Evans is concerned, is greater scrutiny for mortgage brokers. 'When they start getting sued, just like appraisers do, they'll start cleaning up their act.'"