Some housing bubble news from Wall Street and Washington. Bloomberg, "KB Home reported an unexpected second- quarter loss as sales fell to the lowest in three years and its chief executive officer said a glut of homes is hindering any chance for a rebound in the U.S. housing market. The company posted a cancellation rate of 34 percent. The average selling price slid 8 percent to $271,600."

The Street.com. "'Our second quarter results reflect the current oversupply of new and resale housing inventory, a difficult situation compounded by aggressive competition and continued weak demand,' CEO Jeffrey Mezger said in a statement. 'Housing affordability challenges and tighter credit conditions in the subprime and near-prime mortgage market have also exacerbated current market dynamics, keeping prospective buyers out of the market, slowing the absorption of excess supply and further delaying a housing market recovery.'"

The Associated Press. "KB reported a loss of $148.7 million for the period ended May 31. The latest period included a pretax charge of $308.2 million to reflect the decreased value of unsold homes on its books, and walking away from deposits on land it no longer wants to buy."

"'Given current market conditions, we are not able to provide an earnings estimate for the year,' Mezger said."

"Housing revenue plunged 41 percent to $1.3 billion, as unit deliveries slipped 36 percent to 4,776."

From MarketWatch. "'Pricing pressure intensified in many of our markets during the second quarter, compressing margins and requiring inventory-impairment charges in certain of our communities,' Mezger said."

"KB Home said it was using more price concessions and sales incentives 'to meet competition.' Meanwhile, the land charges were driven by 'marked price reductions in housing markets across the country during the spring selling season.'"

"'We interpret management's tone as more cautious likely due to worsening trends toward the end of the quarter,' wrote Banc of America Securities analyst Daniel Oppenheim. 'However, we also think the company was aggressive in working to generate orders and likely found that, with the buyer fear at this point, lower prices do not always lead to increased traffic or sales,' he added."

"Separately, home builder Beazer Homes USA Inc. said in a filing late Wednesday that Michael Rand has been terminated as chief financial officer, 'due to violations of the company's ethics policy stemming from attempts to destroy documents.'"

"Analyst Stephen Kim said Beazer also stands out for its unwillingness to abandon land options."

"'We suspect that this unwillingness to walk from land options is due to the very large deposits the company used to hold those options,' Kim wrote. 'Thus, we suspect that Beazer may experience belated write-offs and/or a more sluggish margin recovery due to higher cost basis land than its peers.'"

"With many predicting the battered housing market will get worse before it gets better, home builders' cash flows stand to take a further hit due to rising home-inventory levels and investments in risky land assets, according to analysts at Deutsche Bank."

"'Based on our detailed analysis of inventory trends, we do not think investors should be overly optimistic regarding the home builders' ability to generate cash flow in the next 12 to 18 months,' analysts wrote in a lengthy report this week."

"By most accounts, the spring selling season has been a bust and hopes for a housing recovery are firmly on hold."

"'With housing prices declining, inventory rising and adjustable-rate mortgages resetting; we believe the probability the situation worsens is high,' says Edward Maraccini, portfolio manager at Johnson Asset Management."

The Wall Street Journal. "Caliber Global Investment Ltd., said it will return cash to shareholders after suffering losses from securities backed by U.S. subprime mortgages."

"The company, managed by London-based hedge fund operator Cambridge Place Investment Management LLP, last month took a $15.1 million impairment charge and canceled its dividend after poor performance on securities backed by U.S. subprime loans."

From Reuters. "Impac Mortgage Holdings Inc. said on Tuesday that its board has elected not to declare a second quarter dividend on its common shares."

"'In light of increased delinquencies, REO and loan losses, we believe it is prudent to aggressively liquidate REOs in this market,' said CEO Joseph R. Tomkinson."

"Carlyle Group, the private-equity firm that oversees $59 billion, cut the size of the initial public offering of a fund that invests in bonds backed by mortgages as damage from the slump in the U.S. real-estate market spreads."

"'The amount of headwinds in the market right now' led Carlyle to reduce the offering, CEO John Stomber said."

"Capital One Financial Corp., the largest independent U.S. credit card issuer, is cutting 2,000 jobs, or about 6 percent of its workforce, amid mounting loan losses and a slowdown in the mortgage industry."

"Capital One will take a pretax charge of $200 million this year, including $90 million in the second quarter, to pay severance and other expenses, the company said in a statement today."

"Capital One faced pressure to cut costs as new foreclosures set a record in the first quarter after it acquired GreenPoint Mortgage Funding Inc. through its $13.6 billion purchase of North Fork Bank in December."

"The subprime mortgage problem will worsen over the next year and the rate of loan delinquencies could rise further, an influential fund manager specializing in mortgage backed securities said on Wednesday."

"'The subprime area is a total unmitigaged disaster and it's going to get worse,' (said) Jeffrey Gundlach, chief investment officer at the Trust Company of the West, who oversees about $60 billion in assets."

"Moody's Investors Service on Wednesday said it expects to downgrade more subprime-related collateralized debt obligations this year and next than it did in 2006."

"'Given what's been said about this market, (and) as we see expectations of cumulative losses increasing, yes, I do expect to see downgrades,' Yuri Yoshizawa, group managing director at Moody's, told Reuters."

The Financial Times. "The glut of credit in global financial markets, combined with excessive leverage, could all 'end in tears' when a big transaction finally goes wrong, Stephen Green, chairman of HSBC, warned on Wednesday."

"His comments highlighted the widespread unease among banking executives after five years of benign credit conditions and the growing amounts of leverage in the financial system."

"This has been particularly notable in the collapse of the subprime mortgage market in the US, which this year triggered HSBC’s first profit warning."

"Mr Green said he was also concerned about the difficulty of bailing out institutions affected by a blow-up because risk was now so widely spread throughout the financial system."

"He said: 'When your risk has been parcelled up hundreds or thousands of times, it’s much more difficult to orchestrate a reconstruction of a difficult situation and, therefore, the write-off then risks being worse than it needs to be.'"

The Telegraph. "The United States faces a severe credit crunch as mounting losses on risky forms of debt catch up with the banks and force them to curb lending and call in existing loans, according to a report by Lombard Street Research."

"The group said the fast-moving crisis at two Bear Stearns hedge funds had exposed the underlying rot in the US sub-prime mortgage market, and the vast nexus of collateralised debt obligations known as CDOs."

"'Excess liquidity in the global system will be slashed,' it said. 'Banks' capital is about to be decimated, which will require calling in a swathe of loans. This is going to aggravate the US hard landing.'"

"Kia Motors Corp., South Korea's second-largest automaker, canceled plans for a $500 million bond sale this week, joining at least seven companies abandoning borrowing as investors cut demand for riskier assets."

"At least eight companies...pulled more than $3 billion of debt sales amid concern that losses from bonds backed by U.S. subprime mortgages will spread to other markets. Caliber Global Investment Ltd., a $908 million hedge fund, said today it will close after losses."

"'This may mark a tipping point in the credit cycle,' said Robert Appleby, who helps manage $2 billion at ADM Capital in Hong Kong. 'If we see a shakeout, it will be a healthy one because it will prevent deals from being priced incorrectly.'"

"The perceived risk of owning U.S. corporate bonds rose for the fourth day this week, according to credit-default swap traders who bet on creditworthiness. Contracts based on $10 million of debt included in the CDX North America Crossover Index increased $3,000 to $188,000 today, close to a 10-month high of $192,000, according to Deutsche Bank AG."

"'For so long, investors have been making excuses to buy,' said Appleby at ADM. 'Now they are looking for reasons not to buy. Psychology does change on a dime.'"