Some housing bubble news from Wall Street and Washington. "Meritage Homes Corp. said on Friday it expects second-quarter revenue to be down about 37 percent from a year ago and to record more than $100 million in charges as it struggles in a weak U.S. housing market. The home builder said it has been particularly hard hit in the area of Fort Myers and Naples, along Florida's Gulf coast."

"'Weak demand and high inventory levels have increased competition among home builders, pressuring margins,' said Steven Hilton, CEO of the Scottsdale, Arizona-based company, in a statement."

"Cancellations rose to about 37 percent of gross orders, up from 32 percent a year ago."

"Meritage expects pretax charges of $75 million to $80 million for inventory impairments and to write off land options, plus another $28 million in pretax charges related to goodwill impairment for its Fort Myers and Naples operations."

From CNN Money. "Management expects the homebuilding market in southwest Florida will continue to be severely depressed for the foreseeable future."

"'Southwest Florida has been experiencing some of the most difficult housing market conditions in the country. While our 2006 home closings there represented only approximately 2% of our Company-wide closings, our year-to-date 2007 home closings in Ft. Myers/Naples are down more than 70% from the level a year ago,' said Mr. Hilton. 'We have been unable to renegotiate acceptable terms for existing lot options, which led us to terminate all of our existing option contracts, and we have been unable to acquire new lots at prices that reflect today's market values.'"

From CNBC. "Today Meritage Homes reported preliminary sales, closings and backlog for the second quarter, and honey, it ain’t pretty. Sales down 37%, closings down 28% and backlog down 39% from a year ago."

"The trouble for Meritage in particular is their exposure to Florida, which Hilton admits will 'continue to be depressed for the foreseeable future.'"

"It’s Florida, it’s Arizona, it’s Nevada, it’s California; frankly it’s wherever the homebuilders went nuts with their nuts and bolts."

"Daryl in Tucson writes that a friend of his purchased a home from a builder there, and the builder lowered the price after the contract was signed. And Jeff writes from Central Valley, CA: 'KB Homes has been building the same 8 houses for months now to make them look active and they also put 'sold' signs in a few homes, problem is nobody ever moves in!'"

"I remember the clamor of demand, demand, demand. I reported on the new trend to the 'ex-urbs'...that were supposedly the wave of the future. And I drove out to all the 'adult active communities' under construction, where all those baby boomers, desperate not to end up in the nursing home, would 'age-in-place.' I drank the 'Kool-Aid;' I’ll give you that."

"But how could the builders--who’ve seen far more housing cycles in their company histories than I have in my reporting history-- how did they not see this coming?"

From Reuters. "Heavy redemptions from investors concerned about their holdings of subprime mortgage securities claimed Braddock Financial Corp.'s Galena Street Fund as the latest hedge fund victim."

"Braddock, a top-performing bond hedge fund manager, on Thursday said it will liquidate the $300 million fund after redemptions slashed its assets by a quarter since 2006, CEO Harvey Allon said."

"Reports that losses in subprime mortgages were wreaking havoc with hedge funds, especially last month, 'just made investors nervous about being invested in the subprime market at all,' Allon said."

"Galena investors will receive 20 percent of their balances by early next week, and then probably 'more frequently than quarterly,' he said."

From Bloomberg. "UBS AG, buffeted by three quarters of declining earnings and losses at one of its hedge funds, replaced Peter Wuffli as CEO of the world's biggest money manager."

"'Boards and CEOs normally don't split in this way, it's extraordinarily rare,' said Richard Bove, an analyst who covers U.S. financial companies for Punk Ziegel & Co. 'There was an issue with earnings.'"

"UBS said in May it was shutting the Dillon Read unit that had been championed by Wuffli after the hedge fund lost 150 million francs in the first quarter because of wrong-way bets on U.S. The losses from Dillon Read echoed the damage caused by Long-Term Capital Management LP, whose 1998 collapse cost UBS $700 million."

The Associated Press. "Analysts, surprised by Wuffli's sudden departure, voiced new concerns over expected losses from failed in-house hedge fund Dillon Read Capital Management, which is being shut down."

"'It remains to be seen whether all of the subprime hit was kitchen-sinked last quarter, or if there is more marked-to-market in second quarter,' said Kinner Lakhani, London-based analyst with ABN Amro."

The Financial Times. "Investment banks are demanding more capital to back loans to hedge funds investing in US subprime mortgage-linked debt, as they try to head off a repeat of the near-collapse of two Bear Stearns hedge funds."

"The 'haircut,' or margin requirement, on financing provided to buy collateralised debt obligations (CDOs) backed by subprime mortgage bonds has been increasing sharply, in many cases doubling, according to hedge funds, bank executives and prime brokers."

"One New York structured product specialist and hedge fund manager said margin requirements had rise by about 5-10 percentage points for single-A and AA-rated CDO securities investing in mortgage-backed securities."

"Matt King, analyst at Citi, estimated in a note this week that margins for BBB-rated bonds from such CDOs went from 10-20 per cent to 50 per cent, with smaller increases for higher-rated bonds."

"The world's biggest bondholders have had their fill of leveraged buyouts, convinced that increasing mortgage delinquencies will drag down the U.S. economy and drive debt-laden companies into default."

"'There are some very scary analogies between high yield and the mortgage market,' said Kevin Lorenz, a managing director who oversees $2.5 billion of high-yield assets at TIAA- CREF in New York. 'You cannot do fundamental analysis and believe that those are creditworthy companies.'"

"The combination of the worst slump in home prices since the Great Depression and the slowest U.S. economic growth in four years during the first quarter is driving investors away from riskier debt."

"'Demand has spiraled out of control,' said bond fund analyst Sukrita Sethi, who helps oversee $2 billion at an affiliate of Fidelity Investments. 'We think the market is overpriced. There's a little bit more scope for spreads to tighten, but a lot more scope for widening.'"

"Goldman Sachs has put two German property portfolios valued at up to €3bn ($4bn) up for sale in the latest sign of international investors exiting the market."

"News of the two deals is likely to raise questions over whether other foreign investors in German property are heading for the door."

"New Century Financial Corp., a collapsed subprime lender that is liquidating in bankruptcy, said on Thursday the U.S. Securities and Exchange Commission has elevated its investigation of the company to formal status. A formal probe gives the SEC subpoena power."

"Irvine, California-based New Century was the largest independent U.S. provider of home loans to people with poor credit before filing for Chapter 11 protection on April 2 amid mounting customer defaults."

"It shut down its lending business, is selling other major assets and has replaced most top executives."

The LA Times. "The SEC began looking into New Century after Wall Street cut off the lender's funding, several states revoked its licenses and it disclosed a federal criminal investigation of its accounting, which had failed to acknowledge a rising tide of loan defaults."

"In April, New Century sought bankruptcy protection from creditors, chiefly the Wall Street firms that had provided the money that New Century lent to its mortgage customers. The Wall Street firms also purchased the company's loans and pooled them to create bonds backed by mortgage payments."