Some housing bubble news from Wall Street and Washington. "Homebuilder sentiment slid in July to its lowest since January 1991 as fallout from the housing slump and subprime mortgage crisis caused a glut of new homes, the National Association of Home Builders said on Tuesday."

"The NAHB/Wells Fargo Housing Market index fell to 24 from 28 in June, the group said in a statement. Economists polled by Reuters had thought it would slip to 27. Readings below 50 mean more builders view market conditions as poor than favorable."

"'The bottom line is that the single-family housing market is still in a correction process following the historic and unsustainable highs of the 2003-2005 period,' NAHB Chief Economist David Seiders said in the statement."

"All components of the index also dipped to their lowest since January 1991, the NAHB said. Declines were seen in all four regions of the U.S., with the northeast and south registering the largest drops.'

From Reuters. "Moody's Investors Service on Monday changed its outlook on Toll Brothers Inc. to negative, from stable, indicating the company's debt ratings are likely to be lowered over the next 12 to 18 months. Toll's cash flow is going to be sharply negative in fiscal 2007 due to capital spending on high-rise projects in New York City, Moody's said."

"'Given the continued build out of the mid- to high-rise towers that are currently under construction, it may be challenging for Toll Brothers to begin generating significantly positive cash flow in fiscal 2008,' Moody's added."

From Thompson Financial. "A 'triple whammy' of a poor US residential housing market, lower lumber prices and a near two-dollar pound have conspired to hit profits of Wolseley PLC prompting another round of branch closures and job losses at Stock, its North American building materials business."

"'Trading conditions in the US residential housing market are the toughest since the late 1980s...and there is no sign of any upturn,' Wolseley's finance director Steve Webster told journalists."

From Dow Jones. "Wells Fargo & Co said second-quarter profits rose 9%, boosted by continued loan and deposit growth, but some of its big regional-banking peers struggled."

"Net charge-offs rose to 0.87% from 0.58% a year earlier. The one major blemish was a rise in losses on home-equity loans. Wells Fargo attributed the trend to depressed home prices in some markets, especially the Midwest and California's Central Valley."

"Wells executives acknowledged they were caught off-guard by the severity of the losses, which they predicted would continue through the rest of the year. They said they are tightening their underwriting standards and putting a greater emphasis on loan collections."

"Regions Financial Corp. became the largest bank so far to suffer a sharp deterioration in credit quality. The Birmingham, Ala.-based bank said nonperforming assets jumped to $585 million, or 0.62% of its loans, from $422.5 million, or 0.45%, three months ago."

"Regions, the nation's eighth-largest by market value, blamed the increase in part on commercial real estate lending, which regulators and investors fear may be the Achilles heal of many regional banks. Specifically, Regions said it was seeing weaker demand for some real estate projects."

"It also said it is implementing 'more prescriptive credit policies, including extensive credit file reviews,' which added to its pool of nonperforming loans."

The Wall Street Journal. "Falling home prices are about to take a big bite out of many midsize banks' profits. Until recently, banks were eagerly doling out loans to real-estate developers looking to capitalize on soaring home prices."

"Today, as housing markets cool rapidly, banks are starting to reappraise the collateral behind those loans, often finding that land and property values have deteriorated, forcing the lenders to take painful write-downs that are taxing earnings."

"'Going in and reassessing the collateral is going to be the key for everybody in the next 12 to 18 months,' says Gerard Cassidy, a bank analyst at RBC Capital Markets. 'It's going to take a pound of flesh off of the lenders.'"

"In San Diego, Atlanta, Minneapolis and much of Florida, more than four months' worth of finished houses are sitting vacant, according to Metrostudy's Mike Castleman. Meanwhile, rising foreclosures and mortgage delinquencies are hitting some of the same regions, which is likely to further depress home prices."

"While major developers, including Lennar Corp. and KB Home, are absorbing charges to account for the declining value of land holdings, some smaller developers...have filed for bankruptcy protection. Bank of America Corp. and Synovus Financial Corp. are among those on the hook for millions of dollars in loans to the two firms."

"'There are likely many more very small builders and developers in distress,' says Citigroup analyst Keith Horowitz."

From Bloomberg. "Kohlberg Kravis Roberts & Co. canceled plans to raise 1 billion euros of loans for Dutch retailer Maxeda BV as investors shun high-yield debt. More than 20 financing deals have been postponed or restructured in the past three weeks as losses from the U.S. subprime mortgage rout rattled investor confidence."

"'We passed on a number of deals where we thought the structure doesn't work,' said Patrick Steiner, who oversees $4 billion of assets at Octagon Credit Investors in London. 'The market was clearly out of control for a while.'"

"Goldman Sachs Group Inc., JPMorgan Chase & Co. and the rest of Wall Street are stuck with at least $11 billion of loans and bonds they can't readily sell."

"The market for high-yield bonds and junk-rated, or leveraged loans began to crack in June as concerns that LBOs were becoming too risky coincided with a slump in the market for subprime mortgages that caused the near-collapse of two Bear Stearns hedge funds."

"'The underwriters are going to be forced to provide bridge loans and it's getting pretty ugly, but Wall Street deserves to get smacked around a little,' said William Featherston, managing director at J. Giordano Securities LLC. 'It's been easy for so long.'"

"Hedge fund borrowing to invest in credit derivatives may magnify volatility in a market slump, according to a Fitch Ratings survey of 65 banks and insurers."

"A 'dramatic' increase in hedge funds' use of credit derivatives has pushed their share of trading to 60 percent of credit-default swaps, and about 33 percent of collateralized debt obligations, Fitch said in the report today, citing data from Greenwich Associates."

"U.S. corporate bond risk premiums reached the highest in almost two years last week as hedge funds bought credit-default swaps to offset potential losses from the subprime mortgage rout."

"'Until all of this recent volatility, investors had been forced down the credit quality ladder, and up in leverage to meet investment targets,' said Matt King, head of credit products strategy at Citigroup Inc. in London. 'Now it appears hedge funds are deleveraging'' to meet demands from their lenders.'"

The Associated Press. "Say goodbye to easy money, and watch out for the far-reaching effects. The drying up of the free-flowing cheap-debt spigot has been battering the housing market for months, and it's now spilling over to other parts of the financial world."

"'There is no denying it. It is ugly out there,' wrote the influential credit-market watchers at Standard & Poor's Leveraged Commentary & Data."

"As for housing, things have gone from bad to worse in recent days as credit-rating agencies announced they will downgrade billions of dollars in bonds backed by risky subprime home loans."

"Not only will that further tighten lending standards, but it is sure to rattle the large banks that supplied much of that debt."