Some housing bubble news from Wall Street and Washington. Dow Jones, "New-home sales resumed falling in August, sinking to the lowest level in seven years, and prices tumbled. Year-to-year, new-home sales were 21.2% lower than the level in August 2006. The median price of a new home decreased by 7.5% to $225,700 in August from $243,900 in August 2006. The average price declined by 8.0% to $292,000 from $317,300 a year earlier."

From CNN Money. "It was the slowest pace of sales since June 2000. The inventory of new homes on the market rose to an 8.2 month supply, as the glut of completed homes without a buyer was near a record high, with 180,000 completed homes listed for sale, just off the record high of 182,000 set in May of this year."

"As weak as the new home sales report is, experts caution it could actually be masking other signs of weakness. Builders have reported significantly higher cancellation rates for buyers who have signed a contract but then back out of the sale. So demand could be weaker than the report suggests."

"Also about three quarters of builders surveyed by their trade group report offering incentives...in order to maintain demand. So the drop in prices could actually be more severe than the report indicates."

From Bloomberg. "Sales of new homes in the U.S. dropped more than forecast in August and prices plunged by the most since 1970. The number of properties completed and waiting to be sold rose by 2,000 to 180,000."

"KB Home today reported a third-quarter loss on lower sales and $690 million in expenses to write down real estate."

"'We see no signs that the housing market is stabilizing and believe it will be some time before a recovery begins,' Jeffrey Mezger, CEO of Los Angeles-based KB Home, said today in a statement. 'The oversupply of unsold new and resale homes and downward pressure on new-home values has worsened in many of our markets.'"

"KB Home, the homebuilder that has lost half its market value this year, reported a third-quarter loss on costs to abandon land purchases."

"'The oversupply of unsold new and resale homes and downward pressure on new home values has worsened in many of our markets as tighter lending standards, low affordability and greater buyer caution suppress demand,' said Mezger."

"Net orders fell 6.2 percent to 3,907 in the third quarter, KB Home said. The average selling price slid 7 percent to $267,700."

"KB Home's biggest markets by deliveries are Las Vegas, Houston and Orlando, Florida, according to the company."

The Street.com. "'Our third-quarter results reflect the seriously challenging market conditions that prevail for homebuilders across most of the nation,' said Mezger."

The Wall Street Journal. "Mezger also noted impacts from higher foreclosures and builders and investors cutting prices to move supply, all of which cut the company's prices and profit margins and 'prompted us to take substantial write-downs of inventory and goodwill.'"

"Excluding charges, gross margins fell to 13.9% from 23.3%."

From Reuters. "The cancellation rate for the quarter was 50 percent, compared with the prior quarter's 34 percent, reflecting the troubles in the mortgage market, KB said. For the just-completed quarter, net orders for new homes, an indicator of future sales, were off 6 percent at 3,907."

"'I was kind of surprised to see that their orders were actually down compared to a really bad number last year,' said analyst Alex Barron."

"The value of the assets of Carlyle Capital, the publicly traded credit fund backed by the private equity firm Carlyle Group, fell 24 percent in August as it sold holdings and global debt prices declined."

"Credit fund managers were hurt as rising mortgage defaults sent investors fleeing all but the highest-rated securities. Carlyle Group twice propped up the fund in August, lending a combined $200 million and buying $900 million of its assets."

"'It was a common theme that these companies moved to rescue their affiliates during a month of extreme losses,' said Bradley Alford, who runs an investment firm in Atlanta. 'I would question how long Carlyle is willing to prop up this entity if losses continue.'"

"Kenneth Heebner, manager of the top-ranked real estate fund in the United States, has sold stakes in New York property owners, saying he believes prices will decline as banks, hedge funds and buyout firms fire workers."

"'You're seeing a retrenchment in the private equity, hedge fund and brokerage businesses, and there could be a lot of layoffs,' Heebner said. 'That could have a devastating impact on high-end residential real estate in New York.'"

The Seattle PI. "Last month, Carol Allen was two months out of bankruptcy and set to refinance her Seattle home. Just before closing, Option One decided to 'reprice' loans in its pipeline, adding 1.6 percentage points to her interest rate and about $400 a month to her payment."

"'I can't afford that,' Allen said last week."

"So Allen) walked away, sticking with her adjustable-rate mortgage. Allen's story is just one example of how the hangover in the subprime mortgage market, which serves people with poor credit, is causing headaches for many Seattle-area homeowners and buyers."

"Lenders who previously approved mortgages to people with bad credit, no down payment and little or no documentation of income now are refusing loans if even one of those three factors is questionable."

"Option One spokeswoman Christine Sullivan acknowledged Monday that the repricing of loans such as Allen's was part of the larger fallout. 'Like other lenders, Option One has tightened underwriting guidelines and made product and pricing changes,' she said."

"Tightening standards is good, but it has gone too far in certain cases, said Adam Stein, president of the Washington Association of Mortgage Brokers.. He noted that a recent customer's low credit rating and high-debt level precluded him from getting a loan, despite an income of more than $200,000 a year."

"'This guy's still got $80,000 to $90,000 a year of discretionary income,' he said. 'The market just isn't tolerating exceptions right now, even if they would make sense.'"

"The subprime market has nearly dried up altogether during the past two to three months, said Angela Ceaser, who owns Integrity Community Mortgage in Lakewood, and worked with Allen on her loan."

"But while the subprime market has been most affected by recent problems, prime borrowers are not immune. Ceaser said she recently ran into problems with a prime borrower whose information she fed back into Washington Mutual's system to look at other options after the bank already had approved a loan."

"'It wouldn't even price her,' she said, even though she still was able to close the already approved loan."

"Patricia Sawyer of Renton refinanced into an adjustable-rate mortgage in December, after hearing a radio ad promising low payments and no closing or appraisal costs."

"'Now I know it was too good to be true,' she said last week."

"Her new payment was lower than her old one, but higher than expected, and she didn't realize it added $1,100 a month to her principal because it was less than the interest charge. With her payment set to jump in October, Sawyer would like to refinance."

"But her credit is bad, she said, and if she qualified for a new loan, the added principal and prepayment penalty from her current lender would push her payment above what she could afford."

"Allen, who walked away from her refinance, said her adjustable-rate loan resets in October. She plans to save and work on her credit in hopes of qualifying for a better loan in a year or so. 'I can't even tell you the last time I even went shopping,' she said."