Some housing bubble news from Wall Street and Washington. Bloomberg, "Builders in the U.S. began work on the fewest homes in 12 years in August. Building permits dropped 5.9 percent to a 1.307 million pace, also the lowest since 1995. The National Association of Home Builders/Wells Fargo index of builder sentiment dropped to 20, matching the January 1991 reading as the weakest ever, the Washington-based association said yesterday."

"The housing market is seeing 'more rapid descent,' Ara Hovnanian, CEO of Hovnanian Enterprises Inc., said yesterday at a conference."

From Builder Online. "Officials from Hovnanian Enterprises, Beazer Homes, The Ryland Group, Standard Pacific, TOUSA, Toll Brothers, D.R. Horton, and MDC Holdings sang from the same song book about market conditions, which took a turn for the worse in August - 'the cruelest month,' quipped Boyce Thompson, editorial director at Hanley Wood, BUILDER's parent company, which co-sponsored the Credit Suisse's Homebuilders Conference."

"Mark Zandi, chief economist for Moody's Economy.com, who was the conference's luncheon speaker, delivered a cold slap in the face to anyone who thinks that buyer demand is about to revive any time soon."

"Zandi says that a combination of negative forces, too much unsold inventory (about 950,000 new and existing units, by his calculations), the prospect that between $400 billion and $500 billion worth of mortgages will default this year and next, and the steady 25,000- to 30,000-per-month job losses in housing-related companies - suggest that recovery is a long way off."

"Some builders share this pessimism; 'Things are not very good in the housing industry,' said TOUSA's chief Antonio Mon, in classic understatement. And the mortgage mess continues to instigate cancellations, which are still in the 30 to 33 percent range for the conference speakers."

"All of the builders have made significant - and in some cases massive - reductions in their land assets, either by selling lots they own or abandoning land-options they control. They are also extracting price concessions from product suppliers and, in several cases, altering their house plans to use less building material."

"Toll Brothers' CEO Bob Toll said he's not disposed yet to sell land in favorable markets his company has owned or controlled for years. 'We have land in Florida that I'm not going to give away, at least not as long as we're positive [in earnings],' he said."

"That being said, through October Toll had reduced its land position by 31 percent this year."

The Associated Press. "The chief financial officer of homebuilder D.R. Horton Inc. said Tuesday the homebuilder was focused on driving down costs and reducing debt to contend with continued pricing pressures."

"'It is certainly a challenging market,' said CFO Bill Wheat in a presentation at a conference. Wheat and Treasurer Stacey Dwyer said one challenge faced by the homebuilder is to absorb the higher levels of home supply."

"'There's still too much inventory,' Wheat said."

From MarketWatch. "Residential builders are launching promotional price reductions and other incentives in a bid to attract anxious homebuyers and move standing inventory off their books."

"'Market conditions have changed,' said Hovnanian during from a home-builder conference. 'The market has been fraught with concessions and incentives.'"

"Also, potential buyers hear negative commentary on the housing market in the media and the problems shaking the mortgage market, he said."

"'It's something we have to accept. It's part of the business today,' said Beazer Homes USA CEO Ian McCarthy, who added that his company has been running promotions since June 2006 and is planning more. 'The market needs to be addressed in different ways today.'"

"'People just don't turn up anymore,' McCarthy said."

"'People will mistrust their prices,' said real estate expert Danielle Babb. She questioned if big sales events like Hovnanian's trade short-term gains for long-term pain."

"Also, buyers may end up simply waiting to see if another 'Deal of the Century' comes along. 'Buyers are seeing how desperate builders are, so they figure there might be more deals,' Babb said."

From Reuters. "The Federal Reserve's rate cut sent U.S. home builder shares soaring, but one influential home builder said the half-percentage point cut may be sending the wrong message."

"'I would have done a quarter instead of a half because it signals we're in deep doodoo,' said Robert Toll, CEO of Toll Brothers Inc."

"The supply glut has been exacerbated by a crisis in the mortgage markets that started with defaults by the riskiest borrowers. 'Does anyone want to call this the bottom because of the Fed cut?' he asked, while speaking at the Homebuilder Conference. 'I don't think you can call it yet.'"

"Central banks may not have the tools to restore stability to credit markets amid the 'Panic of '07,' and instead should demand greater transparency from financial companies, Moody's Investors Service said today."

"'The new financial paradigm has brought with it some problems, which the world's financial policy technicians have not yet solved,' Moody's said in a report by Vice Chairman Christopher Mahoney and Senior VP Pierre Cailleteau. 'Each credit crisis teaches new lessons, often resulting in corrective reforms. The current `Panic of '07' will as well.'"

"Moody's itself, as well as Standard & Poor's and Fitch Ratings, were criticized by investors, lawmakers and regulators for being too slow to respond to the rising defaults. Policy makers...have pointed to possible conflicts of interest between the ratings companies and the banks that pay their fees."

"Moody's, S&P and Fitch waited until April to downgrade some subprime securities, after their value had fallen by as much as 80 cents on the dollar."

"Investors have an 'over-reliance on ratings for pricing,' Mahoney said. Some 'have no idea what they have and they have no idea how to price it.'"

"'What turned an overdue risk reappraisal into a financial panic is the combination of untested financial innovation, price- sensitive accounting rules, leverage and opacity,' Mahoney and Cailleteau said. 'This cocktail has proved explosive.'"

"For those on the brink of foreclosure...and for those who also are subprime mortgage borrowers, the Fed move is of little consequence."

"'It will help those who need it the least,' said Richard Hastings, an analyst at Bernard Sands LLC. 'But for those who need the most help, this does nothing for them. The Fed cannot help them at all.'"

The Atlanta Journal Constitution. "Lost in the furious debate over how hard the Federal Reserve should work to head off a downturn lurks a nagging and unpleasant thought: Maybe the economy needs a recession."

"Not too many experts will come right out and say so — most say it does not — but a minority chorus has long argued that the Fed should reverse the easy policy that successively fueled a dot-com boom, a consumer spree and an unprecedented surge in the housing market."

"'We borrowed trillions of dollars to remodel our kitchens, buy SUVs and plasma TVs, and there are consequences,' said Peter Schiff, president of Euro Pacific Capital. 'We are in serious trouble. The piper has to be paid.'"

"The Fed cut...will only delay the inevitable, 'It will be terribly painful, but it's therapeutic. It's like a drug addict going through withdrawal from heroin. It is awful, but it's what will get us better,' Schiff argued."

The LA Times. "Angelo Mozilo, CEO of beleaguered Countrywide Financial Corp., said Tuesday that the lender was making progress in adjusting to the harsh new realities of the home mortgage market."

"'With pain comes opportunity,' Mozilo said at an investment conference."

"Mozilo said flatly that 'we are out of the sub-prime business.' In subsequent remarks, he appeared to qualify that comment by saying Countrywide would continue to make a limited number of sub-prime loans that could be sold to Fannie Mae and Freddie Mac."

"Mozilo criticized media coverage of the mortgage meltdown several times Tuesday, saying reporters incorrectly blamed 'aggressive lending and exotic reset products' for rising foreclosures."

"During the boom, many lenders, including Countrywide, gave borrowers loans without requiring them to document their income. It was widely assumed that many of the borrowers didn't document their incomes because they were lying."

"Though Mozilo said stated-income loans were indeed much more likely to go into default, the reason the owners gave for their distressed status was the same as for those with fully documented loans."

The Wall Street Journal. "Subprime-lending woes will have an impact on General Electric Co.'s third-quarter results, in the latest sign that earnings in the current quarter will be pinched by housing-market weakness."

"The conglomerate said it would take a hit of $300 million to $400 million related to its planned exit from the subprime market. It will mark the third time in as many quarters that GE's results will be affected by subprime woes."

From CNN Money. "If the banking industry, with its load of worries caused by the subprime meltdown, has another month like it did in August, it will be in record territory for job losses."

"Last month, banks with ties to the subprime mortgage industry laid off more than 26,000 employees, the most of any month since global outplacement consultancy Challenger, Gray & Christmas began keeping such records in 1993."

"Scott Stern, CEO of LendersOne Mortgage Cooperative, said he believes the worst may be yet to come, but that the industry will survive and return to profitability."

"In fact, Stern said, getting some of the people out of the industry who came in during the boom years won't be a bad thing. There simply are more people now than there is business, and once that equation evens out things will get better, he said."

"'The mortgage industry grew and grew because we created buyers who traditionally wouldn't have qualified,' Stern said. 'All those people that are leaving the industry, it's probably necessary because now there will be an equivalent number of industry people compared to transactions. There will be a lot less transactions, a lot less people, but a better market.'"