Some housing bubble news from Wall Street and Washington. MarketWatch, "The 13-month-long decline in home prices in 20 major U.S. cities accelerated in August, with prices dropping a record 0.7% in the month, according to the Case-Shiller price index. Prices were down 4.4% in the past year, the fastest decline in the seven-year history of the 20-city index. In the original 10-city index, prices have fallen 5% in the past year, the biggest decline since 1991."

"'The fall in home prices is showing no real signs of a slowdown or turnaround,' said economist Robert Shiller."

"Prices could fall much further. In a separate report, analysts at Goldman Sachs figured that prices in California are about 35% to 40% overvalued, compared with past relationships between home prices and income growth. The median sales price of a home in California was $589,000 in August, Goldman said, but should be around $375,000, they said."

"In the Case-Shiller index, fifteen of the 20 cities tracked in the index have seen prices fall in the past year, led by Tampa, Fla., with a 10.1% decline, followed by Detroit with a 9.3% loss. Indeed, eight of the 20 cities recorded their largest-ever year-over-year price declines in August."

From Bloomberg. "The price measure from the Realtors group can be influenced by changes in the types of homes sold. Because the S&P/Case- Shiller index tracks the same home over time, economists say these more accurately reflect price trends."

The New York Times. "UBS on Tuesday reported a net loss of 830 Swiss francs ($713 million) in the third quarter, its first quarterly loss in nearly five years, as troubles in the United States subprime mortgage market led to big writedowns and losses in its investment banking unit."

"Switzerland-based UBS, Europe’s largest bank by assets, is just one of many large financial institutions to suffer the effects of the recent credit crunch, which sent values of many mortgage-related securities sharply lower. Marcel Rohner, who took over as UBS’s CEO earlier this year, called the results 'unquestionably disappointing.'"

From The Age. "Rohner, who replaced Peter Wuffli four months ago after the in-house hedge fund Dillon Read Capital Management collapsed, aims to restore profit by slashing 1500 jobs and reducing risk-taking."

"'They didn't have very good control over what was happening at their investment bank,' said Mark Glazener, a fund manager at Rotterdam-based Robeco. 'It's still not very clear what is going on.'"

From Reuters. "UBS repeated warnings of further writedowns, but CEO Rohner declined to give any detailed forecasts. 'The range of possible outcomes is widening,' he said."

"UBS's Chief Financial Officer Marco Suter later told Reuters in an interview that any writedowns UBS may have to make on subprime-related exposures in the fourth quarter were 'highly unlikely' to be on the same scale as in the third quarter. 'Nothing is inconceivable,' Suter said when asked if fourth quarter writedowns could be as big as in the previous three months."

"Bank of China, the country's flagship foreign exchange lender, booked $322 million in provisions to account for its exposure to U.S. subprime mortgage-backed bonds."

"The state-run lender reported on Aug 23 that it held $9.65 billion worth of U.S. subprime-related bonds and collateralized debt obligations, the largest exposure revealed by a Chinese bank."

"In the first half of the year it booked subprime-related charges totaling about $153 million. To reflect the depreciation in fair value of the related subprime securities, the lender also set aside $321 million of reserves against the balance sheet."

Dow Jones Newswires. "Investors in two highly leveraged Bear Stearns Cos. hedge funds that went belly up in the summer are taking an unusual tack in an effort to probe possible wrongdoing in the fund's operations, said a person involved with the effort."

"Investors who lost about $650 million in the Bear Stearns High-Grade Enhanced Leverage fund, known as Hegel, are scheduled to vote at Bear Stearns headquarters in New York on Nov. 7 and in London on Nov. 14 on whether to install a forensic accounting and restructuring firm in place of Bear as controlling party."

"By installing an investigative firm at the center of the funds, which were heavily invested in collateralized debt obligations tied to subprime mortgages, investors hope to pressure Bear Stearns to cooperate, another person said."

"Separately, Massachusetts securities regulators are investigating whether Bear Stearns had a conflict of interest by improperly trading with the two in-house hedge funds, saddling investors with added losses. Bear infused about $1.6 billion into one of the funds in an effort to save it prior to its collapse."

"Treasury Secretary Henry Paulson said it's too soon to call an end to the U.S. housing slump. 'We haven't hit the bottom yet in housing,' Paulson said."

"The fallout from the U.S. subprime market has cost the world's biggest securities firms and banks more than $30 billion in bad loans and trading losses in the third quarter."

"The U.S. administration is studying what went wrong, with an emphasis on the role of credit-rating companies and accounting rules related to structured investment vehicles, Paulson said." "'We need to shed light on it and make the policy adjustments so this doesn't happen again,' Paulson said."

From Business Week. "After three decades of stability, the national rate of homeownership suddenly began rising in the mid-1990s, going from 64% in 1994 to 69% in 2004."

"But new research published by the Federal Reserve Bank of Atlanta concludes that the bulk of the increase was caused by looser mortgage-lending practices rather than demographic factors such as more households of home-buying age."

"In an Oct. 23 e-mail to BusinessWeek, Goldman Sachs chief U.S. economist Jan Hatzius wrote: 'The key issue is the potential for a vicious cycle' in which falling homeownership hurts housing prices and forces more defaults, causing ownership to decline even more. That's because falling prices make it more difficult for holders of certain types of mortgages to refinance and hang on to their homes."

"Added Hatzius: 'What the Atlanta Fed paper does is illustrate how important changes in access to credit can be in this cycle.'"

"One warning sign: The rate of homeownership has already begun to drop. It was 68.2% in the second quarter of 2007, down a full percentage point from its peak. The third-quarter number was scheduled for release on Oct. 26."

"Many analysts have pointed to easy lending as a contributor to the housing boom, but the Atlanta Fed paper may be the first to quantify its effect in a rigorous way. Using math-heavy macroeconomic analysis, the authors conclude that the availability of new mortgage options accounted for 56% to 70% of the decade-long increase in the U.S. homeownership rate, while demographic changes accounted for only 16% to 31%."

"Although the paper cites lowered downpayment requirements as the biggest factor in raising ownership, co-author Carlos Garriga of the St. Louis Fed says a forthcoming paper will attribute more of the effect to 'teaser' loans with low introductory payments that appeal to young and lower-income buyers."

"Nevertheless, the homeownership rate could fall well below the level it reached in 2004, at least temporarily, because the mortgage market is in such turmoil."

"In a recent report, Goldman's Hatzius wrote: 'Given the current number of U.S. households of 110 million, the change in the homeownership rate over the past two years has already subtracted almost 500,000 from the underlying demand for new homes.'"

"Looks like there's more bust left in the housing bust."

From USA Today. "In hindsight, it's not hard to see why so many home buyers got burned in the subprime mortgage meltdown. They might not have fully grasped the risks they were taking. Or perhaps they refused to believe housing prices could actually fall, or were desperate to keep up with others and achieve the goal of homeownership."

"But what explains Stanley O'Neal? He was CEO of Merrill Lynch as it lost a staggering $8 billion on mortgage-backed investment products."

"Countrywide Financial Corp., Washington Mutual Inc., Hudson City Bancorp Inc. and hundreds of other lenders borrowed a record $163 billion from the 12 Federal Home Loan Banks in August and September."

"They borrow in the bond market and lend the money to their members. Federal Home Loan Bank obligations, when combined with the $1.5 trillion debt and $4.7 trillion in bond guarantees of Washington-based Fannie Mae and Freddie Mac in McLean, Virginia, are 46 percent more than the $5.04 trillion of Treasury debt held by the public."

The Financial Times. "Angelo Mozilo, CEO of Countrywide Financial, on Monday strongly criticised the US government’s response to the collapse of the subprime lending market, saying there had been 'zero' effort to tackle the crisis."

"'In terms of tangible effort from the federal government...there has been no programme, no federal effort, no legislative assistance – zero,' he said."

"'First-time buyers cannot buy a home now. Only the wealthy and privileged can afford to buy homes,' he said."

"Mr Mozilo blamed the subprime crisis on 'easy, low-cost money' that drove up house prices and 'exotic loans and diminished underwriting standards.'"

"'People stretched themselves,' he said, though he implied that the blame for the crisis should be shared. 'It takes a village to do this. As long as [house] values keep falling, the subprime situation will get worse.'"

The Associated Press. "Alan Greenspan issued bearish comments about the U.S. housing industry Monday, saying that 'prices of homes will continue to go down' until housing inventory starts to shrink."

"The former Federal Reserve Board chairman, speaking at an investment conference in Bermuda, said 'we're nowhere near' the point where inventories of new homes are set to drop, noting that home builders continue to discount new homes and add other inducements in a bid to cut their inventory."

"'We've got a way to go, and I'm not sure where that leaves' the housing industry in the next year, he said."

"Former Federal Reserve Chairman Alan Greenspan said on Monday securitized assets backed by subprime loans were unlikely to become a problem in the future because markets have lost their enthusiasm for them."

"'Markets have made the decision that subprime securitization is much too risky, so problem solved,' Greenspan told a conference."