Some housing bubble news from Wall Street and Washington. MarketWatch, "Sales of existing homes fell further in October even as more homes came on the market, driving the supply of homes to the highest level in 22 years, the National Association of Realtors reported Wednesday. For single-family homes alone, the inventory of 10.5 months is the highest since July 1985. The median sales price fell 5.1% in the past year to $207,800. That's the largest year-over-year price decline ever recorded."

"Sales dropped 1.2% to a 4.97 million seasonally adjusted annualized pace in October, the real estate advocacy group said. The sales pace is the lowest since 1999, when the group began tracking combined sales of single-family homes and condos. The median sales price for single-family homes is down a record 6.3% in the past year to $205,700."

"The fundamentals of the market don't support a further decline in sales, said Lawrence Yun, chief economist for the NAR. 'I don't anticipate any further major sales declines,' Yun said. If sales do continue to fall, 'it would be a major concern' and 'would raise the risk of an economic recession.'"

"In the West, where sales have plunged 33% in the past year and down 48% from the peak."

"Existing-home sales in the Northeast are 12.6 percent below October 2006. Existing-home sales in the South are 19.4 percent below a year ago. In the Midwest, existing-home sales are 16.9 percent below October 2006."

The Associated Press. "Shares of two big Texas-based homebuilders fell to their lowest levels in more than four years on Tuesday after their chief executives said that the troubled housing market will weaken even more next year. 'This is my fourth downturn,' said Donald J. Tomnitz, CEO of D.R. Horton Inc. 'No question about it, this is the most difficult downturn Horton and I have worked through.'"

"Timothy Eller, the CEO of Centex Corp., said, 'There is no way to predict when this thing will bottom.'"

"Tomnitz said the current slump is different because speculators who had bid up prices disappeared. 'Once those investors could no longer buy a home and flip it for 15, 20 percent more, they left the market,' he said."

"The speculative bubble pushed up prices, which Centex's Eller blamed for the current state of housing. Despite relatively low interest rates, he said, 'We have more unaffordable markets in the U.S. than we've ever had,' making it harder for buyers to qualify for loans."

From Builder Online. "D.R. Horton CEO Don Tomnitz, who believes that the wave of foreclosures that will hit the market in 2008 when a million-plus subprime mortgages readjust will make for a very tough year."

"On a more positive note, Tomnitz said home builders have done a great job adjusting prices and cutting costs through the downturn, so most builders are in a very strong position when they go head-to-head against existing-home sellers."

"'That's the rosy picture here,' said Tomnitz. 'We can offer a new product at a more competitive price,' he concluded."

From Bloomberg. "Wells Fargo & Co., the second- largest U.S. mortgage lender, will take a $1.4 billion pretax charge tied to increased losses on home equity loans."

"The fourth-quarter charge reflects 'the higher losses the company expects in this portfolio because of further deterioration in the outlook for the housing markets,' the bank said in a statement. The bank cut off most home-equity loans originated by other financial institutions and mortgage companies and tightened standards on ones made by outside brokers."

"CEO John Stumpf said this month the bank is 'not immune' to the housing market slowdown, which he called the worst since the Great Depression."

"Although Wells Fargo didn't pinpoint the troubled markets in Tuesday's SEC filing, management has previously said the bank is experiencing its biggest headaches in California's Central Valley and 'auto-belt' states in the Midwest."

"Freddie Mac, the second-biggest source of money for U.S. home loans, plans to sell $6 billion in preferred stock and cut its dividend in half to shore up capital depleted by record mortgage defaults and foreclosures."

"The company may be trying to raise capital in 'a big chunk' because sales 'three to six months from now may happen at worse prices,' said said Thomas Atteberry, who oversees $2.8 billion in fixed income. Atteberry's holdings include $550 million in mortgage bonds guaranteed by Freddie Mac and Fannie Mae."

"Investors will be looking for about an 8.25 percent dividend on the non-convertible shares if they carry a fixed rate, according to Jim Vogel, head of research into debt of government- affiliated issuers at FTN Financial."

"'It's going to be expensive capital for them but they just don't have a choice,' said Andrew Harding, who helps manage $16 billion. 'Sometimes the rate isn't as important as getting the loan itself.'"

"'On the surface, the fact that they're going with this offering means they'll have to service a dividend on a regular basis. To me, it just adds another liability to their books,' said Eric Bjorgen, co-manager at Leuthold Core Investment Fund. According to Bjorgen, 'it smacks of desperation. They're probably not finding much in the bond markets and they're finding that traditional avenues have dried up.'"

From CNN Money. "Abu Dhabi's $7.5 billion stake in Citigroup Inc. is more than just a bandage for the bank, but it's far from a cure."

"'It's a bad deal,' said CIBC World Markets analyst Meredith Whitney in an interview, pointing to the 11 percent yield, which is nearly 4 percentage points higher than the yield the bank gives shareholders through dividends. 'Someone was not using their calculator on this deal,' she said."

"Sandler O'Neill & Partners LP analyst Jeff Harte...added, 'their decision to raise capital given the current market is somewhat troubling. They may be more capitally constrained than we'd like to think.'"

"The 11 percent yield is higher than investors get for non-investment grade bonds, noted Bill Smith, president of SAM Advisors LLC, which owns 60,000 Citigroup shares. 'We blew right through junk status,' he said."

From Reuters. "The seizure of the credit market, which roiled the financial markets and cast a pall over the U.S. economy, could last into 2009, real estate leaders said on Tuesday."

"The fear factor grew as defaults of home loans made to those with risky credit histories popped up in all kinds of investments, in what has become to be called an FTD -- a financially transmitted disease."

"'Did anyone know E*Trade was in the subprime business?' said Michael Fascitelli, president of Vornado Realty Trust."

"Fascitelli and CB Richard Ellis Group Inc Vice Chairman Darcy Stacom said Wall Street must first digest the nearly quarter of a trillion dollars in loans it absorbed before it resumes profitable lending operations."

"'The system has one chunk in it,' Fascitelli said. 'When you're constipated, you're not very hungry are you. Nothing goes in until something comes out. The Wall Street firms will not resume lending at the pace they did until they've cleared that big load.'"

"Although Fascitelli would not say exactly when he believed that would happen, he said the fast and easy amounts that made possible large transactions earlier this year would not return. 'If we have a recession, then all bets are off,' he added."

The LA Times. "Countrywide Financial Corp. moved to reassure investors Tuesday that it wasn't borrowing too much and wouldn't be constrained in its ability to provide home loans."

"'We said it back in August, we said it in September, we said it last week, we'll say it until we turn blue in the face, but we have ample liquidity to fund our growth and operational needs,' said David Bigelow, Countrywide's managing director of investor relations."

"Florida local governments and school districts pulled $8 billion out of a state-run investment pool, or 30 percent of its assets, after learning that the money- market fund contained more than $700 million of defaulted debt."

"'Knowing other people were pulling out, and that word was spreading, we looked at the potential for a run on the pool,' said Jim Moye, Orange County's chief deputy comptroller."

Keep Maine Current. "The state treasurer apparently got caught in the subprime mortgage lending mess when a $20 million short-term investment designed to raise money for the state’s cash pool was made in a fund whose assets are frozen, at least for now."

"State Treasurer David Lemoine, whose office made the investment based on advice from its financial advisers at Merrill Lynch, said Monday he believes the money will be repaid."

"'Virtually within days their assets were frozen and the rating went from top rate to junk bond status overnight,' Lemoine said. 'I haven’t booked it yet,' he said, but, 'I’m pretty confident, that with patience, we should get our money back.'"

The Wall Street Journal. "The ax has been falling on the CEOs of banks -- UBS, WestLB, Bear, Merrill, Citi, Northern Rock. I think the ax should be aimed up one level at the boards of these institutions, whose directors have failed miserably."

"Amnesia about past credit mistakes is common in the banking business as banks compete for every deal that any other bank is willing to do. This amnesia is taking its usual blame for the current slowdown. But this time is very different. The handwriting has been on the wall for some time, and bank boards have made little effort to read."

"Wolseley Plc, the world's biggest distributor of plumbing and heating equipment, plans to cut 1,300 jobs in the U.S. in its fiscal second quarter as the worst housing recession for 16 years hurts profit."

"'This is at the very extreme of our worst-case scenario and 2008 will get worse,' said Paul Checketts, an analyst in London. 'The cuts announced today are the bare minimum.'"

"Up to one in three or 5.5 million mortgage holders in Britain could face serious financial difficulties as a result of the U.S. subprime crisis and the tougher lending climate it has created, a study showed."

"'The focus over the last few months has very much been on subprime borrowers, but they are only the tip of the iceberg,' Toby Clark, a senior finance analyst at Mintel, said in a statement."

"Mintel said 9 percent of British mortgage holders were classed as sub-prime, while a further 24 percent were 'non-standard' and relatively high risk because they had irregular incomes."

"'In today's more conservative lending climate, the unconventional financial situation of these homeowners means that they will now face higher repayments and increased lenders' fees when remortgaging or moving house,' Mintel said."

The Calgary Herald. "Since it was introduced a year ago, the 40-year amortization for residential mortgages has been a big hit with Canadians, especially in this province."

"Albertans have embraced the long-range mortgage debt repayment plan more than any other Canadians, says Canada Mortgage and Housing Corp."

"Bill McFarlane, regional manager of builders' markets for Royal Bank, says the uptake is large. 'I'm suggesting it's over 50 per cent of the mortgages, and in the new home category, it's probably higher.'"

"The reason for the popularity is simple, says Richard Corriveau, regional economist with the Calgary branch of CMHC. 'It's largely a result of the escalation of house prices,' he says."

"'The principle and interest on the 40-year amortization would be $2,420 a month, compared to $2,840 for a 25-year term,' he says. 'That means people would need $12,000 less of an income to qualify, or they could buy $75,000 more house.'"

"A big benefit, though, is for the first-time buyer, who wouldn't otherwise be able to purchase a new home with the rising prices in the city, says McFarlane. The average price for new single-family homes is expected to reach $475,000 this year and $550,000 next year."

"'Rising prices over the past several years have squeezed affordability,' says McFarlane. 'The extension to 40 years has helped substantially. While incomes have increased, they have not kept pace with the run-up of prices of homes.'"

"The sentiment of people today has changed, says Corriveau."

"'There is less aversion to debt,' he says. 'The days of paying off the home may be far behind us. The comfort level in Alberta is that prices will continue to climb, so even if people take out a 40-year amortization, they have the feeling they are investing in something that will increase over time.'"