Some housing bubble news from Wall Street and Washington. Bloomberg, "Toll Brothers Inc., the largest U.S. luxury homebuilder, said fourth-quarter revenue fell 36 percent and the cancellation rate rose to the highest ever as demand faltered in the weak housing market. In the three months ended Oct. 31, customers backed out of 39 percent of their orders, Toll said today in a statement. Signed contracts declined 33 percent."

"Toll will have an expense of as much as $450 million for land writedowns and said demand worsened in October as excess supply held back customers. 'We can't predict how long this down period will last,' Chairman Robert Toll said in the statement. 'Many of our prospective clients are sitting on the sidelines watching and waiting.'"

"The number of contracts in the company's western region of Arizona, California, Colorado and Nevada plunged to 17 from 131 a year ago. The number of contracts signed in the South region, which includes Florida and Texas, fell to 112, or 44 percent from a year ago."

From MarketWatch. "'Unfortunately, the pace of customer cancellations increased in this fourth quarter,' said Toll's chief financial officer, Joel Rassman. 'We, and other reporting builders, have observed that October's activity appeared weaker than September's. These trends suggest that we still have challenging times ahead.'"

"'We continue to think Toll needs to lower prices aggressively near-term to boost sales in order to maintain a minimal backlog and work through its long land supply,' wrote Banc of America Securities analyst Daniel Oppenheim."

"'In a declining market, selling at what appears to be a low price today is better than selling at an even lower price tomorrow,' he added. 'More buyers fell out of backlog in the quarter likely given difficulty selling a previous home and lower confidence, as weakness at lower price points spread up the food chain.'"

"'Demand has all but evaporated at most Toll communities, as shown by an order pace of only 656 in the fourth quarter,' said Nishu Sood at Deutsche Bank. 'Other builders have been far more willing to lower prices, but we think growing inelasticity will force all the builders to increasingly move to the sidelines.'"

"The analyst predicted Toll will ultimately have to throw in the towel and lower prices, 'driving a longer impairment cycle than peers that have already dramatically lowered prices.'"

From CNN Money. "Toll...also had a less macroeconomic hope to help rescue sales. 'Perhaps, as the presidential campaign heats up and moves to the front page, negative articles about housing will move off the front page,' he said in the statement."

"The latest S&P/Case-Shiller home price statistics for 20 of the nation’s largest metro markets showed a 4.4 percent year-over-year decline. 'It’s important to keep things in perspective,' said Brian Catalde, president of the National Association of Home Builders . 'The current housing price correction is most pronounced in the once super-heated markets in California, Nevada, Florida and Arizona. In most other markets, price declines have been pretty modest.'"

"'To argue that home values will continue to decline and never recover, somebody has to make a convincing case that it will cost less to build a new home five years from now than it does today – and that’s just not going to happen,' said Catalde. 'Despite today’s housing slowdown, the cost of land, labor and materials required to build new homes continues to go up.'"

The Financial Post. "British Columbia's lumber producers are flooding the U.S. market with cheap lumber and mowing down forestry companies in the rest of Canada, an Atlantic Canada sawmill president said yesterday as an East Coast versus West Coast yelling match broke out in the forests."

"Dundee Securities analyst Richard Kelertas (said) everyone is losing money and while the East Coast may complain, at this point it's every mill for itself. 'With this kind of market it's survival of the fittest, so somebody from the West would say [to the East], 'too bad',' he said. 'The West wants to be the last ones to shut down.'"

The Financial Times. "Morgan Stanley has lost $3.7bn on subprime mortgage-linked investments in the past two months after a big market bet went disastrously wrong, the bank revealed Wednesday night."

"Morgan Stanley said the estimated losses implied defaults in the range of 40 to 50 per cent for outstanding subprime mortgages written in 2005 and 2006."

The New York Times. "The American International Group, the world’s largest insurance company, said yesterday that it wrote down nearly $2 billion in investments related to mortgages in the third quarter and expected to write down an additional $550 million in the next quarter."

From Reuters. "Merrill Lynch & Co Inc said on Wednesday its total exposure to risky collateralized debt obligations and subprime mortgages is $27.2 billion, or about $6.3 billion more than what the company disclosed late last month."

"Merrill's larger figure is mostly because of a deeper level of disclosure surrounding its banking operations. Mike Mayo, an analyst at Deutsche Bank, has estimated that Merrill's additional write-down could top $10 billion."

"Banks may be forced to write down $64 billion because of falling prices on collateralized debt obligations backed by subprime assets, Citigroup Inc. analysts said."

"'Of the many skeletons hiding in the subprime closet, writedowns on banks' positions on CDOs of ABS are probably the scariest,' wrote analyst Matt King in London."

"The U.S. asset-backed commercial paper market had its biggest weekly drop in two months as $40 billion of mortgage-related writedowns by banks gave investors more reason to avoid buying the debt."

"The market has fallen for 13 straight weeks, shrinking about 29 percent since reaching a peak of $1.18 trillion on Aug. 8."

"Industrywide, banks may have to mark down $250 billion to $500 billion of assets primarily related to rising defaults on subprime mortgages, which are made to borrowers with poor credit, Royal Bank of Scotland Group Plc analysts said yesterday."

"Moody's yesterday downgraded or placed on review the credit ratings on debt sold by 16 SIVs that manage $33 billion. SIV 'debt ratings continue to be vulnerable to the unprecedented large and sustained declines in portfolio value combined with a prolonged inability to refinance maturing debt,' Moody's said in a report."

"SIVs have been forced to sell at least $75 billion of assets since July."

"Washington Mutual Inc. got what it wanted in 2005: A revised bankruptcy code that no longer lets people walk away from credit card bills. The largest U.S. savings and loan didn't count on a housing recession."

"The new bankruptcy laws are helping drive foreclosures to a record as homeowners default on mortgages and struggle to pay credit card debts that might have been wiped out under the old code, said Jay Westbrook, a professor of business law at the University of Texas Law School in Austin and a former adviser to the International Monetary Fund and the World Bank."

"'Be careful what you wish for,' Westbrook said. 'They wanted to make sure that people kept paying their credit cards, and what they're getting is more foreclosures.'"

"As losses have mounted, banks have seen their credit card businesses improve. The amount of money owed on U.S. credit cards with payments more than 30 days late fell to $7.04 billion in the second quarter from $8.37 billion two years earlier, according to data compiled by Federal Deposit Insurance Corp."

"In the same period, the dollar volume of repossessed homes owned by insured banks doubled to $4.2 billion, the federal agency said."

"New foreclosures rose to a record in the second quarter, led by defaults in subprime adjustable-rate mortgages, according to the Mortgage Bankers Association in Washington."

"People are putting their credit card payments ahead of their mortgages, said Richard Fairbank, CEO of Capital One Financial Corp., the largest independent U.S. credit card issuer. Of customers who are at least three months late on their mortgage payments, 70 percent are current on their credit cards, he said."

"'What we conclude is that people are saying, 'Honey, let the house go,' but keep the cards, Fairbank said."

"'We have people walking away from homes because they can't afford them even post bankruptcy,' said Henry Sommer, president of the National Association of Consumer Bankruptcy Attorneys. 'Their mortgage rates are resetting at levels that are completely unaffordable, and there's nothing the bankruptcy process can do for them as it now stands.'"