Some housing bubble news from Wall Street and Washington. CNN Money, "New home sales slipped to a nearly 13-year low in January, according to a Census Bureau report showed, down 2.8% from 605,000 in December. Sales fell 33.9% from the same month last year and hit their lowest levels since February 1995. The median price of a new home sold in January was $216,000, down 4.3% from $225,600 in December and 15.1% from $254,400 a year earlier."

"This decline probably doesn't accurately capture the weakness in prices for new homes, as about three out of four builders have reported having to pay buyers' closing costs or offer other incentives such as expensive features for free in order to maintain sales."

"'We may not pull out of this for another 5 years,' said senior economist at the Credit Union National Association, Mike Schenk."

"The latest housing boom was about nine years long, and there's a way to go to undo some of the excess, Schenk believes. 'Prices were up 45% over the last boom,' said Schenk. 'Prices that are down 10% do not return us to normalcy.'"

From Bloomberg. "A decline in inventory failed to keep pace with the drop in demand. The number of (new) homes for sale fell to a seasonally adjusted 482,000, and the supply of homes at the current sales rate jumped to 9.9 months' worth, the most since 1981."

"Sales of previously owned homes, which account for about 85 percent of the market, fell in January to the lowest level since records began nine years ago, the National Association of Realtors also reported."

"New-home purchases, which account for the rest of the market, are considered a timelier indicator because they are based on contract signings. Existing home sales are calculated when a contract closes, usually a month or two later."

"Toll Brothers Inc., the largest U.S. luxury homebuilder, reported its biggest quarterly loss in 22 years. The results included pretax writedowns of $245.5 million."

"The average price of Toll's gross signed contracts in the fiscal first quarter fell 13 percent to $634,000 from $730,000 a year earlier. The average price of the canceled homes in the quarter was $770,000."

"'Ceaseless talk of a recession continues to dampen the mood of consumers,' CEO Robert Toll said in the statement. 'This drumbeat, coupled with concerns over mortgages, the direction of home prices, and foreclosures, has kept pent-up demand on the sidelines.'"

From MarketWatch. "Home builder Toll Brothers took more write-downs in its current quarter as revenue dropped 23% and its backlog of orders fell 42%. And what did the company blame that poor performance on? Loose lips."

"Whether or not a recession occurs in the overall economy, it is here in spades in housing. And what is doing the talking is data. How about a conversation that begins with housing starts: They were down 30% in 2007 and they are likely to fall nearly that much this year, according to the National Association of Home Builders."

"Then keep your jaws flapping over new-home sales, which are expected to fall to at least a 25-year low of 632,000 units this year."

"Need another cocktail-party zinger? Cut in with existing-home sales, which are going to drop to a 20-year low in 2008. And if you want to halt everyone else's chatter bring up the topic of home prices, which showed the first overall nationwide decline in 2007 since statistics have been kept."

"Maybe the drumbeat that home builders really should have paid attention to was the thumping that occurred a couple of years ago as unqualified buyers and greedy investors beat a path to their subdivisions and high-rise condominiums."

"But back then the only tune companies heard was sales and the only rhythm sales agents swayed to was the one brought by steady commission checks."

From Reuters. "U.S. banks and thrifts set aside record amounts of money last year in anticipation of higher loan losses, as the housing and credit markets soured, U.S. regulators said."

"FDIC Chairman Sheila Bair linked the earnings drop to weakness in the housing sector and the credit squeeze in financial markets. 'We can expect these problems to continue in 2008,' she told reporters."

"Analysts said they see broad signs of deterioration in bank credit quality, mostly concentrated in a half dozen states led by Michigan, Florida and Georgia."

"Banks set aside record reserves in the fourth quarter and for the year to cushion against expected loan losses. They set aside $31.3 billion in the fourth quarter to offset weakening conditions in the housing and credit markets, and $68.2 billion for the full year."

"The industry's delinquent loans jumped 32.5 percent to $26.9 billion in the fourth quarter, the biggest quarterly percentage rise in 24 years, the agency said. U.S. lending standards are being tightened and loan demand is slowing, FDIC officials said."

"'This is an inherently healthy process and it won't last forever,' Richard Brown, the FDIC's chief economist, told reporters. The weakness in the credit markets 'probably has several more quarters to run,' he added."

"Fannie Mae, the largest provider of financing for U.S. home loans, reported a $3.6 billion quarterly loss on Wednesday and said it expects a 'significant' worsening of the housing bust."

"Fannie Mae said its results were largely driven by a $3.2 billion loss on derivative contracts used to hedge its investment portfolio as interest rates declined."

"Washington-based Fannie Mae, which was created in 1938 to boost homeownership, is now struggling to strike a balance between enlarging its business while tightening underwriting guidelines to protect itself from further losses."

"Regulators and lawmakers have leaned harder on Fannie Mae and Freddie Mac in recent months to bolster the housing market, most recently by increasing the size of loans eligible for their purchase. However, losses at the companies have squeezed their profits and reduced their ability to expand."

The Wall Street Journal. "Mortgage giants Fannie Mae and Freddie Mac are close to a deal with New York Attorney General Andrew Cuomo to make changes meant to discourage inflated appraisals, widely viewed as an important contributor to the mortgage crisis, according to people familiar with the matter."

"The proposal, in which the two government-sponsored companies would require lenders they work with nationwide to change their appraisal practices, would cap a year-long probe by Mr. Cuomo's office that has already resulted in a lawsuit against an appraisal-management company, for allegedly submitting to pressure by a big lender to inflate appraisals."

The Advocate. "A Stamford hedge fund that has been steadily losing assets since the summer has informed investors that it has begun liquidating its remaining holdings and plans to close up shop for good."

"Sailfish Capital Partners made a number of bad credit bets tied to subprime mortgages and has been dramatically affected by the widespread financial credit crunch, the firm's founding partners, Mark Fishman and Sal Naro, wrote investors earlier this month."

"Founded in 2005, Sailfish had managed as much as $1.9 billion last year, before it began losing assets. Clients of the firm, who couldn't withdraw money until Sailfish reached its two-year anniversary last summer, pulled about $400 million from the fund in January, according to published reports."

"In their letter, the fund's partners talk about the difficult economic conditions dating to last summer, when the housing market blew up and the credit markets collapsed. 'The world has changed dramatically and rapidly since August 2007,' the letter said."

The Chicago Tribune. "Nationwide, 233,001 homes received at least one notice from lenders last month related to overdue payments, an increase of 57 percent from a year earlier, according to RealtyTrac."

"'You have more people going into default and a higher percentage of the properties going back to the banks,' said Rick Sharga, RealtyTrac's VP of marketing."

"Nationally, attempts to help struggling homeowners seem to be falling short. 'The loan workout modification programs aren't having a significant material effect on keeping properties from going back to the banks,' Sharga said."

"One dramatic trend last month was a 90 percent spike in the number of properties that were repossessed by banks, compared with January 2007. 'It suggests that there's little or no equity in a lot of these homes, because they're not even being sold to investors at auctions,' Sharga said."

"Efforts to save U.S. homeowners from foreclosure should not unduly alter the contracts behind troubled loans, a senior Treasury Department official said on Tuesday."

"Proposals that 'would retroactively change contracts on existing loans' could cause long-term harm to the housing finance system, Treasury Assistant Secretary for Economic Policy Phillip Swagel said, according to prepared remarks."

"Such a move 'would make it more difficult for future subprime borrowers to get into a house in the first place,' he said."

"Swagel said the Treasury Department is examining whether there is enough market discipline in the current mortgage finance system. 'The originate-to-securitize model succeeded in dispersing risk ... but had the unwelcome effect of also dispersing information,' he said."

"Investors had too little information about the true risks of mortgage-backed securities collateralized debt obligations and other products that helped fuel the recent housing finance bonanza."

"Besides lacking information, investors relied on a faulty assumption that U.S. home values would continue to rise and so put aside some of due-diligence work."

The Sacramento Bee. "Mortgage rates are rising, putting additional pressure on the troubled housing market, and a new report on inflation suggests that rates might go up even more. Mortgage rates tend to move in tandem with the yield on long-term government bonds, which have increased in recent weeks as investors react to concerns over inflation."

"'We keep seeing more and more horror stories about the economy,' said Michael McGee of a Rancho Cordova mortgage brokerage firm. McGee said higher mortgage rates aren't helping a housing market that he believes is the worst of his 36-year career. 'It's never been as bad as it is today,' he said."

"Consultant Steve Dutra said higher rates will blunt the impact of falling housing prices, which analysts had hoped would kick-start a new round of buying."

"'With prices coming down, we were hoping interest rates would stay low as well,' said Dutra, a VP in the Sacramento office of John Burns Real Estate Consulting. Higher rates means 'a certain amount of people will be taken out of the market,' he said."

"Dean Wehrli of consulting firm the Sullivan Group said higher rates aren't especially worrisome – but the economic trends are. 'We have to be worried about jobs again – Sacramento's job growth has slowed down so much the last few months,' he said."

"Sacramento-area unemployment has risen to 5.9 percent, while job growth is at its lowest level since 1993."

"The recent uptick in mortgage rates has proved frustrating to potential homebuyers and existing homeowners, given the publicity over the Federal Reserve's decision to slash interest rates. The Fed's moves affect short-term rates and don't necessarily influence the long-term rates to which mortgage pricing is pegged."

"'People are calling me up and saying, 'Hey, I heard the rates are going down – I want to refinance,' McGee said. He's had to turn away most of his callers."