Some housing bubble news from Wall Street and Washington. MarketWatch, "The decline in U.S. home prices quickened in February, with prices down a record 12.7% in the past year for 20 key cities, according to the Case-Shiller home price index released Tuesday by Standard & Poor's. In February, prices were down 2.6% compared with January for 20 key cities, with prices in the smaller 10-city index off 2.8%. That's the fastest monthly price decline in the history of the index. The pace of decline has accelerated for nine consecutive months."

The Associated Press. "'There is no sign of a bottom in the numbers,' David Blitzer, chairman of the index committee at S&P, noting that all 20 metro areas have declined for six straight months."

"Half of the cities saw home values plunge by double digits led by Las Vegas at 22.8 percent and Miami at 21.7 percent. Those two areas experienced the sharpest appreciation in 2004 and 2005 with annual increases above 50 percent and 30 percent."

"Countrywide Financial Corp., the nation's largest mortgage lender and servicer, said Tuesday it lost $893 million during the first quarter due to a sharp increase in its provision to gird against unpaid home mortgage loans. The latest results marked the third consecutive quarterly loss for Countrywide."

"The company was forced to set aside $1.5 billion to cover loan losses. Charge-offs, or loans written off as not being repaid, totaled $606 million during the quarter. The lender raised its reserve for credit losses to $3.4 billion by the close of the quarter."

"The mortgage lender recorded an impairment charge of $347 million during the quarter related to securities backed by home equity lines of credit. Countrywide also took a loss of $394 million as it transferred loans to a held-for-investment portfolio. Revenue plunged 72 percent to $679 million from $2.4 billion in the year-ago quarter."

From CNN Money. "In a sign of just how bad things have gotten, the already harrowing delinquency numbers in Countrywide's subprime portfolio moved higher to 35.88% from 33.64% in the previous quarter. Even the company's conventional loan portfolio showed deterioration, as delinquencies jumped to 6.48%."

From Bloomberg. "GMAC LLC, the auto and home lender that General Motors Corp. sold to a private equity group, said in a statement that the latest results included a loss of $859 million at its Residential Capital LLC mortgage unit. ResCap recorded a $910 million loss a year earlier."

Deutsche Bank AG, Germany's biggest bank, reported its first quarterly loss in five years after writing down the value of loans for leveraged buyouts and asset- backed securities by 2.7 billion euros ($4.2 billion)."

"The company wrote down the value of leveraged loans and loan commitments by 1.8 billion euros and of securities backed by residential and commercial mortgages by 885 million euros in the first quarter."

"Meritage Homes Corp., a U.S. builder that sells most of its homes in Texas, Arizona and California, reported a first-quarter loss as the housing slump forced the company to write down property values."

"The net loss amounted to $45.3 million. Revenue from home sales fell 35 percent, to $371.7 million, and the company recorded $60 million in pretax expenses to write down property and the value of joint ventures. Meritage said its average selling price fell 13 percent, to about $280,000, in the quarter from a year earlier."

"Empire Land has filed for bankruptcy protection, joining at least a dozen home builders that sought protection from creditors in the last 10 months as home sales and prices slumped."

"'A severe tightening or loss of financing for the entitling and development of land, and the resulting pressures that were placed on the debtors' cash flows,' helped prompt the bankruptcy filing, Chief Financial Officer Neil Miller said in a statement filed Friday with the U.S. Bankruptcy Court in Riverside."

"The closely held company listed assets and debt of $100 million to $500 million in its filing. Empire Land and its affiliates build so-called master-planned communities, large-scale projects that include commercial buildings and schools, in California and Arizona."

The Charlotte Observer. "D.R. Horton will finish construction on its current inventory, a fraction of the homes, over the next six months to a year, Crosland spokesman Bill Norton said. 'Basically, it's a national company that's under pressure out of its Texas headquarters to renegotiate contract terms,' he said of the builder."

"Hannah Swetland, who moved into the neighborhood in October, said she noticed almost immediately that something wasn't right. A few homes went up quickly, but then construction stopped, she said."

"'We bought before any builders were thinking about the economy,' Swetland said."

"Now, she's worried about 'our property values, but also just that the community was left like this,' she said."

The Rocky Mountain News. "Men dressed as pigs frolicked outside the annual meeting of Richmond American Homes in Denver this morning, drawing attention to the role they say corporate home builders played in creating the mortgage and foreclosure crises."

"The six costumed pigs were supplied by the Laborers International Union of North America, which hasn't had much luck unionizing house construction workers, but represent a lot of workers who work on commercial buildings."

"The 'Pigs at the Trough' campaign hopscotches across the country, attending annual meetings of corporate home builders, and on Wednesday will be back in Washington, D.C., as Congress debates the Foreclosure Prevention Act, union spokesman Jacob Hay said."

"Hay said corporate builders overbuilt homes, then to get rid of the excess inventory pushed subprime loans through their mortgage subsidiaries."

"The consensus by local and federal officials is that home builders did play an important part in the foreclosure profit by offering loans at, say, 4 percent, that would change in a few years to 7 percent — a rate that many of the buyers couldn't afford."

"Richmond American Homes is a part of MDC Holdings, founded in 1972 by Larry Mizel. Despite a loss of more than $400 million last year, MDC awarded Mizel and President David Mandarich bonuses of $2 million."

"The worst housing slump in 70 years erased 67 percent from the market value of homebuilders in the Standard & Poor's 500 Index, turning the companies into small-cap stocks."

"'They went through the laundry and got shrunk,' said Stephen Lieber, who oversees $11 billion. 'It's gone beyond an inoperable business situation and turned into an economic crisis.'"

"Centex reached a market value of $10 billion in July 2005 when new home sales peaked at an annual rate of 1.39 million units. The Dallas-based company has since lost 74 percent of its market capitalization."

"'The boom was an aberration,' said Jonathan Vyorst, a New York-based money manager at Paradigm Capital Management Inc., which oversees about $2 billion. 'The homebuilders have a long way to go and the value of land on their balance sheets has to be reduced dramatically.'"

From USA Today. "What needs to happen to stimulate the housing market? Dean Baker: 'Prices have to fall. We had a bubble that got prices hugely out of whack with the fundamentals. We need a real price decline of between 30% and 40% from the 2006 peaks.'"

"Lawrence Yun, Chief economist, National Association of Realtors: 'Overshooting downward can lead to unnecessary loss in economic activity. Prices do need to come down in some markets. But a measurable overshooting downward introduces a host of new problems, including additional pressure on foreclosures. We need to genuinely think of bringing legitimate buyers back into the market.'"

"Does the national median home price need to fall a lot more before the housing market can get moving again? Yun: 'Prices need to adjust as the market dictates. Another 10% fall in some markets could occur. However, I doubt prices will or need to fall in the vast middle America. Indianapolis, Dallas, Kansas City, Omaha are, if anything, underpriced markets.'"

"What if you can't pay your mortgage, yet can't sell your home for enough to pay off your mortgage? Should you mail in your keys and walk away? Baker: 'People should consider the risk to their credit rating vs. how much they can save. In some cases, walking away might be a perfectly rational choice.'"

From Reuters. "Home foreclosure filings jumped 23 percent in the first quarter from the prior quarter, and more than doubled from a year earlier, as more overextended borrowers failed to make timely payments, real estate data firm RealtyTrac said on Tuesday."

"Foreclosure filings were far-reaching, rising on an annual basis in 46 states and in 90 of the 100 largest metropolitan areas, to a total of 649,917 properties."

"Nevada, California, Arizona and Florida had the highest foreclosure rates among states during the quarter. Georgia, Michigan, Ohio, Massachusetts and Connecticut were the other states with the top 10 foreclosure filings."

"The share of vacant U.S. homes grew to a record high in the first quarter, the government reported on Monday. The percentage of owner-occupied homes sitting empty rose to 2.9 percent, the third straight monthly rise, for a total of 18.6 million vacancies, U.S. Census Bureau data showed."

"With prices seen falling further at a time when there is an overabundant supply, some government mortgage relief programs may not preclude foreclosures from mounting."

From Realty Check. "When you break down the sub-categories, you find that the number of bank-owned properties is rising faster than ever before. 'Typically you’ll see about 20 percent of the foreclosure filings being bank-owned,' RealtyTrac’s Rick Sharga told me in an interview this morning."

"'We’re getting to a point now where it’s well over 1/3 and aiming at 40 percent, so that just suggests that a lot of these homes can’t even be sold to investors at auctions – because there’s just no equity in the properties,' he said."

"Sharga estimates that by the end of this year there will be over a million bank-owned homes in the market. There are about four million properties listed on the Multiple Listing Service. The National Association of Realtors noted last week that in a casual survey they found 18 percent of the homes currently on the MLS are foreclosed homes."

"It’s interesting to me that given all the programs supposedly helping folks in default and all the banks claiming that they are doing refi’s or 'work-outs' or whatever, a growing number of homes are still going back to the bank."

"Congress, the Bush administration and regulators have urged lenders to renegotiate terms for borrowers so they can stay in their homes, easing the glut of empty houses. Such efforts may mask the slump's extent by delaying foreclosures, RealtyTrac CEO James Saccacio said in the statement."

"'This country needs a cleansing,' said billionaire real estate investor Sam Zell. 'We need to clean out all those people who never should have bought in the first place, and not give them sympathy.'"

"Government attempts to slow the flood of defaults 'could be simply deferring another flood of foreclosures,' Saccacio said in the statement. 'That could extend the length of time it takes the market to recover from this downward cycle.'"

"The subprime borrowing spree featured lax lending standards that allowed people to buy homes with little or no down payment, and many of those borrowers today have no incentive to pay off mortgages that are worth more than the homes they bought, Zell said."

"'That whole process has to be liquidated,' Zell said."

The Kansas City Star. "The news that caught my attention comes from recently released transcripts of the 2002 meetings of the Federal Open Market Committee. It makes monetary policy for the United States."

"The transcripts, released after a five-year delay that reflects an irksome lack of transparency at the Fed, shed new light on its role in fueling a housing bubble that has since popped — putting us in our current economic predicament."

"One theme in the newly released transcripts is how Tom Hoenig, president of the Federal Reserve Bank of Kansas City, expressed concern as early as March 2002 about how incredibly low short-term interest rates — then 1.75 percent, and on the way to 1 percent — might be 'setting up conditions that I think will give rise to future imbalances.'"

"In May, Hoenig again warned about 'risks of … some financial excess.' In June, he called the low-interest-rate regime 'extremely accommodative. And I think we need to take a longer-term view of this.'"

"The transcripts also reveal how captivated the then Fed chairman, Alan Greenspan, was with how the housing boom was leading the economy out of the 2001 recession."

"'Despite the weakness in the economy, homebuilding has been remarkably well maintained,' Greenspan said in June. 'We are getting fairly dramatic increases in a lot of areas in the market value of homes and hence in total housing equity, from which there has been a consistent degree of extractions' in the form of refinancings and home equity loans."

"'Unless we get a significant decline in home prices, and that’s a very questionable prospect at this stage, it’s hard to imagine that there will not be very considerable ongoing support for consumption expenditures coming out of the housing equity markets,' Greenspan said."

"In August, Greenspan acknowledged concerns about a 'housing value bubble' but questioned 'whether that’s a valid notion.'"