Economic Despair

This must be a bank's worst nightmare; a homeowner who doesn't care about foreclosure. If there are enough people like Mr. Zulueta, then the very existence of the US banking system is in question. The walk-away home debtors are very dangerous.

When Raymond Zulueta went into default on his mortgage last year, he did what a lot of people do. He worried. In a declining housing market, he owed more than the house was worth, and his mortgage payments, even on an interest-only loan, had shot up to $2,600, more than he could afford. “I was terrified,” said Mr. Zulueta, who services automated teller machines for an armored car company in the San Francisco area.

Then in January he learned about a new company in San Diego called You Walk Away that does just what its name says. For $995, it helps people walk away from their homes, ceding them to the banks in foreclosure.

Last week he moved into a three-bedroom rental home for $1,200 a month, less than half the cost of his mortgage. The old house is now the lender’s problem. “They took the negativity out of my life,” Mr. Zulueta said of You Walk Away. “I was stressing over nothing.”

You Walk Away is a small sign of broad changes in the way many Americans look at housing. In an era in which new types of loans allowed many home buyers to move in with little or no down payment, and to cash out any equity by refinancing, the meaning of homeownership and foreclosure have changed, economists and housing experts say.

Does Bernanke know what he is doing? He gives a good impression of being incompetent.

Feb. 28 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke's readiness to cut interest rates to avert a recession is stoking concerns that prices will get out of hand.

``Bernanke has really overweighted the economic risks relative to inflation,'' said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, following the Fed chief's testimony to Congress yesterday. ``He may get some disagreement'' among colleagues on the Federal Open Market Committee, Silvia said.

Investors' expectations for inflation over the next 10 years jumped to the highest since June after Bernanke pledged to the House Financial Services Committee to act in a ``timely manner'' to combat ``downside risks'' to growth. A day after government figures showed wholesale costs rose 7.4 percent in January from a year ago, Bernanke said the price outlook has deteriorated ``slightly.''

Bernanke is at the Senate Banking Committee today in the second day of semiannual testimony on the economy. His prepared remarks were the same as yesterday's.

You could see this one coming. The Fed has cut rates but so far, mortgage rates have remained high. Could it be something to do with risk?

The Fed's effort to bail out the credit crisis and Housing crash has run into an odd problem: Despite cutting rates 225 basis points since September, mortgage rates have actually gone up. "The Fed's efforts so far to soften the blow of the housing slump with lower interest rates appear to be having a muted effect. Since September, the Fed has reduced its target for short-term interest rates by 2.25 percentage points to 3%. But some mortgage rates are actually rising, and those that are falling haven't fallen that much.

The average interest rate on a standard 30-year fixed-rate mortgage was 6.38% yesterday, little changed from September but up from 5.61% in late January, according to HSH Associates, a mortgage-data publisher in Pompton Plains, N.J. Interest rates on so-called jumbo mortgages -- those larger than $417,000 -- were at 7.35%, also close to their September levels.

More on the Case-Shiller numbers from the International Herald Tribune

Across much of the nation, home values are dropping — even those backed by solid mortgages — and banks are repossessing more every day. Most experts say the dive won't hit bottom for another year and only after excess inventory is sharply reduced and credit markets improve.

More government intervention may be needed, too, if the free market system doesn't work quick enough.

"The housing value crisis is spreading and deepening," said David Abromowitz, a senior fellow at the Center for American Progress. "It has gone way beyond subprime borrowers stretched too far with bad loans and now has clearly extended into the housing markets more broadly."

U.S. home prices dropped 8.9 percent in the final quarter of 2007 compared with a year ago, according to the Standard & Poor's/Case-Shiller home price index released Tuesday. That marked the steepest decline in the index's 20-year history

The lawyers are moving in. This is going to get expensive.....

WHEN BORROWERS FIGHT BACK: Banks watch closely to see if a couple's legal struggle with their lender will launch a new front in the battle over troubled mortgages.

A federal appeals court is nearing a decision on a battle between Chevy Chase Bank and a Wisconsin couple that could for the first time enable homeowners across the country to band together in class-action lawsuits against mortgage firms and get their loans canceled.

The case is alarming Wall Street's biggest banks, which could bear the hefty cost of reimbursing all mortgage interest, closing costs and broker fees to groups of homeowners who uncover even minor mistakes in their loan documents.

After a federal judge in Milwaukee ruled last year that the Wisconsin couple had been deceived and other borrowers could join their suit, Chevy Chase Bank appealed to the circuit court in Chicago. Kevin Demet, the lawyer for the plaintiffs, said a decision by the appeals court is imminent, though others involved in the case said it could be a matter of weeks.

"It's one of the most important cases for the mortgage industry right now," said Louis Pizante, chief executive of Mavent, which provides consumer protection law services to major lenders. "The case was somewhat interesting a couple years ago when it started, but its ramifications and impact have completely changed given the current environment."

In some senses, this is hardly a news story anymore; another month, another fall in house prices.

The monthly S&P/Case-Shiller Home Price data was released yesterday, and once again, the results weren't pretty.

17 out of 20 cities declined year over year, and all 20 cities declined month over month. Miami saw the biggest year over year declines at -17.5%. Miami was followed by Las Vegas (-15.34%), Phoenix (-15.27%), San Diego (-14.96%) and Los Angeles (-13.7%). New York fell just 5.6% over the last year, and Boston fared even better at -3.36%. Seattle, Portland and Charlotte were the 3 cities that still managed to show year over year growth from 12/06 to 12/07. The composite index of all 20 cities was down 9.08% year over year. On a month over month basis, the West Coast cities once again saw the biggest declines, while Chicago, New York, Portland and Charlotte held up the best

At the end of 2007, the FDIC have a list of 76 institutions which it regards as problem banks at the end of 2007, up from 50 at the end of 2006.

U.S. banks set aside a record $31.3 billion for loan losses in the 2007 fourth quarter to offset weakening conditions in the housing and credit markets, the Federal Deposit Insurance Corp said on Tuesday. For all of 2007, the U.S. bank industry set aside $68.2 billion for potential loan losses, the agency said in its quarterly report.

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. Meanwhile, earnings at U.S. banks and thrifts plunged 83.5 percent to a 16-year low of $5.8 billion in the fourth quarter, down from $35.2 billion a year earlier, the FDIC said.

"It's no surprise to anyone that the second half of 2007 was a very tough period for the banking industry," said FDIC Chairman Sheila Bair. "Fourth quarter results were heavily influenced by a number of well-publicized write-downs by large banks." U.S. lending standards are tightening 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. Other FDIC officials said the agency expects the number of problem institutions to rise. There were 76 institutions on the FDIC's list of problem banks at the end of 2007, up from 50 at the end of 2006, the agency said. The list is based on capital adequacy, earnings, liquidity

These days, you just can not get away with lying on TV. The internet is there to catch you.

Unfortunately, oil prices are not playing nice. The Fed would like to cut rates but inflation just will not go away.

The price of oil has hit a record high for the second day running, touching $102.08 a barrel for US sweet crude. However, the figure is still surpassed in inflation-adjusted terms by the peak of $102.53 reached in 1980, the International Energy Agency says. The oil price surge is supported by traders switching their cash out of shares and currencies and into commodities, traders say

Click on the chart for a larger version
As far as the NAR are concerned, the housing market adjustment will be one of quantities not prices. Sales will collapse in 2008, but prices will only fall marginally.

Somehow, I suspect this forecast will be revised drammatically as the year progresses. just one year. There seems to be no end to the crash.

NEW YORK ( -- Foreclosure filings nationwide soared 57% in January over the same month last year - another indication that the nation's housing woes are deepening.A study released Tuesday by RealtyTrac, an online marketer of foreclosure properties, showed that 233,001 homes were affected, 8% more than in December. Of that total, 45,327 homes were lost to bank repossessions.

The only good news was the comparatively modest month-to-month increase in total filings. "It could be that some of the efforts on the part of lenders and the government - both at the state and federal level - are beginning to take effect," said James Saccacio, RealtyTrac's chief executive.

"The big question is whether those efforts are truly helping homeowners avoid foreclosure in the long term, or if they are just forestalling the inevitable for many beleaguered borrowers," he said.

Many mortgage-assistance efforts simply give borrowers a chance to pay off missed payments, rather than lowering monthly payments, which effectively just delays foreclosures. But now lenders claim they are restructuring more mortgages by lowering or freezing interest rates and reducing balances. These solutions are much more likely to help people save their homes.

Nevada, California and Florida had the highest foreclosure rates in the nation. During the housing boom, all three states recorded big price run-ups, and saw a large proportion of homes sold to investors. In Nevada, one of every 167 homes was in some foreclosure stage last month.

I recently received an email from Chris, a student from Stony Brook University. He is conducting a survey to examine how people think and feel about the political issues, parties, and candidates in the upcoming election. He has asked me to place a link on my site to encourage people to participate.

In the survey, you will be asked a series of questions about two political candidates, John McCain and Hillary Clinton. The survey would like to identify how individuals that find information on the web think about politics, and your participation would be greatly appreciated. In total, the survey should take about 15 minutes to complete. The survey is completely anonymous and you can skip any questions you do not wish to answer.

Click here to take the survey:

Please feel free to contact Chris Weber at Stony Brook University with any questions or concerns.

Thanks for your help!

These kinds of articles were popular during the boom. The premise was always the same; some kind of structural impediment was responsible for double digit price growth. However, it has been sometime since I have seen one of these articles. This one claims that Seattle prices are too high becomes of "regulation"; yeah right!

Backed by studies showing that middle-class Seattle residents can no longer afford the city's middle-class homes, consensus is growing that prices are too darned high. But why are they so high?

An intriguing new analysis by a University of Washington economics professor argues that home prices have, perhaps inadvertently, been driven up $200,000 by good intentions.

Between 1989 and 2006, the median inflation-adjusted price of a Seattle house rose from $221,000 to $447,800. Fully $200,000 of that increase was the result of land-use regulations, says Theo Eicher — twice the financial impact that regulation has had on other major U.S. cities.

"In a nationwide study, it can be shown that Seattle is one of the most regulated cities and a city whose housing prices are profoundly influenced by regulations," he says.

Those realtors will try anything to make a sale.....

The housing market in Las Vegas is pretty bleak. Many real estate agents are looking to find new ways to attract buyers into the glacially slow real estate market. One such “hook” that has popped up in a few places all over the country such as Stockton, San Diego, Palm Springs and now Las Vegas, are foreclosure bus tours. If you’ve loved partying in Vegas, riding through the suburbs might be a good way to see what you’re in for before your wild hair leads you to something more permanent. And then again, it could also help those in search of the never-ending Vegas party.

I recently took a “Foreclosure Express” tour in Las Vegas. Partially out of interest in the concept, and partially because with Vegas being one of the slowest housing markets in America, I wanted to see just how bad it had gotten. Or, for some people, how good it had gotten. Information provided by the sponsors of the Vegas Foreclosure Express said, “there is one foreclosure for every 152 households, giving the state the highest foreclosure rate in the nation.” Filings in 2007 were up 16% from the year before, they said

I don't understand the outrage here. The over-riding of a home equity loan is that you have some equity in your home. If house prices fall, wiping out home equity,then on can hardly be surprised that banks stop lending HELOCs.

At the risk of making a tangential point, should HELOCs be used to finance pre-school feews, as the woman in this article from the WAPO seems to be doing?

Homeowners Losing Equity Lines As House Values Fall, Some Banks Withdraw Credit

Nancy Corazzi was told by her lender, USAA Federal Savings Bank, that her equity line of credit was suspended because her Howard County home had dropped in value. In one brief phone call, Nancy Corazzi's lender yanked away what was left of the $95,000 home equity line of credit that she and her husband took out five months ago.

The lender informed her that her Howard County home had plummeted in value and the company did not want the risk that she would owe more than the house was worth. "I got off the phone and I was shaking," said Corazzi, who was using the money to pay preschool tuition for her twins ."I was near tears. We needed this credit line to get us through some tough times."

Several of the nation's largest lenders, along with smaller ones, are shutting off access to home equity lines in areas where home values are declining. It's an unusually aggressive move as the industry grapples with fallout from the mortgage crisis that began unfolding last year. is really that bad..... oh boy.....I never realized it was that bad......

Check out the Northern Virginia bubble fallout blog.

The fiscal bust is just a few years ago - medicare, social security, the national debt - just give it ten more years.

December 4, 2005 (WLS) -- For years, every generation of twenty-somethings has had nicknames. Generation X and Y come to mind. But the latest phenomenon is well-educated, well-financed and not eager to pay dues. Employers, sociologists and even the media have dubbed them "the entitlement generation." They are images of desire, and they are everywhere. And many times they are expensive. In a world of instant communication and instant gratification, having it all can't wait. In the working world these people are known as the entitlement generation.

"Yes, there's an entitlement generation we are seeing a little bit more of," said Debbie Bougdanos. Bougdanos would know. She works at the world renowned advertising firm Leo Burnett and is in charge of recruiting for the creative department. Plenty of portfolios come across her desk. Many of the applicants think they are ready for the prime assignments, but she says, most assuredly, they are not.

The crash continues.....and continues.....and continues

Home loan failures in San Diego County continued their steady climb in January, setting records for both foreclosures and the notices of default that are the first step in reclaiming mortgaged properties.

Real estate agent Dave Pierce says he misjudged the market and is in default on his Torrey Highlands home. "I know about a dozen people who are losing their houses," he said. The number of foreclosures in the county was 1,305, up 32 percent from December and up nearly 257 percent from January 2007. Notices of default totaled 3,109, up 21 percent from December and up 145 percent from the previous year.

The DataQuick Information Systems report yesterday also showed a narrowing gap between foreclosures and home sales. It reported 1,826 sales of new and resale homes in the county last month, compared with the 1,305 foreclosures. In contrast, there were 2,772 home sales and 366 foreclosures in January 2007.

“When sales are this low, foreclosures have a much bigger impact,” DataQuick analyst Andrew LePage said. “I don't know if we've ever been in a position like this.”

Let us party like it is the end of the world

The U.S. home-mortgage industry is in the dumps. That doesn't mean the party is over for mortgage bankers. Countrywide Financial Corp., the nation's largest mortgage lender by loan volume, will host about 30 representatives of smaller mortgage banks for three nights next week at the Ritz-Carlton Bachelor Gulch ski resort in Avon, Colo. At one of the country's most-glamorous skiing spots, a regular room on a weekday starts at $750.

Making Wall Street pay for subprime? I can't see that happening.

BOSTON (AP) -- Regulators are trying to punish Wall Street for mortgage finance practices that expanded home ownership and spread risk among a host of new players -- but also may have duped borrowers and investors who supplied cash to fuel a housing boom that's turned bust.

A handful of state securities regulators and a couple foreclosure-blighted cities have fired the opening shots with lawsuits trying to prove that investment banks and big lenders are guilty of more than just bad business decisions and failing to foresee looming mortgage troubles. Some regulators say greed and fraud underlie much of the subprime mortgage mess that has spread across the broader housing market, triggering a spike in foreclosures.

Aside from the civil cases, the FBI is looking at possible criminal action, focusing on what Wall Street firms knew about the risks of mortgage securities backed by subprime loans, and whether they hid risks from investors.

The mainstream media has just discovered what the Fed has been up to....

NEW YORK (Reuters) - Banks in the United States have been quietly borrowing "massive amounts" from the U.S. Federal Reserve in recent weeks, using a new measure the Fed introduced two months ago to help ease the credit crunch, according to a report on the web site of The Financial Times.

The newspaper said the use of the Fed's Term Auction Facility (TAF), which allows banks to borrow at relatively attractive rates against a wide range of their assets, saw borrowing of nearly $50 billion of one-month funds from the Fed by mid-February.

Here is an excellent account of the forthcoming bank bailout from

Since the onset of the subprime crisis last summer, the White House has repeatedly rejected the notion of a government bailout, either for homeowners facing foreclosure or for the banks and mortgage companies that made the now souring loans. "There's no bailout with government money, none whatsoever," Treasury Secretary Hank Paulson emphasized. But even as the administration has stuck to its laissez-faire stance in public, behind the scenes a covert bailout has been under way, with a number of public and quasi-public agencies quietly dispensing vast sums to financial institutions saddled with worthless or near worthless mortgage securities. All the while, homeowners at the heart of the problem have been left largely to their own woes. The rescue operation brings to mind John Kenneth Galbraith's dictum that in the United States, the only respectable form of socialism is socialism for the rich.

Talking about being a little late...

BOSTON - Regulators are trying to punish Wall Street for mortgage finance practices that expanded home ownership and spread risk among a host of new players — but also may have duped borrowers and investors who supplied cash to fuel a housing boom that's turned bust.

A handful of state securities regulators and a couple foreclosure-blighted cities have fired the opening shots with lawsuits trying to prove that investment banks and big lenders are guilty of more than just bad business decisions and failing to foresee looming mortgage troubles. Some regulators say greed and fraud underlie much of the subprime mortgage mess that has spread across the broader housing market, triggering a spike in foreclosures.

We just can't keep away from those asset bubbles. Now it is treasuries....

NEW YORK: U.S. government bonds and emerging market equities have benefited as investors have sought refuge from the housing and credit crises, but the surge in popularity of the two asset classes is inflating a dangerous bubble that is likely to burst.

Last year, U.S. Treasuries benefited tremendously from the flight from risk as the credit crisis began. But the sector's popularity took off when the Federal Reserve started cutting interest rates aggressively last September to support the economy. It has reduced its target for the federal funds rate by 2.25 percentage points, to 3 percent.

Short-maturing U.S. Treasury securities have returned nearly 7 percent since August, while 10-year Treasury notes have posted returns of more than 11 percent, according to Merrill Lynch data. Not coincidentally, the Standard & Poor's 500, Dow industrial and Nasdaq Composite indexes in 2007 posted their worst annual returns in four years.

Northern rock, the first of many....

The fall of Britain's Northern Rock bank may be the first dropped shoe in a chorus line of big banks tap-dancing into oblivion. The British government's move yesterday to nationalize the insolvent mortgage lender's remaining operations leaves shareholders holding an empty bag. Their only resort now will be to call their lawyers. What we may be witnessing, in a movement that will surely spread to the US, is a changing of the guard at the top of the financial food-chain between bankers and lawyers.

Here is an answer to all those defaulting car loans. A box that stops the car from starting once the owner has missed a payment. I am trying to think of something similar for a defaulted mortgage; perhaps the door will close, locking you out of your home. Instant foreclosure.

Sometimes it is hard listening to the awful logic of Peter Schiff. People are going to lose money, and he tells them without making it pretty.

It is all beginning to unwind......

The spectre of deleveraging haunts the financial markets. Rightly so, for the removal of credit from the global economy is a process which tends to feed on itself. That means that the credit crunch could easily turn into something much nastier.

Before the deleveraging came the leveraging. Take the US. The ratio of all sorts of debt to GDP rose from 160 per cent in 1975 to 342 per cent at the end the September 2007. Through to 2000, debt increased by 2.4 percentage points a year faster than GDP. But after the turn of the millennium, the excess of debt growth accelerated almost to 3.7 percentage points a year. The pattern was similar but less extreme in the eurozone, and similar but more extreme in the UK.

While it was happening, only a few sourpusses complained. Leverage, it was said, was a natural trend. As economies get richer, they have more need for debt-financed investments and debt-financed inventories. But lending grew much faster after 2000 than even the most gifted apologist could explain away.

From the Washington Post

Mortgage lenders hunting for delinquent homeowners who have dodged their phone calls and letters are employing aggressive new methods to track them down, potentially making every knock on the door or fancy envelope seem like part of the pursuit. Even wedding invitations are suspect.

The idea, they say, isn't to twist arms. Instead, it's to avoid foreclosures, which have cost the mortgage industry billions of dollars in the past year.

Ocwen Financial is negotiating a deal with HomeFree-USA, a nonprofit group, to go door to door in the Washington area to strike deals with elusive borrowers. Fannie Mae is offering foreclosure lawyers up to $600 to help find solutions for these homeowners. Wells Fargo is disguising its letters in different colored envelopes, including some resembling wedding invitations.

Although some lenders initially resisted paying for assistance, the industry has begun backing community groups that help them find these borrowers. The math is simple: The typical foreclosure costs more than $50,000. It is usually cheaper and less time-consuming to lower the borrower's interest rate, put them on a repayment plan or sell the home at a loss. To stem the foreclosures, the mortgage industry says, lenders need to reach people they call "no-contact borrowers," those who have eluded or rebuffed them

Sorry, you can't get your money back.....

NEW YORK (Reuters) — Citigroup (C) has suspended investor withdrawals from a $500 million credit hedge fund to give it a chance to "stabilize," a bank spokesman said Friday. The London-based fund, called CSO Partners, was facing investor redemptions after a 10% loss in November, prompting its manager John Pickett to resign, according to Citigroup spokesman Jon Diat.

"We have temporarily suspended redemptions of all shares of CSO to stabilize the fund and allow time to address its funding needs to meet anticipated obligations," said Diat in a statement.

It is not unusual for hedge fund managers to suspend redemptions on funds in distress. Investment documents typically give the manager the right to put up temporary "gates" barring investor exits so managers don't have to undertake a fire sale of assets to pay exiting investors.

Things are never as we expect. Who would have imagined that people would just walk away from the overvalued homes. No wonder the ratings agency models have had nervous breakdowns.

Fitch Ratings, while telling investors last Friday to expect additional "widespread and significant downgrades" on $139 billion worth of subprime loans, has cited a new factor in their "worsening performance."

"The apparent willingness of borrowers to 'walk away' from mortgage debt," the analysts noted, "has contributed to extraordinary high levels of early default" on loans issued during the 18 months before the mortgage bubble burst. It expects losses to reach 21% of initial loan balances for subprime mortgages issued in 2006 and 26% for those issued in early 2007.

Such behavior, where not precipitated by willful fraud, shows that American homebuyers supposedly duped by their lenders aren't so dumb. They're perfectly capable of acting rationally without political interference.

Now it is a credit crunch by numbers; good zipcodes and bad'uns. Where do you live?

Critics call it the new redlining: Many of the country's largest mortgage lenders are imposing loan restrictions in entire counties or Zip codes that they rank as risky or "declining."

On Jan. 25, Countrywide Bank sent mortgage brokers a list that categorized hundreds of counties as "soft markets" with rankings from 1 to 5, in ascending order of perceived risk. In areas rated 4 and 5 -- roughly 100 counties in metropolitan areas nationwide -- Countrywide said it will now require down payments that are 5 percentage points higher than from most applicants. If a loan program had previously allowed a minimum 5 percent down payment, applicants in these areas will now be required to come up with 10 percent.

An additional 970-plus counties are rated more moderate risks, in categories 1 to 3, with down payment increases of 5 percentage points if an appraisal report indicates there is an "oversupply" of houses for sale or a marketing time of more than six months.

Other national lenders have distributed their own proprietary "declining markets" lists. GMAC-ResCap, based in Minneapolis, even has a Web site where loan officers can type in a Zip code to learn how risky the company ranks the area. The general public is not supposed to see the site, but a mortgage company executive provided me with access.

In late January, a Zip code for McLean -- a high-income, high-cost residential community and home of mortgage investment giant Freddie Mac -- was rated D, or high-risk, on the Web site. The upscale residential neighborhood in Northwest Washington where Fannie Mae, another mortgage investor, has its headquarters was rated at an elevated risk of C.

Time to clip the credit cards. They are getting way too expensive...

Credit-card issuers have drawn fire for jacking up interest rates on cardholders who aren't behind on payments, but whose credit score has fallen for another reason. Now, some consumers complain, Bank of America (BAC) is hiking rates based on no apparent deterioration in their credit scores at all.

The major credit-card lender in mid-January sent letters notifying some responsible cardholders that it would more than double their rates to as high as 28%, without giving an explanation for the increase, according to copies of five letters obtained by BusinessWeek. Fine print at the end of the letter—headed "Important Amendment to Your Credit Card Agreement"—advised calling an 800-number for the reason, but consumers who called say they were unable to get a clear answer. "No one could give me an explanation," says Eric Fresch, a Huron (Ohio) engineer who is on time with his Bank of America card payments and knows of no decline in the status of his overall credit.

Here is an interesting story; a survey shows that most homeowners have difficulty believing that house prices have fallen. Funny that they had no problem believing that house prices had increased during the bubble.

NEW YORK ( -- Despite numerous reports showing home values in historic decline, more than three out of four homeowners believe their own home has not lost value in the past year, according to an online survey.

The survey was conducted by Harris Interactive for, a Web site that gives estimated home values. The survey of 1,619 homeowners found 36% believe their home has increased in value, and another 41% believe their value has stayed the same. Only 23% believe their home has lost value.

"This survey reveals that despite the data to the contrary, people either aren't paying attention to their housing market or are in denial about their own home's value," said Stan Humphries, vice president of data & analytics. Zillow's own estimates are that home values declined 5% on average last year, with many markets posting much steeper declines.

I rmember when TOLL shares were going through the roof. Now, all I am left with are the memories.

BOSTON (MarketWatch) -- Toll Brothers Inc. doesn't see any end in sight to the U.S. housing market's woes as the luxury home builder said Wednesday that first quarter home-construction revenue fell 22% compared to the same period last year. "The housing market remains very weak in most areas. Based on current traffic and deposits, we are not yet seeing much light at the end of the tunnel," said Robert Toll, chairman and CEO also said its backlog fell to $2.4 billion, down 42% from the first quarter of fiscal 2007, as the number of signed contracts on homes fell 46% from last year. In addition, the average price of a house sold by Toll fell, while the average price of canceled houses rose. Joel Rassman, Toll's chief financial officer, said in a press release: "With conditions still weak in most markets, we expect to continue to face challenging times ahead. We are still in the midst of finalizing our first-quarter impairment analysis."

Does anyone remember hearing about the "housing shortage"?

CLEVELAND - Judge Raymond Pianka views his courtroom as the emergency room of the foreclosure crisis. Weary of lenders and wholesalers who don’t show up to answer to housing code violations like unsecured doors and windows on foreclosed properties, he began holding trials without them. He’s put 12 companies on trial in absentia and has fined most, leaving each unable to sell any properties in the area until it pays up.

Rust Belt cities, already beaten down by a miserable economy before foreclosures began spiraling nationally, are moving to cut the number of houses left vacant when the mortgage can’t be paid. At stake are valuable tax dollars and the survival of neighborhoods. County treasurers and mayors are filing lawsuits and developing land banks to buy distressed properties and either demolish them or repair and sell them. Buffalo, N.Y., brings property owners and lenders together in court on monthly “Bank Days” to find solutions for cleaning up vacant homes.

Structuredd credit; who would have thought that it would become the source of humor.

Things must be bleak when your hedge fund manager—after posting an approximately 40% decline on the year—looks for solace in black humor. Structured credit shop Eidesis Capital is licking its wounds after a disastrous 2007. And, quoting comedian Lily Tomlin, it warns, “things are going to get a lot worse before they get worse.”

“Despite all the well-publicized and traumatic developments to date, the extent of the problems in credit are underestimated and mechanics of what is transpiring in the credit formation infrastructure are still not fully appreciated by most market participants,” the firm’s managing members wrote to investors last month.

Jim Jubak lashes into the Fed. Well worth a read....

Do the members of the Federal Reserve think we're stupid? Do they think we don't understand that their quick fix for the economy and the financial markets in 2008 is going to completely unravel in 2009?

Do they think we can't see that they're setting up the economy and the financial markets for a replay of the bust-to-boom-to-bust cycle that followed the bursting of the stock market bubble in 2000, in which easy money created a housing bubble that has now burst?

The Fed's actions of the past five months are going to lead to higher inflation or higher interest rates (and a slowing economy again) in 2009. Apparently the Fed doesn't think we can read between the paragraphs of its Jan. 30 press release and see that coming.

The credit crunch continues; the CDO market is still stuck in the mud.

Feb. 5 (Bloomberg) -- Buying and selling of collateralized debt obligations based on mortgage bonds, high-yield loans or preferred shares has ground to a near-halt, traders said at the securitization industry's largest conference.

The slowdown of the more than $2 trillion CDO market follows record downgrades in mortgage-linked securities last year. Some AAA rated debt lost all its value. CDOs, which have fueled unprecedented bank writedowns since mid-2007, repackage assets into new securities with varying risks.

Lighter trading volumes for asset-backed bonds and larger- than-typical differences between the prices at which they can be bought and sold have made valuing holdings difficult and dissuaded investors from purchasing the debt, said Sanjeev Handa, head of global public markets at TIAA-CREF.

Demand for new CDOs has stalled, with just one created in the U.S. so far this year, according to JPMorgan. The creation of CDOs dipped about 10 percent last year to $494.7 billion, according to the company. The figures include only issuance for which investor money was collected upfront.

After resisting price cuts, builders have started to roll back the housing bubble.

WASHINGTON (MarketWatch) -- U.S. builders slashed prices by more than 10% in December in a failed bid to boost sales, which dropped about 5% to the lowest level in nearly 13 years, the Commerce Department reported Monday. For the year, sales declined at a record 26.4% pace. "A lousy end to a lousy year," summarized Richard Moody, chief economist for Mission Residential. The grim figures show no relief in sight for a battered building sector and are certain to be a major item on the Federal Reserve's agenda for its two-day policy-setting meeting that begins Tuesday.

The fall guy is fighting back. He says it is not his fault that SocGen lost billions.

Jérôme Kerviel, the trader accused of fake transactions costing Société Générale billions of euros, insisted on Tuesday he would not be used as a “scapegoat” by the bank. In his first public comments since the scandal broke, Mr Kerviel told Agence France Presse he recognised his “share of the responsibility”, but he would not take all the blame.

”I was designated [as being solely responsible] by Société Générale. I accept my share of responsibility but I will not be made a scapegoat for Société Générale,” the 31-year-old former bank employee said in an interview at his lawyer’s office in Paris. Mr Kerviel’s first public intervention came a day after he was questioned by two investigating magistrates who are examining the case. Judges Renaud van Ruymbeke and Françoise Desset grilled Mr Kerviel for eight hours on Monday, AFP reported.

Didn't GM once make cars? Now it makes losses on the housing market.

Feb. 5 (Bloomberg) -- GMAC LLC, the auto and mortgage lending company 49 percent owned by General Motors Corp., posted a $724 million fourth-quarter loss as bad loans in the U.S. rose to a record.

The net loss compares with a profit of $1 billion a year earlier, the Detroit-based company said in a statement. GMAC, whose majority owners include Cerberus Capital Management, is talking to buyers for parts of the Residential Capital mortgage unit, which had a $921 million loss.

GMAC vowed today to make money in 2008 after falling home prices and record U.S. foreclosures led to a $2.3 billion loss for 2007. Auto finance profit slid 77 percent as sales declined at GM's North American unit. Moody's Investors Service cut its ratings on GMAC and ResCap, citing concern about ResCap's liquidity and the effect on GMAC's financial health.

What??? Another downgrade of collateralized debt obligations? You mean that they are not worth as much as you previously thought? Weren't they all AAA? What happened? What did we miss

Feb. 5 (Bloomberg) -- Fitch Ratings may downgrade all of the $220 billion of collateralized debt obligations it assesses that are based on corporate securities because of rising losses.

The New York-based company may lower the notes by as much as five levels after failing to accurately assess the risk of debt that packages other assets, according to guidelines proposed by Fitch today. CDOs with AAA grades that are based on credit-default swaps and aren't actively managed may face the steepest reductions.

Ratings firms are responding to criticism that they failed to react quickly enough as increasing defaults on subprime mortgages in the U.S. caused a plunge in the value of CDOs. Fitch, a unit of Fimalac SA in Paris, lowered $67 billion of mortgage-linked CDOs in November, slashing some AAA debt to speculative grade, or junk.

When will Moody's press the button? When Moody's are thinking of a downgrade, you know that it has already happened.

Feb. 4 (Bloomberg) -- Moody's Investors Service may cut the ratings on A$83 billion ($75 billion) of Australian mortgage- backed bonds linked to PMI Group Inc. on concern the U.S. home- loan insurer will find it harder to pay claims.

Moody's is reviewing the ratings on bonds tied to loans insured by the local unit of PMI, it said today in a statement. They account for about 45 percent of the A$180 billion mortgage- backed bonds issued in Australia, making for the biggest review Moody's has done in the nation, said Henry Charpentier, structured finance analyst at the ratings company in Sydney.

Any downgrades will stifle sales of Australian mortgage- backed bonds, which fell 87 percent in the six months to Dec. 31. Australian lenders will find it more costly to raise capital to fund mortgages if Moody's cuts the ratings.

Bernanke's plan to destroy the dollar is still on track. Where are you Ron Paul? We need you now.

Feb. 2 (Bloomberg) -- The dollar fell for a second straight week against the euro after the Federal Reserve lowered its benchmark lending rate by a half-percentage point to 3 percent and indicated further cuts in borrowing costs may be needed.

The dollar pared its weekly loss yesterday as an expansion in manufacturing offset the first U.S. decline in jobs in four years and traders balked at bidding the euro above the all-time high. The European Central Bank is forecast to hold its main refinancing rate at a six-year high of 4 percent next week, maintaining the advantage over the Fed's target.

``It looks like the U.S. economy will be slowing at a faster pace than other global economies, clearly dollar- negative,'' said Michael Woolfolk, senior currency strategist at the Bank of New York Mellon in New York.

The dollar dropped 0.8 percent to $1.4802 per euro this week, from $1.4681 on Jan. 25. The U.S. currency came yesterday within a half-cent of the November low of $1.4967 per euro, the weakest level since Europe's currency debuted in 1999. Against the yen, the dollar fell 0.2 percent to 106.49, from 106.72. The euro increased 0.6 percent to 157.67 yen, from 156.68.

Could we see some of those CDO merchants actually doing jail time? Go on, admit it, the thought excites you.....

Federal prosecutors are looking into whether UBS misled investors about the value of mortgage bonds it held, according to a published media report.

In a preliminary investigation, the U.S. attorney in New York's Eastern District in Brooklyn is probing whether the Swiss financial giant booked inflated prices for mortgage bonds despite knowing their valuations had fallen, according to the report, published Saturday in The Wall Street Journal.

Trying to guess how far housing can go; boy, is that a tough one. What do you think? Does 10 percent sound like a reasonable number? What about 20 percent?

Here is what Businessweek has to say

As Washington policymakers struggle to keep the U.S. out of recession, the swirling confusion over the housing market is making their job a lot tougher. Will American consumers keep shopping or be forced to pull back? Will banks lend freely or be hamstrung by mortgage defaults? What are the best policy options right now? Those and other important questions simply can't be answered without a good idea of whether home prices will rise, flatten out, or keep dropping.

Some experts have begun to suggest that a bottom is in sight. Pali Research analyst Stephen East wrote in a research note to his firm's clients on Jan. 25 that "the sun is not shining very brightly, but at least the worst of the storm has likely passed." With optimism budding, Standard & Poor's beaten-down index of homebuilder stocks soared 49% from Jan. 15 through Jan. 29.