None other than Alan Greenspan told investors yesterday that housing prices should bottom out in 2009.

The blurb at MarketWatch on Wednesday:

U.S. home prices will likely bottom out in early 2009 after the market absorbs excess inventories, former U.S. Federal Reserve Chairman Alan Greenspan told audiences in Asia Wednesday, according to news reports. Greenspan, who spoke by video link to audiences in Hong Kong and Singapore, said the current pace of liquidation will accelerate, but excess supply won’t be eliminated until early 2009, according to Dow Jones Newswires, which cited prepared remarks provided to investors by Deutsche Bank, which sponsored the conference.

There’s an old saying that economists should be interpreted as contrarian indicators; something tells us that adage is doubly true in Greenspan’s case.

In the secondary market, things can change in an instant. One minute, its hedge funds bailing out banks. The next, it’s banks bailing out hedge funds.

Bloomberg takes a look Wednesday at — surprise! — a flickering pulse in the battered CDO market:

Babson Capital Management LLC took over a $680 million CDO from Hartford Financial Services Group Inc. this month, adding to the $22 billion of the securities it oversees. Deutsche Asset Management replaced London-based Brevan Howard Asset Management LLP on a CDO in April. Blackstone Group LP, the largest buyout fund operator, sold three CDOs totaling $1.3 billion in April.

The combination of takeovers and new funds signals a new stage of the global credit crisis as CDO managers vie for more than $2 billion in annual fees generated by the market. One in five managers of the funds that pool bonds, loans and other assets face “financial stress” or ruin, according to Fitch Ratings.

“We absolutely believe the market will come back,” said Matthew Natcharian, 39, managing director for structured products at Springfield, Massachusetts-based Babson, a unit of MassMutual Financial Group. “We’re actively looking for opportunities,” said Natcharian, whose firm also invests in private equity and emerging-market bonds.

And here we thought that Wall Street had lost its appetite for risk. Silly us.

Talk about ruining the mojo for a classic 80s tune: CNBC on Monday took a look at a growing trend of arson among troubled homeowners, either looking to get back at a lender they feel wronged them or as part of an attempt to collect insurance dollars.

Take a look:

Speaking of, why didn’t the segment make use of some Talking Heads as background? We’re just asking.

The WSJ’s Personal Journal puts rubber to the road for homeowners’ associations, many of which are feeling the heat from increased foreclosures. Take Denver’s Monaco Place, for example:

The association at Monaco Place, a community of single-family homes and condominiums in Denver, is short $250,000 of its $9.3 million annual operating budget. It can’t pay for needed roof and siding repairs to homes. Potholes in the streets haven’t been filled in order to save money to keep electricity running in common areas, says Dee Tyler, CEO of Colorado Association Services, which manages the association. Monaco Place was already suffering from a high rate of foreclosures before the credit crunch hit. In the past three years, about a third of its 193 units have been foreclosed on.

One-third of a community in foreclosure? That’s a lot. You’ll need to read the story to see just how bad things have gotten for HOAs in places like Stockton, California.

The Financial Times’ John Dizard writes Tuesday that the Countrywide/Bank of American marriage that’s been the subject of quite a bit of hand-wringing recently will go through, despite grandstanding by Congressional Democrats:

It’s too early for pheasant shooting in the Washington area, but for those politicians with a sporting disposition, it’s Angelo Mozilo season … Now there’s a barrage of leaks, reports, whispers and so on suggesting that the acquisition of Countrywide by Bank of America will come unravelled, or that somehow the Countrywide bank can be “saved” while the holding company is flushed away with its bondholders.

I don’t believe that. I think the deal will be done, possibly at a lower price.

Dizard, BTW, concludes that the demonization of Mozilo by anti-mortgage consumer activists is because he’s a convenient target — he says that Mozilo was doing what Congress, regulators and (gasp!) consumer advocates wanted him to do: raise homeownership rates during what at the time was a historic boom that few saw an end to.

Funny how time distorts what once was reality, isn’t it? Dizard may be writing across the pond, but from our view, his recollection is spot-on.

Luxury homebuilder Toll Brothers reported operating results through April on Tuesday morning, and the tally shows that the housing mess is far from over. Some highlights:

• Revenue of approximately $817.9 million, down 30 percent from one year ago.
• Inventory backlog 50 percent lower than year-ago, signaling a slowing in build activity.
• Average prices fell to $590,000, compared to $711,000 in the year ago quarter, and $634,000 in FY 2008’s first quarter (Toll’s fiscal year doesn’t run in tandem with the calendar year)

That said, we especially liked CEO Robert Toll’s willingness to blame the media for creating downward pressure on prices:

Robert I. Toll, chairman and chief executive officer, stated: “The just-completed spring selling season was quite weak in most markets as buyers remained on the sidelines. We believe there is significant pent-up demand which is growing. When we have held promotions, buyers have come out to play and put down deposits. Often, however, a lack of confidence in the direction of home prices overcomes their enthusiasm and they don’t take the next step of going to contract. They, like all of us, read the papers and watch TV, both of which keep advising them that home prices are declining.

In plain English, and to paraphrase: If only those damn media types would stop letting home buyers know what’s really going on in housing, we could push a few more people into homes that are now worth an average of $590,000 versus $711,000 one year ago.

Just remember, those price declines are all in your head. At least until you have to sell.

We’ve heard from our sources on the Street that Fannie Mae’s decision to price so-called “jumbo conforming” mortgages in-line with existing conforming product last week is having an effect, with the $417,000 to $729,500 mortgages finally starting to move.

We asked one of our sources in the primary market what sort of rates were out there — who manages the mortgage operations at a very large home builder — and we were told the following was par for last Friday:

Right about where we’d expect, from our perspective. If you’re an originator, and you’re starting to see “jumbo conforming” loans move, be sure to let us know about it. Send an email to tips@housingwire.com.

The Wall Street Journal ran an interesting story Monday looking at the flip-side of a proposed housing aid package being pushed aggressively by Congressional Democrats — namely, that there are a pretty good number of people that don’t want to see Federal dollars used to help troubled borrowers.

It’s a polarizing question, according to the WSJ:

The public is split. “If you’re the Secretary of Bailouts, and people come in and show you that they’re worthy of being helped out, everybody will have a story,” says Robert Krance, 64 years old, a Houston physician and McCain backer. “I don’t know how you can create a reasonable, enforceable method for deciding who should be helped.”

A hands-off approach by the government is “the right thing to do,” agrees Jeff Cohu, a 40-year-old professor attending a McCain rally last week. “The market will readjust faster and better than the government could.”

A Gallup Poll in late March found that 56% of Americans favor government intervention to prevent people from losing their homes because they can’t pay their mortgages, while 42% oppose it. The partisan divide was sharp: 58% of Republicans opposed intervention; 71% of Democrats and 55% of independents supported the idea.

We’ve interestingly seen housing and mortgages move to the back-burner for the Presidential wanna-bes from both major parties. It’s strongly polarizing results like this that suggest the issue won’t be on the back burner for very long — and that any Presidential candidate ignores housing policies at their own peril, regardless of party affiliation.

The idea that home owners are walking away en masse is called out as an “urban myth” by the New York Times this weekend:

The blogosphere is full of tales of homeowners who supposedly are choosing to mail the house keys to their lenders rather than keep their depreciating homes. And yet “jingle mail,” the term for those tinkling packages of keys, appears to be far rarer than many seem to think.

Freddie Mac, the big government-sponsored mortgage company, estimates that just 0.14 percent of the defaulted mortgages in its portfolio involved properties that were abandoned by borrowers. Fannie Mae, another mortgage company, puts the figure in the single digits. Both companies deal in relatively conservative loans, so the total rate may be somewhat higher. Industry officials say they have no way of knowing for sure.

The question would seem to be how prevalent investor-owned properties are, and it’s worth noting that Fitch Ratings has singled out “walk aways” as a key reason behind increasing losses for MBS investors.

And in terms of investor-owned properties, it’s likely tough to ascertain just how many really are out there. We know that 20 percent of mortgage fraud — and there is plenty of it out there, as HW readers know — involved so-called “occupancy fraud.”

Here at HW, we tend to think that “walk-aways” aren’t the massive problem made up by media types, but we also think they’re more prevalent than industry types might want to believe — or even would otherwise be aware of, given the incidence rate for fraud.

We also think the problem is geographically centered in areas where Fannie and Freddie would traditionally have little market presence — places like California and Florida, for example.

Here at HW, we’ve been covering what appears to be a potential rebound in the secondary mortgage market. But at least one senior exec is pulling a “not so fast” response to that sort of thinking.

Via MarketWatch, late last week:

The market for highly structured credit products exposed to residential mortgage securities hasn’t rebounded, American International Group Chief Financial Officer Steven Bensinger said on Friday during a conference call with analysts. “If you look at the commercial mortgage-backed securities market, that has certainly done somewhat better in the second quarter so far than in the previous few quarters,” he explained. “However, in the highly structured credit market with residential mortgage, subprime and Alt-A securities, we don’t see any precise evidence to date that those markets have rebounded.” The closely watched ABX index, which has become a kind of benchmark for subprime mortgage securities, has recovered recently. But that “is not a good measure of what’s happening in our portfolios,” Bensinger stressed.

Which leads us to underscore the fragmented nature of the MBS market; agency bonds are soaring right now, and as HW’s Linda Lowell has noted, a prepayment-based investment strategy seems likely to work well on that side of the market.

Bensinger’s comments serve as a reminder that subprime and Alt-A paper is still very much into the “distressed” category, however.