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The slowdown of the U.S. housing market will last through 2007 as inventories are pared enough to prompt a change in consumer psychology, the chief executive officer of the nation’s biggest mortgage lender said on Tuesday.

Mortgage lending has slowed as rising inventories in the housing market led to a “hard landing” for the industry after a decade of strong growth, Countrywide Financial Corp. (NYSE:CFC - news) CEO Angelo Mozilo said at a Merrill Lynch & Co. conference in New York.

“We have another year of adjustment, or transition” in the industry until consumers believe home prices won’t decline, Mozilo said. “Various events will make the change take place and one of them is” a decline in available homes, he said.

Mozilo said he expects the industry will see lending volume grow progressively from 2008 to 2010 because of a build-up of demand. Until then, the industry will continue to consolidate and eliminate excess capacities.

Calabasas, California-based Countrywide last week said it has funded $375 billion in residential mortgage loans in the year through October, down 7 percent from the same period of 2005. Its pipeline of mortgages that haven’t yet closed totaled $61 billion in October, down 14 percent from a year earlier.

Countrywide has also said it would trim more than $500 million of annual costs by year end, in part by firing more than 2,500 employees.

Some housing bubble reports from Wall Street, New Orleans and Washington. “The slowdown of the U.S. housing market will last through 2007 as inventories are pared enough to prompt a change in consumer psychology, the CEO of the nation’s biggest mortgage lender said.”

“Mortgage lending has slowed as rising inventories in the housing market led to a ‘hard landing’ for the industry after a decade of strong growth, Countrywide Financial Corp. CEO Angelo Mozilo said at a conference in New York. ‘We have another year of adjustment, or ‘transition’ in the industry until consumers believe home prices won’t decline, Mozilo said.”

The Globe and Mail. “First, Americans quit buying homes. Now, they may have stopped fixing and furnishing them too. Bob Nardelli, Home Depot’s CEO said job losses in the home construction market are the worst he’s seen in 35 years, and the pain is starting to spread to the home renovation market.”

“‘The loss of jobs…in the home construction market is at unprecedented levels,’ Mr. Nardelli told analysts. ‘Home builders [are] basically writing off earnest money and liquidating land. We’re starting to see a lot of that unemployment find its way over to the small repair and remodel contractors.’”

“In October, U.S. retail sales fell at an annual rate of 0.2 per cent, the third consecutive monthly decline, according to a U.S. Commerce Department report yesterday. ‘The housing slowdown left its grimy fingerprints all over this report,’ economist Douglas Porter said.”

“‘People are being very cautious,’ said economist Ian Shepherdson. ‘The housing crunch is now hurting.’”

Sellers reigned during the market’s 2001-’05 boom; now it’s payback time for buyers, real estate agents say. In this year’s first 10 months, metro Milwaukee sales - which include the four-county area - are down 4.8% and “for sale” offerings are up 16.1%, MLS figures show. That count includes one-, two- and condo-unit properties in Milwaukee, Waukesha, Washington and Ozaukee counties.

“Our biggest difficulty is keeping deals together,” said Maddente, who is executive vice president of Wisconsin-based First Weber Group. “When something (bad) comes back on an inspection, they want to reopen negotiations.”

Deals are being made, sometimes at a snail’s pace, “as sellers become more realistic,” said Mike Ruzicka, president of Greater Milwaukee Association of Realtors.

What’s realistic? “Buyers want a place in move-in condition and a price that’s in the ballpark - 3 percent to 10 percent over last year’s levels, depending on the property and its location,” Ruzicka said. “But even a property that looks good and is priced right is going to take time to sell. Buyers have a lot of options, and they’re taking their time looking.”

The secret to selling a home successfully in this year, said Howard Loeb, broker-associate at Shorewest Realtors in Mequon:

“Price right, present well - and be open to negotiation.”

Not every deal comes down to price, Loeb said. Sometimes, concession cinches the deal.

“Maybe the seller can help with interim financing, or the buyer’s PMI (private mortgage insurance) or even buy out the lease on their apartment,” Loeb said. “Buyers like a seller who’s flexible.”

It’s been busy here, and once again, I’m crossing the country by airplane. I planned to write this blog on this flight, and I guess the gods are on my side because US News has a couple of interesting home related stories in it today. The first story looked like it was going to talk about how NAR’s data is showing a slowing housing market. Quickly, though, the piece turned to telling people’s personal stories of suddenly being unable to sell homes that were easily flipped in the last few years- even at reduced prices. The reaction of these would-be sellers was somewhere between disbelief and depression, and the article includes a few quotes that show just how caught up people became in the housing bubble. Now that things are slowing, these same people are caught with their pants down- and it hurts. Articles like the one in US News will make the burst of the housing bubble common knowledge. It will also make the average person into a housing bear, and at some point, they will be just as negative on the market as they were positive a few years ago.

The second story is about how the housing slowdown is now officially denting GDP. Although to some it was obvious that the economy would take a hit once trillions of dollars stopped flowing out of housing, not everyone agreed. Now it’s official, and although many argued that the bursting bubble wouldn’t affect the general economy, there can no longer be any dispute.

Turning back to the NAR data, I’ve loaded the Q3 Northeast existing home sales numbers into BATT, and the following chart was the result. In short, Q3 showed slowing existing homes sales, and falling prices

A housing report from the Idaho Statesman. “The inventory of vacant single-family residential construction lots and unsold speculative homes rose dramatically in the third quarter of this year, according to a recent survey. The survey’s author and veteran Treasure Valley builders believe the increases will provide potential home buyers with more options, which in turn will help drive area home prices lower.”

“The survey, by a local Web site that tracks new subdivisions, vacant lots and unsold spec homes in the Valley, showed that 7,740 lots got preliminary approval in Ada County during the third quarter, bringing the total number of available lots to 25,883.”

“Recent industry statistics show that the drop in area home sales during the third quarter shaved 3.5 percent off the median price of an Ada County home between July and September. The median price at the end of September was $240,000.”

“Wayne Forrey, director of development for Kastera Homes in Eagle, said the growing inventory of building lots and unsold homes means the turnaround for the home building industry will not be immediate. ‘It’s going to take a while to absorb all of that (inventory),’ Forrey said. ‘And the high end housing market will be slowest to recover. We have a disproportionate number of homes priced over $300,000. But we don’t have many buyers at that price range.’”

“The Treasure Valley area housing market will remain strong as long as Idaho employment growth remains among the strongest in the nation, said Don Hubble, owner of Hubble Homes in Meridian. ‘Another problem is that most of the jobs being created are in the $35,000-a-year range, which are not top-paying jobs. And that is going to limit the parts of the market that people can afford,’ he said.”

Some housing bubble reports from Wall Street. “D.R. Horton, the largest U.S. homebuilder, said Tuesday that quarterly profit fell 51 percent as orders declined, but results topped forecasts. Net sales orders for new homes fell 25 percent to 10,430 from 13,950, while the dollar amount of these orders fell 33 percent.”

From MarketWatch.”The latest quarter included charges of $142 million, or 28 cents a share, covering inventory impairments as well as $57.2 million, or 11 cents a share, covering write-offs of deposits and pre-acquisition costs related to land-option contracts that the builder doesn’t intend to pursue.”

“During the conference call Tuesday, D.R. Horton’s management said the company’s cancellation rate rose to 40% from 29% in the third quarter, underscoring the pullback in the housing market. Gross profit margin on home-sales revenue in the fourth quarter before inventory impairments and land-option write-offs fell to 20.9% from 25.4% a year earlier.”

“‘This decline was due primarily to core margin deterioration resulting from a lack of pricing power and increased use of sales incentives relative to last year,’ said CFO Bill Wheat. The company is focusing on further scaling back its inventory, the CFO added.”

“Fellow builder Technical Olympic USA Inc., meanwhile, said it swung to a third-quarter loss of $80 million, from the profit of $70.3 million it generated in the same period a year earlier. The Hollywood, Fla.-based company said the results included $203.9 million in charges resulting from the write-down of assets including investments in joint ventures, write-off of deposits and abandonment costs, and inventory and goodwill impairments.”

“The company said its gross profit margin as a percentage of home sales dropped to 17.3% in the third quarter from 27.6% a year earlier. Technical Olympic revised its 2006 profit outlook to a range of $62 million to $72 million on the expectation of ‘continued difficult market conditions.’ CEO Antonio Mon said the forecast does not include additional impairment charges or deposit write-offs.”

The New York Daily News. “Sorry, sellers - you don’t have the upper hand anymore. The city’s apartment buyers realize the market is tilting in their favor. Instead of frantically throwing themselves at the one suitable apartment they find, many are playing the field. If one seller doesn’t like their offer, so what? They’ve got other options.”

“Some buyers are still learning how to function in the new market environment. Broker Richard Ferrari says they should ask the tough questions, and keep pushing until they get answers they like. ‘Look out for your own interests,’ said Ferrari, a Prudential Douglas Elliman senior VP.”

“Don’t ask, ‘Is the price negotiable?’ Instead ask, ‘How negotiable is it?’”

“Most of the apartments Richard Ferrari has sold since Labor Day have gone for 90% to 95% of their asking prices. So, don’t be shy. As a starting point for negotiations, offer 15% less than the asking price, Ferrari said. ‘A buyer has nothing to lose by demanding a lower price,’ he explained.”

“Until recently, developers have been doctrinaire about not giving discounts. Now, many are willing to negotiate, but you have to ask. ‘The prices are no longer set in stone,’ said Bellmarc principal Neil Binder.”

“If the apartment’s in a development project, ask the builder to pay the real estate transfer tax. The tax is 1.825% of the selling price - almost $14,000 for a $750,000 apartment.”

“Don’t ask, ‘What will this apartment be worth in three to five years?’ No one really knows the answer to this question, Ferrari said. Don’t force the broker to fictionalize. The right question is, ‘What’s this apartment actually worth right now?’”

The Herald News from New Jersey. “The ‘For Sale’ sign is an unwelcome addition to Manuel Maldonado’s neat little yard. The Maldonados, like many other homeowners, faced financial difficulties and refinanced with a nontraditional mortgage, the kind of adjustable-rate loan that has inundated the market over the past few years.”

“Now, mortgage payments eat up Maldonado’s entire monthly income.”

“Equity Source Home Loans said the value of the Maldonado’s home had grown to $345,000. They offered the family a $230,000 adjustable rate mortgage, with monthly payments of $2,330, more than Maldonado’s take-home pay.”

“But Equity Source verbally promised them that they could refinance again in six months, the Maldonados said. With better credit, they’d get a lower interest rate and smaller monthly payments, Equity Source told them. The Maldonados signed.”

“Adjustable-rate mortgages have been around for years, but recently have shot up in popularity. When housing prices exploded in the early 2000s, mortgage brokers began offering them widely. The loans have proliferated in New Jersey because of rapidly rising home values.”

It’s Friday desk clearing time. Boston, “It was on the market for more than two years, but Brad Whitford’s 5,567-square-foot custom Federal-style Cape in Marshfield Hills was finally sold for $3 million. The original asking price was $4.9 million.”

From New York. “The local housing market continued its steady decline in October, with sales and median prices down in Orange and Ulster counties, according to county boards of Realtors. The Orange County Association of Realtors reported fewer homes under contract this October than it did a year ago, suggesting that the coming months will see a continuing drop in closings.”

In New Hampshire. “Two residences on Rose Petal Lane will be auctioned off on the premises on Saturday. The highest bidder wins no matter how low the bid. ‘This is a chance for the buyer to state their price,’ auctioneer Daniel Flynn said. ‘The buyer dictates the market.’”

“The greatest potential for problems is the North Texas foreclosure bubble. So far this year, more than 35,000 homes in the Dallas-Fort Worth area have been posted for foreclosure. More than 15,000 homes have been taken by lenders when the owners couldn’t keep up with the payments.”

“That means more than a quarter of the pre-owned houses up for sale in the Dallas-Fort Worth area are foreclosed properties.”

“A real estate downturn that has become rampant in some parts of the U.S. and Eastern Canada may be creeping into the Central Okanagan. ‘Prices have been going up year after year,’ said Brenda Moshansky, for the Okanagan Mainline Real Estate Board. ‘At times, they have been going crazy so fast, it’s not unusual to have a reckoning.’”

“Peter Gilgan has sold more than 30,000 homes as owner of Canada’s biggest builder. Now he’s struggling to sell his own, a nine-bedroom mansion listed at a record price of C$45 million ($40 million). ‘There’s no longer the demand,’ said Mike Donia, a Toronto- based specialist in luxury homes. ‘It just waned.’”

For the first time ever recorded, Americans owe more money than they make. Household debt levels have now surpassed household income by more than eight percent, reaching 108.4 percent in 2005, according to a May 2006 study by the Center for American Progress. Consumer debt is now at a record $2.17 trillion, reports the Federal Reserve Board and consumers cashed out a whopping $431 billion in home equity last year.

Christian E. Weller, the author of a recent Center for American Progress (CAP) report, ‘Drowning in Debt,’ says the middle class, specifically, is struggling.  Wages have been stagnant and they’re losing the battle to keep up with the cost of living.  “The data shows that people are borrowing more money not because of over-consumption, but because they’re caught in a bind,” says Weller, a senior economist at the CAP.  “In that bind, the only escape valve for middle class families is to borrow more money.”  NEWSWEEK’s Jessica Bennett spoke with Weller about the scope of America’s debt, why it’s so hard to get out from under, and how it will affect the economy in the future.