The real interesting question is how much oversupply is there in the housing marketplace. Just looking at vacancy rates suggests that there are about 1 million vacant units (owned) in excess of the normal long-term average vacancy rate. And that doesn’t count the homebuilder inventory, which is pretty much unknown. But the other thing is, the home ownership rate is about 4% above its long term average as a result of the bubble. That’s about 2.5 million units if you believe, as I do, that the current home ownership rate is unsustainable and will return to trend. So there may be as many as 3.5 million units of oversupply. And they’re still building a million units a year.

Yes, I know those people have to live somewhere and will move to rental accommodation. And some of those “ownership” units will become rentals, because there are not enough vacant rentals to take up the slack. But they’ll do so at prices which make them economically viable - profitable - to the owner as rentals. So rents probably aren’t going down much, if at all. But house prices will likely decline to the point that it is significantly cheaper to own than to rent if you have the money or can get financing. Getting financing will mean a substantial down payment, excellent credit history and documented stable income well able to make payments. Maybe that sounds harsh, but that is the way it was at 64% home ownership. It worked for a long time. Driving the rate to 69% in pursuit of some political vision has come at an immense cost.

Dataquick reports record foreclosures in California:

A total of 72,571 Notices of Default (NoDs) were filed during the July-to-September period, up 34.5 percent from 53,943 during the previous quarter, and up 166.6 percent from 27,218 in third-quarter 2006, according to DataQuick Information Systems of La Jolla.

Last quarter’s default level passed the previous peak of 61,541 reached in first-quarter 1996. A low of 12,417 was reached in third-quarter 2004. An average of 34,781 NoDs have been filed quarterly since 1992, when DataQuick’s NoD statistics begin.

Realtor Jim observes that, in San Diego, the rising daily rate of addition to bank owned properties (REOs), 38-40, is converging with the falling daily rate of MLS sales - 58 so far in October.

Oh and the ABX indexes appear to be in free-fall. 18 of 20 indexes made new all-time lows today. The 06-1 AAA and AA were the exception , but they are both falling fast. 15 of 24 CMBX (commercial mortgage-backed) also made new lows today.

Commentary from Ambrose Evans-Pritchard in the Daily Telegraph.

If you are a bear, you must accept that you will always be wrong in polite society, and you will continue to be wrong all the way down to the bottom of recession. That is the cross that bears must bear.

Over the last three months we have seen a rolling collapse of speculative debt and real estate across half the global economy, yet friends still come over to my desk at the Telegraph, with that maddening look of commiseration on their faces, and jab: “so when is the sky going to fall then, eh”?

Well, excuse me. The sky has fallen. The median price of US houses has crashed from a peak of $262,600 in March to $211,700 in September. This is an 18pc drop nationwide.

Yes, the year-on-year slide is still just 4.2pc, but that will soon change as the base effect catches up.

Merrill Lynch has just confessed to a $7.9bn write down on CDO subprime debt and assorted follies, nearly double what it suggested three weeks ago.

This is what happens when a bank values its CDO debt at “mark-to-market” rather than “mark-to-myth”, as some of Merrill’s rivals are still trying to do.

Merrill’s Q3 loss of $3.5bn has cut the group’s equity capital by a fifth. This has consequences. The bank’s lending multiples will have to shrink.

In Britain, we have had the first bank run since the City of Glasgow Bank collapsed in 1878. The Fed has cut the interest rates a half point and vastly increased the pool of eligible collateral for Discount operations. The European Central Bank has injected over €400bn of liquidity in the biggest intervention since the euro was created.

Japan is in recession. Housing starts fell 23.4pc in July and 43.4pc in August.

The US dollar has fallen below parity with the Canadian Loonie for the first time since 1976, and to all-time lows on the global dollar index.

All it will take now for a full-fledged rout is a move by the Saudi and Gulf states to break their dollar pegs, which they may have to do to prevent imported US inflation causing havoc; or for the Asian banks stop buying US Treasuries – as Vietnam, Singapore, Korea, and Taiwan, have gingerly begun to do.

And for good measure, the Bank of England has just warned in its Financial Stability Report that lenders are still in serious trouble, that there is a risk of commercial property crash, and that equities are “particularly vulnerable” to a downturn. It is said there may well be a repeat of the summer crisis, “potentially on an even larger scale.”

What more do you want?

Big article in the Chronicle today noting that Mill Valley is the #1 fire risk in the S.F. Bay area, due to vegetation, topography and old, narrow streets. Not good. There is a price for pretty.

Fortunately, we are very close to downtown and the main exit routes. And we don’t have kids, or pets, or a lot of stuff to worry about.

The county assessor/recorder, Joan Thayer, quoted in the local paper, the Marin IJ, wins the understatement of the month award: “Local homes sales dropped 77 percent last month. The housing market has slowed down.” Joan, that’s not “slowed down.” That is “run into a brick wall.”

Some numbers to keep in mind:

• Current value of US household real estate: $21 trillion
• Total mortgage debt: $10 trillion
• Percentage of households that “own” their home: 69
• Fraction of owner-occupying households with no mortgage: about 1/3 (paid cash or paid off)
• Number of excess vacant housing units (excess above long-term average vacancy rate): 1.5-2 million

Note that the mortgage-free households are probably quite a bit less than 1/3 by value.