A report from Bloomberg. "Last month, a risky, new deal hit the municipal-bond market. It came from a small borrower in Colorado that was looking to finance the construction of 1,200 luxury homes in the foothills of the Rocky Mountains. It was an odd time for such a project. Denver’s decade-long housing boom was beginning to show signs of cooling and, moreover, rival developers had already raised record sums to turn vast tracts of land into new communities."

"'There’s no houses to see,' said Nicholas Foley, a municipal-bond fund manager at Segall Bryant & Hamill in Denver. 'It’s just dirt.' No matter. The buy orders poured in anyways and, in the end, about $20 million worth of bonds had been sold for yields as low as 4.75% on 30-year maturities."

"Last year, Colorado land districts sold $1.3 billion in bonds, the most since at least 2005. The securities, which are typically unrated, are repaid by assessments levied on homeowners and offer few protections to investors if the housing market goes south. In the case of the Castle Rock, Colorado development, even if the district skips interest or principal payments, it won’t count as a default, limiting bondholders’ legal power to recoup some of what they’re owed."

"Real-estate backed bonds were hit hard by the housing bust over a decade ago, when a wave of them defaulted in Florida. That also happened in California in the 1990s and in Colorado the decade before."

"Foley said it helps that his firm doesn’t run a high-yield municipal-bond fund and can instead move in and out of securities when they reach 'irrational' points. 'If you make a real call against the high-yield market, you’re making a big call that can cost you your job if it doesn’t go right,' Foley said. 'The easy thing to do is keep buying more and more high-yield.'"

The Denver Post in Colorado. "For the first time since the depths of the housing crash in 2009, the pace of new home construction in metro Denver has dropped for three consecutive quarters. The number of construction starts on new homes dropped 10.5 percent in the second quarter compared to the same period a year ago. That was mostly driven by a steep 17.6 percent drop in single-family home starts, according to counts maintained by Metrostudy."

"Rising mortgage rates, stock market volatility, mid-term elections, and a government shutdown all combined to cause buyers and builders alike to pull back. 'It created quite a bit of anxiety. Builders took their foot off the gas and it had been down to the floor,' said John Covert, who watches the Denver market for Metrostudy on a conference call."

"Covert notes that the average size of the homes that builders are bringing to market is down 18 percent. 'There has been a dramatic shift. Builders are trying to get more affordable and to get int touch where market demand really is,' he said."

"New single-family home permits dropped 18.4 percent through May, compared to the same period a year ago, while the permits pulled for new apartments are down even more, 30.3 percent."

From Bloomberg. "Wealthy buyers are pulling back from some of the most expensive housing markets in the U.S., the latest sign that sky-high prices and fears of a recession are weighing on a key sector of the economy. Toll Brothers Inc., the nation’s largest publicly traded luxury-home builder, said late Tuesday that purchase agreements fell 3% from a year earlier, worse than a decline of less than 1% that was expected by a Bloomberg survey."

"The company’s orders in California, home to some of the priciest markets in the country, tumbled 36% from a year earlier. The company said the weakness in California was primarily in the northern part of the state and that order growth will improve in subsequent quarters because the year-over-year comparisons will be with periods that were softer. The sales slowdown for new homes took hold late last summer."

"'It’s no secret that lower prices is a better place to be right now,' Jack Micenko, an analyst with Susquehanna International Group, said after the call. 'But I think the numbers this quarter were very much a function of how good things were well into the summer last year and then they fell off a cliff.'"

From The M Report on California. "The Orange County Register adds that lawmakers in the state have made little progress, as residential permits have dropped 38% over the past year. CoreLogic states that sales declined across all levels in June. Sales below $300,000 fell annually by 18%, and sales under $500,000 fell 12.3%. Sales of homes listed at more than $500,000 dropped 7.5%, while homes prices at more than $1-$2 million fell collectively by 20.8%."