Monday morning headlines

Home sales freeze?: August could be very slow - perhaps the slowest month on record - because mortgage lenders have gotten so stingy in approving loans and because consumers are just too nervous about buying a home. Not only are sales expected to drop, but pending home purchases may fall out of escrow and be canceled. From the LAT:

Home buyers and sellers are caught in the vise. Eager buyers who thought they had secured a mortgage are hearing "sorry Charlie" more and more. In many cases, lenders have tightened the rules for qualifying borrowers or raised the interest rate in the middle of the escrow process, effectively pricing them out of the deal. "It's hard for a borrower to have any comfort level going into a transaction right now," said Los Angeles mortgage broker Mitchell Ohlbaum, who said he saw a handful of pending deals fall out of escrow last week.

Well, OK, but...: July was actually a decent month. L.A. County home sales were down 11 percent from a year earlier, but up 18 percent from June, according to HomeData Corp., which supplies numbers to the Business Journal. Meanwhile, the median price matched a record $585,000, a 6 percent increase over June. Prices are higher because sales have been dominated by expensive homes (cheaper properties aren’t budging). "The market has become bifurcated,” Delores Conway, director of the Casden Forecast at the USC Lusk Center for Real Estate, told the paper.

What now, Fed?: Last week's decision to pump billions of dollars into money markets has managed to stabilize the financial system, but the Central Bank might need to do more - namely lower interest rates. There's increasing talk of that happening at the Fed's next scheduled meeting on Sept. 18 (if not sooner). That would make borrowing cheaper for hedge funds and homebuyers alike. (WSJ) Meanwhile, the market opened higher this morning. (Bloomberg)

Eli Broad helps out fund: The L.A. billionaire is among several investors who will inject $3 billion into a Goldman Sachs fund that has taken a hit because of the recent market turmoil. The fund relies on quantitative strategies - basically the use of computer models to make market bets. No word on how much Broad is putting in. "We consider this an attractive investment opportunity," Goldman said in a statement. "Existing investors in the fund will also have the opportunity to participate. The investment will also provide the fund with more flexibility to take advantage of the opportunities we believe exist in current market conditions." (Bloomberg)

About those quants: The latest explanation for the stock market's volatility, especially in the last hour or so of trading, involves the use of these computer-driven or quantitative investment strategies. And it turns out that the people who put together these strategies all know each other and all employ more or less the same techniques. Also, their strategies have been widely duplicated by others. If all the models say buy, it becomes hard finding anybody who is willing to sell. See the problem? (NYT)

Toy factory suicide: The co-owner of that Chinese company implicated in the recall of tainted toys killed himself over the weekend in a company warehouse. Lee Der Industrial Co. Lee Der made 967,000 toys recalled this month by Mattel Inc.'s Fisher-Price division because they had paint found to contain excessive amounts of lead. (Times Online)