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*Falling prices. Forecasts were too high because they didn't account for the fact that prices are falling so rapidly in some markets that buyers are walking away from homes they've agreed to buy, says Maury Harris, U.S. economist for UBS Securities. That's a staggering fact, because buyers often forfeit 5% deposits when walking away. Harris says buyers are able to find similar homes in similar neighborhoods, in some cases, for 15% less than the ones they'd agreed to buy. "You're still 10% ahead," he says.
*Builders' delayed reaction. Initially, home builders thought they could dampen the downturn by throwing in fancy countertops or providing discounts, says Brian Bethune, economist at Global Insight. Now, they're "grabbing the bull by the horns and adjusting the rate of production," he says.
|Home prices likely to fall more|
'A serious correction taking place,' Dallas Fed official says
The median-priced U.S. single-family detached home -- half cost more, half less -- fell 1.7% in August to $225,700, compared with a year ago. The decline is no doubt jarring to sellers, who haven't seen prices fall nationally since April 1995. The price drop was also sharp, the second-steepest in 38 years.
"This may be the most overanticipated and overanalyzed downturn in history," [Richard Fisher] said. "One prominent CEO told me the only situation that's received more intense analysis than the housing market was the birth of Brad Pitt and Angelina Jolie's baby."
[David Lereah] has repeatedly cut his forecast for the housing market this year and says he's now unsure how deep the correction will turn out. Sales of existing homes fell 0.5% in August to a seasonally adjusted pace of 6.3 million. There's now a 7.5-month supply of homes for sale, up 60% from last year.