"It's getting scary"

From Bloomberg:

Housing Slump in U.S. May Lead to First Drop Since Depression

Nancy and Brian Christopherson are asking $389,900 for their eight-room Colonial Revival home in Westford, Massachusetts, featuring a new kitchen with maple cabinets. Even at that price, they'll lose $14,100.

Monthly price reductions since they listed it in May for $429,900 have lured no offers for the house, bought for $369,000 in 2004. ``It's getting scary,'' says Nancy Christopherson.

The sharpest slowdown in U.S. home-price growth in three decades is trapping owners with mortgages they can't afford, pushing unsold homes to a record 4.42 million and gutting profits for builders such as Lennar Corp. and Toll Brothers Inc. The U.S. median home price next year may fall for the first time since the Great Depression, says Gabriel Stein, chief international economist with Lombard Street Research in London.

Economists such as Nobel laureate Joseph Stiglitz warn that the reduced sales may push the world's largest economy into recession, and concern is mounting over economic growth in Europe and Canada. The Federal Reserve will reduce its U.S. benchmark lending rate, says Jan Hatzius, chief U.S. economist with Goldman Sachs Group Inc. Last month, the central bank ended a two-year streak of 17 increases that pushed the rate to 5.25 percent, citing cooling home sales.

``The housing slowdown will be a large drag on economic activity,'' Hatzius says. ``The Fed will cut rates to 4 percent next year as the housing downturn starts to push up the unemployment rate.''
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``For the next couple of months, we're probably looking at between zero to a five percent drop in prices,'' Lereah says. ``The only way for home sales to come back, and for inventories to start to diminish, is for sellers to start to bring prices down.''

Not all homeowners are willing to accept less. Roxy Allen, 54, listed her four-bedroom house in Littleton, Colorado, for sale in May. She dropped the price once to $339,900 from $352,000 and has refused to go lower. She hasn't received a single offer.

``The Realtor wants you to just make a deal with somebody and sell it for cheap,'' Allen says. ``Why would I sell my house for less and buy one for more?''
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Some sellers across the U.S. must reduce their expectations, even those who don't move. Edward Brown, 47, a Florida real estate investor, says he's financially overextended and needs to sell a three-bedroom house in Cape Coral, Florida. He's asking $579,000 -- $20,000 less than he paid for the property a year ago.

``No one expected the market to drop so quickly,'' he says. ``There are a lot of people like me who are caught in a pickle.''