Housing Market Won't Bottom Out Until Builders Cut Prices Significantly

New and existing home sales peaked in July and September of 2005, respectively. It took a while for home builders to catch the drift: Starts didn't top out until January 2006, leaving a huge inventory of unsold homes in their wake. Single-family starts, which are the most sensitive to changes in interest rates, are down 63 percent from the January 2006 peak, easily topping the 38 percent peak-to-trough decline in 1973-1975 and 57 percent 1984-1991 dive, and vying for first place with the 65 percent plunge in 1977-1981.

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