All manias and panics get to a point where the collective mindset changes, and people think "a sure thing" no longer is. Then you see a rush to the exits as the masses attempt to get out of the bubble asset (tulip bulbs, pets.com, 1929 stocks, commodities, etc)

People are indeed panicking. That's why there are 54,000 listings in Phoenix today (vs. 5,000 a year ago). There's a run on the banks, but the banks are closed. Buyers are the bankers who could give the sheep their money and there are no buyers. The ATM's are closed too.

Housing, unlink stocks, is illiquid, and people who bought at the top are now stuck with them, and there is nothing they can do.

Take one flipper who bought a pre-construction condo in Phoenix, and made the mistake of closing on it this year. First he thought he was going to get rich, make more money on this one transaction that he did at his real job for the entire year. Then after he put it up for sale he saw that nobody was coming to look, so he became a bit concerned, and lowered his expectations from 'filthy rich" to "making great money". Still nobody came to look. So he cut his price (for the first of may times) and lowered his expectations again to "come out ahead".

Still nobody came to look.

So now, he's throwing in his car, a trip to Hawaii, and $50,000 cash back after closing. His mindset: "Get out of this alive".

And still nobody comes.

From Manias, Panics and Crashes (my favorite book!), written pre-housing bubble and timeless:

· The upswing usually starts with an opportunity - new markets, new technologies or some dramatic political change - and investors looking for good returns.

· It proceeds through the euphoria of rising prices, particularly of assets, while an expansion of credit inflates the bubble.

· In the manic phase, investors scramble to get out of money and into illiquid things such as stocks, commodities, real estate or tulip bulbs: 'a larger and larger group of people seeks to become rich without a real understanding of the processes involved'.

· Ultimately, the markets stop rising and people who have borrowed heavily find themselves overstretched. This is 'distress', which generates unexpected failures, followed by 'revulsion' or 'discredit'.

· The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

...tick, tick, tick, tick...