And remember, their price decline prediction doesn't even include the massive incentives being used to clear dead inventory and sucker new homedebtors. Nice to see someone besides HP talking about the stages of a meltdown too.

Housing Prices Expected to Fall

It may not be the news homeowners, contractors and real estate agents want to hear, but economists continue to predict further declines in home prices will prevail throughout 2007.

Moody's Economy.com, a private research firm, projected that the median home sales price will drop this year by 3.6 percent -- the first decline for an entire year in U.S. home prices since the Great Depression.

"Nationally, the big bang in sales is over and don't expect it to recover until late this year or early next year and prices are not done falling -- they will contract more," Wyss said.

He explains there are three basic phases in a housing downturn and each local and regional market is experiencing various stages of the three-year downturn.

Phase I is "Denial." During this first year prices keep going up despite falling sales, Wyss said.
"People just refuse to sell at lower prices and that usually lasts about a year," he added.

Phase II is "Anger." In this phase, oversupplies build, people can't sell and prices come down while building slows. This can cause further economic fallout when people stop or slow the building rate, Wyss said.

Phase III is "Acceptance." Wyss said this occurs when the unsold inventory is cleared out.