Stu949 is absolutely right. The builders know that there is a fair number of “fence sitters” out there (this is not surprising b/c even in a downturn, there are still buyers).
Many of these fence sitters are not entirely convinced that the market will crash b/c home prices have been going up for so long that it’s hard to imagine that they will come down significantly (most people operate based on recent memories).
The builders know that these fence sitters just need a “little push”. And increasing the price a little bit just might do the trick.
The real problem: for every new home being sold, there is a re-sale home NOT being sold. Builders are simply stealing sales from resellers who bought investment homes in 4S & need to sell b/c prices have gone down & the ARMs are resetting.
At some point (2008), a good percentage of the houses bought as investments in 4S will end up as REOs. That’s when the lenders who own the REOs will compete with the builders to sell. That’s when it will get interesting.