The steepness and severity of the NOD graph, looking a bit like a rocket launch, gives one pause. My only guess is that it will affect the depth and length of the decline, less so the slope. Here’s why: The only sellers I see rapidly becoming aggressive on pricing are the builders. Banks are hard to predict; sometimes they will auction, sometimes they will market in the conventional way. Individual sellers will tend more to let the house sit on the market than to price aggressively. If an enormous supply of houses, priced conservatively, is suddenly dumped on the market, that has little effect on the house selling prices because those houses just sit there – the transactions are what determine the house prices. A large inventory will thus take a long time to make its effects on house prices felt.

If all houses were sold at auction, with immediate effect on house prices, the NOD chart would portend a precipitous drop indeed.