Builders have done different techniques to boost sales and move inventory. Freebies are one of them like giving out appliances as well as no cost closing. These have not solved their problems. The tactic of giving extras did not attract enough buyers and some home builders resorted to price cuts and discounts.

They are slowly experiencing the negative effects the price cuts. Builders have not gotten the sales volume they need to compensate for the reduced margins or just get the inventory moving. Many potential buyers are not buying as they are awaiting more price cuts or just waiting for the prices to stabilize as the homes they will buy may depreciate further and they will be at a loss.

“If people stop cutting prices that would be good (for the builders)” says David Goldberg, an analyst with UBS Investment Bank. It can work if everybody does it. If still some people do price cuts, then the buyers will just go to them and the other will just be forced to do price cuts too.

Apparently, it does not work if 60% of them do it. That's the share of builders that cut prices last month. About half of them labeled the cuts at least effective in bolstering sales or limiting cancellations, down from nearly three-quarters in May, according to National Association of Home Builders.

Yet with the market not expected to improve soon and builders desperate for cash and saddled with inventory, any have been unwilling to resist price-cutting. If they did not cut their prices, they reason, buyers would either turn to competitors who offer better deals or buy used of foreclosed homes.

Still, there are limits. "The reason some companies say 'Enough is enough' on the price cuts is because price cuts often generate expectations of further reductions," says Dave Seiders, the NAHB chief economist. "The question is: 'How far can you go?"

"I've been advising builders, in general, [to] do whatever it takes to get rid of inventory now because the prospects for house prices in the coming year don't look good," he says. "I'm afraid that '08 may be a year of pretty systematic price erosion, at least in many markets."