http://money.cnn.com/2008/04/14/real_estate/housing_crisis.ap/index.htm?postversion=2008041411

            This article is mainly a poll that investigate why majority of people in America are not buying new homes.  The poll was done by the Associated Press-AOL Money & Finance poll.  The poll shows that most of people think that homes are over priced.  The unemployment suffered by most of America and rising oil prices has also led to decrease in people’s desire in buying homes.  That’s on the demand side of the curve.  On the supply side of the curve, the poll shows that majority of sellers feel that their home value has fallen which led to decrease in desire to put their homes on the market.

            The result of polls can be partially explained by the cascading principle.  Let’s assume high signal means and low signal means bad.  On the buyers’ side, the first buyer gets a low signal which makes him think that houses are over-priced and he chooses not to buy.  The second buyer also gets a low signal and he sees that the first buyer chooses not to buy and the decision is not to buy.  The third buyer looks at choices of first two buyers, and his signal becomes irrelevant.  He chooses to not to buy.  The rest of the buyers’ signal all become relevant since they will just observe whatever people before them, which is telling them not to buy.  That leads to a general decrease in demand for homes.  That explains the result of the polls.  The same principle can also be applied to explain the seller side which will also lead to not selling.  That explains the result of the polls.