Housing Dive Hits Builders Hard

The new housing numbers are bruising for builders.

The median price of a newly built home has now dropped by the largest margin in 36 years.

"We're cutting prices and stopping work until the market the catches up," said one builder.

Many builders had no choice but to offer cut-rate deals, because of a glut of homes on the market -- a million more now than this time last year.

And some homeowners trying to sell their houses have slashed prices too.

One four-bedroom home in Ridgewood, N.J., sold this week but not without the seller paying a price. The owners offered what you'd expect at a mall -- a "weekend only" sale.

And real estate agents have marked down listings by as much as 10 percent.

"We met with the homeowners, and we were quite frank with them. They're going to have to bite the bullet," said real estate agent Ralph Caserta.

But homeowners aren't just having trouble selling their homes -- some are simply trying to hold on to them. Many people bought homes while the housing market was hot, using adjustable rate mortgages to get more than they could afford.

"Adjustable rate mortgages in the wrong hands are a bit like handing someone a loaded gun without giving them any training," said Rick Sharga of RealtyTrac.

It's been disastrous for single mother Patty Altman, who lives in Atlanta. Her mortgage has jumped four points, which translates to more than $300 a month.

"Being unable to refinance, unfortunately, I'm actually having to let the house go," Altman said.

Patty is now looking to rent.

So many others are too. Analysts forecast that rentals will increase by 6 percent in some cities across the country this year. Some people are looking to get out of expensive homes, and others are not ready to buy new homes.

"The courageous soul who is willing to go out there now and doesn't mind putting in a low bid is a very smart buyer, but you will find very few people comfortable buying when no one else is out shopping," said ABC News real estate consultant Barbara Corcoran.

But until they are, builders and brokers will have no choice but to keep cutting prices.