Let’s Not Make a Deal: Plummeting Home Prices May Not Be a Bargain

New home sales fell to a 12-year low in November, a statistic that strikes fear in some–and makes others start salivating.

A number of investors and homebuyers have been waiting for prices to bottom out so they can start snatching up deals. But before we all get ready to circle foreclosed and discounted properties like sharks hunting for chum, consider that housing busts don’t always bring housing bargains.

Home prices had more than doubled by the end of 2006, The Wall Street Journal reported recently; an eventual correction was likely almost impossible to avoid. And yet, those big bargains some investors are waiting for really haven’t appeared.

In fact, home prices haven’t really dropped drastically everywhere. They’re lower, sure–but aside from certain regions like California, Vegas and south Florida, which have seen price declines of up to 20 percent, drops across the nation mostly have been much smaller, according to The Chicago Sun-Times. The Office of Federal Housing Enterprise Oversight reported that in the third quarter, home prices fell just 0.4 percent nationally.

Until now.

It may seem impossible that the housing decline could be severe enough to drag down the national economy but not strong enough to provide a few housing deals. Well, friends, recent news would indicate that time may be upon us. Some indications:

• Builders are Slashing Prices. The biggest U.S. homebuilder by market value, Fort Worth, Texas-based D.R. Horton Inc., sold 20,000 lots outside Phoenix in November to two Arizona real estate companies for less than the sale price Horton had paid to escrow the same land six months before.

In November, Lennar Corp. sold 11,000 properties in eight states for a price that Bloomberg says may mark the lowest housing market point yet: 40 cents on the dollar. Morgan Stanley Real Estate paid 60 percent less than the price at which the 32 communities for sale were valued just two months earlier.

• The Bargain-Basement Buyers Are Moving In. Bloomberg also reported that some investors, such as "self-described vulture investor" Marcel Arsenault, are calling this period in the housing slump as the time to buy. Arsenault says he’s watching Denver, Phoenix, Austin and Tucson and–especially–south Florida. (Basically the hardest hit areas, which logically would offer the biggest deals.)

New York University economics professor Nouriel Roubini, who also is co-founder of economic research and analysis firm RGE Monitor, predicted upcoming top-to-bottom national home price losses of 30 percent at a recent real estate conference in New York, according to CNNMoney.com.

However, although some residential shoppers may get deals in the coming months, it’s not good news for the housing slump. Selling homes–even at low prices–in theory should get the market moving again, providing the real estate industry with business and, as less homes are available, increasing demand and eventually giving builders a chance to get back to work.

But some experts–including Roubini–say that isn’t necessarily the case. He says that, due to the price drops, "there will be 10 million houses with negative equity" where the owners will owe more on than their properties’ value, get frustrated, give up and default.

Which means more homes on the market–and the last thing we need is to add to our bloated 10-month-plus housing supply. If we do, we’re right back where we started: A place where Roubini predicts will further depress the real estate market.

Which–even despite any housing deals that will likely be available at the time–is likely to depress us all.