The significant statistic:

"The median price of homes sold in September was $174,900, falling 8.5% from a year earlier led by an influx of distressed properties, which include foreclosures and short sales."

Home prices are so low already that HBs can't price them at a profit, even with cutting corners. It just gets worse, and with more foreclosures coming every day, we have yet to see the bottom in prices.