Last week, existing American home sales saw their biggest plunge since 1990. New home sales were also weak, but showed a slight rise from recent sales data. -from Newsmax.com Desperate moral-boosting remarks by certain real estate operators and even by Federal Reserve Chairman Ben Bernanke to persuade us all that the crisis is over, could not assuage our concerns. The Financial Times hits the problem right on the head. We have often said that an unwillingness of sellers to sell at what they consider (based upon past market performance) a “bad” price has effectively stalled a fall in the market price. The article, titled “Drop in house prices likely as sellers stay out,” quotes Tom Kunz, CEO of Century 21: “Sellers have finally figured out that this is a buyers market. For too long they were hung up on the couple down the street that put their house on the market at $300,000 and got $350,000. But that is not going to happen any more. “You are starting to see some price reductions. It is already happening in over heated markets like Florida, California, and Boston.” In our opinion, any further reductions in the prices of residential real estate will prove to be damaging to consumer confidence and therefore to aggregate demand of U.S. consumers. This will hurt forecasted corporate earnings in certain sectors, raising today’s market average PE ratios to “expensive” levels. Compounding the real estate crisis is the bankruptcy-threatening situation facing Ford, one of America’s industrial icons and a former blue-chip company. General Motors, once the largest company in the world, also faces serious financial problems. To some extent, both of these giants have been brought low by the unions and their demands for wages and benefits (including pensions and health care) that were increasingly unsupportable by the long-term competitive positions of their products.