Falling home prices have a devastating impact on new home construction, according to Pat Newport, a housing market analyst for IHS Global Insight.
"They are a key reason why builders aren't building new homes, even in the fastest growing states, like Texas," he said. "Existing homes are selling for so much less, the builders can't compete."
Normally, new-home construction is an important contributor to the economic recovery. Not so this time, according to Mike Larson, an analyst with Weiss Research.
"Housing has been an albatross for the economy as opposed to an engine powering it," he said.
If residential development had come back as it has in the past, the current recovery would be much stronger. There's be much more robust hiring of construction workers, building materials manufacturers and drivers and deliverymen to bring the products to site.
Newport pointed out that when developers build a new home for $300,000 it adds $300,000 to the economy, as measured by GDP. An existing-home sale just adds 5% or 6% in broker's commission.
"As a component of the GDP," said Larson, "housing has been out to lunch."