The Arizona Republic reports that the big homebuilders are 'regrouping.' "A parade of builders has announced sales declines of as much as 40 percent in what one analyst called 'confession season.' It has been hard for some builders to face the new reality. Some analysts say builders got so accustomed to the good times that they forgot that real estate runs in cycles, and they still haven't adjusted."

"They're sitting with bloated inventories of unsold spec homes, created when buyers canceled deals. There were 8,700 finished but unoccupied homes in the Valley at the end of March. That compares with 4,300 at the same time last year. 'You see it in spades in Phoenix,' said Stephen East, an analyst with Susquehanna Financial Group. 'There's a huge amount of inventory that has come on the market in the last six or nine months.'"

"Despite their homey marketing, housing is a commodity for many builders. The big national builders roll houses off their production lines like carmakers cranking out Chevys. They're in trouble when the mass market can't afford their product. Analysts say that is exactly the situation now."

"'These builders, where volume is the name of the game, they have to be really careful about where they price,' East said. 'And I think large public builders have to take some blame for the dramatic run-up in house prices.'"

"Builders are realizing that their customers can no longer afford the houses that were within financial reach before last year's boom. 'The builders open the doors, and there aren't any qualified customers,' RL Brown said. 'They say, 'My God, what happened?' What happened is he moved his price beyond the customer.'"

"'It's the right decision,' said Greg Williams, president of KB's Phoenix division. 'It's the moral thing to do. If we think we're overpriced, we have to adjust the price.'"

The Fresno Bee. "Sales of new homes in Fresno and Madera counties have fallen by more than 25%, and the number of canceled sales has skyrocketed this year as builders struggle to adjust to a slowing marketplace."

"A record-setting 5,233 existing houses are for sale in Fresno and Clovis, up from 1,823 two years ago, according to the Fresno Association of Realtors. Meanwhile, sales of new single-family homes in Fresno County through May fell to 1,291 from 1,735 during the same period last year."

"Add to that a 56% increase in the number of active subdivisions, and the fact that nearly 14% of all new-home deals fall through before completion (compared with about 1% last year) and you have a situation where builders are forced to retrench."

"'Builders will do what they can to keep their operations going,' said Patrick Duffy, managing director of Hanley Wood."

"'Buyers recognize values are going down, and that causes them to cancel a sale. The general mood of the marketplace has turned into 'Let's wait and see what happens,' said Mitch Covington, president of the Building Industry Association of the San Joaquin Valley. 'The market was ripe for a correction,' he said. 'We knew it was going to come, but we still sell homes.'"

"One thing builders don't want to do is drop prices, unless they have to. Developers know if they cut the price in the third phase of a subdivision, buyers of houses in the first two phases will squawk. However, that does not stop big publicly held builders with quotas to reach from offering one-day sales and other programs in an effort to slash excess inventory, Duffy said."

"Dick Ellsworth, land specialist at Grubb & Ellis, said some larger builders are reducing their land holdings but are having trouble finding buyers for so-called 'paper lots.' One of those is Centex Homes, which spokeswoman Lissa Walker said was overloaded with property. 'We have land positions through 2011 or 2012,' she said."