A housing report from the Washington Post. "Sam LeBlanc tried to cushion the blow when he gave his wife, Karyn, the bad news. Her condominium isn't worth nearly as much as she thought. 'I was a little crushed,' Karyn recalled."

"Increasingly, though, research shows that emotions play as big a role as intellect. Sam did a lot of market research and decided they should ask $269,000. The number came as a blow to Karyn, because she knew similar units, including some she thinks weren't as nice, sold last year for $280,000."

"'You want to believe it's worth a lot more because you've invested your time and energy on it,' Karyn said."

"'It's classic loss aversion,' said Christopher J. Mayer at Columbia Business School in New York. 'You don't want to realize the loss. It leads to housing markets that don't function very well. You've got a lot of houses on the market and they aren't selling.'"

"Mayer said that people allow their wishful thinking to overcome realistic perceptions because they don't want to view themselves as having made a mistake."

"David Laibson, who teaches psychology and economics at Harvard University, said a common error people make is believing that homes can't drop in value below what they paid for them, and, in particular, that they can't fall below their mortgage amounts."

"'There seems to be a psychological resistance to taking losses on the sale of a house,' Laibson said. 'People think they'll make money on it. . . . That logic worked for a long time, and now anyone who bet on that logic is being burned.'"

"Of course, real estate agents say they haven't needed research laboratories to teach them about buyer and seller behavior. 'You always view your house as more valuable than the numbers will justify,' said Owen Heine, an agent in Strasburg, Va. 'Every person views his house as a castle. It's human nature to love what you have.'"

The Wall Street Journal. "With real-estate prices falling around the country and even pro-industry trade groups predicting further declines over the next year, buyers are backing away from deals in droves. Economists report that contract-cancellation rates for big builders were running around 40 percent. Anecdotally, real-estate professionals say they are seeing a similar dynamic in existing-home sales."

"'There are a whole lot of people running from contracts,' says Alexandria, Va., real-estate attorney Beau Brincefield. He is currently representing more than 50 buyers who are seeking to get out of contracts on single-family homes, townhouses and condos, compared with none a year ago."

"Even though it may mean losing a deposit that could run tens of thousands of dollars, many buyers are deciding that is less onerous than the alternative."

"Sean Shallis, a real-estate strategist in Jersey City, N.J., says that roughly 22 percent of his sales have fallen apart before closing this year because the buyers backed out,. With the market cooling, buyers have decided they can buy a similar property for less. 'The longer your property is under contract, the longer the buyer has to talk and think about it and watch the market change,' he said."

"Mr. Shallis himself is among the would-be buyers with cold feet. Late last year, he agreed to pay $595,000 for a new two-bedroom condominium in Jersey City for his in-laws. He pulled the plug on the deal this summer. 'My exit strategy was if they didn't move into it, we could sell it or rent it,' Mr. Shallis says. But that plan made less sense after the price of similar properties dropped to as low as $529,000. Mr. Shallis walked away from the contract and lost his $30,000 deposit."

"Denis and Michael Budge put their two-bedroom house in Carson City, Nev., on the market a little more than a year ago at $495,000, so they could move to another home they had already bought in Waldport, Ore. After some nail-biting months with few showings and no offers, they finally landed a buyer, who signed a contract in June for $425,000."

"But during the escrow period, as prices in their area continued to slide, the appraisal came in, at $395,000. The Budges were still willing to sell, even at that greatly reduced price, but the buyer backed out the day before the closing. Now they are stuck with two mortgages. 'We thought we were going to relax and enjoy our retirement,' says Ms. Budge. 'Not any more.'"

"Amy Crews Cutts, deputy chief economist at Freddie Mac says the current jitters are largely a result of investors fleeing the housing market in the last few months, which 'slammed (it) into reverse,' and consumers' fears that the bubble had burst. The result: a huge backlog of unsold homes, which could further depress prices."

"Glenn Nudell recently got $115,000 in concessions when he bought a 12-year-old five-bedroom home in Skillman, N.J., for almost $1.1 million. If the seller hadn't agreed, he says, 'I'd have backed away.'"

"But then he had to sell his eight-year-old, four-bedroom home in Princeton, N.J. But he couldn't sell it until he had knocked $70,000 off of his original $630,000 asking price. Is he concerned that the buyer of his house might back away from the deal before it closes next month? 'Of course,' he says."