The Star Telegram reports from Texas. "New-home starts and sales fell sharply in North Texas in the fourth quarter, as builders adjusted to the slowing market. Builders are cutting back building new homes and selling land they have stockpiled, analysts said."

"'We have the most new-home builder inventory that we have ever seen in the market, and we have ample existing-home supply, and we have foreclosures,' said Ted Wilson, principal at a Dallas-based housing-tracking service."

"Wilson said the cancellation rate has risen as well. The percentage of failed contracts has jumped to 35 percent from 25 percent, Wilson said. He cited three factors: credit problems, investor walkaways and the inability of potential buyers to sell their existing homes."

"Home buyers should continue to see lots of incentives as they shop for new homes, Wilson said. 'It's tough right now. A lot of builders are not making a lot of money,'"

The Dallas Morning News. "Local homebuilders have gotten the message about the housing slowdown, sharply cutting construction during the final months of 2006. Single-family home starts in the Dallas-Fort Worth area dropped more than 17 percent during the fourth quarter."

"With 9,629 units, it was the weakest quarter for housing starts in two years. Sales of new homes in the fourth quarter also dropped about 4 percent compared with a year earlier. With almost 12,000 unsold new houses on the market in North Texas, don't be surprised to see further declines in construction, said Ted Wilson."

"'The builders have continued to back off starts,' Mr. Wilson said. 'Everybody is taking a good, hard look at the business.'"

"Don't be surprised if housing starts in the D-FW area are more restrained this year. That's because builders overdid it early in 2006. The problem is even worse on the West Coast and in Florida."

"'A lot of big builders are having severe problems in other parts of the country,' Mr. Wilson said. 'On a weekly basis, I'm hearing about layoffs around town in the industry.'"

"'It's definitely an adjustment that any prudent builder is going to make for the market conditions,' said T.W. Bailey, president of the Home Builders Association of Greater Dallas."

"Some buyers are bailing out of purchases, Mr. Bailey said. 'We are seeing some cancellation orders from people who made a commitment and see a change in their income and future,' he said."

"The fourth-quarter decline in new home sales mirrors the fall-off in sales of preowned homes in North Texas. Earlier this week, the North Texas Real Estate Information System reported that preowned home sales in December were down 5 percent from a year earlier."

"December was the seventh consecutive month of lower pre-owned home sales in North Texas. It was the fourth consecutive month that home prices were down from the previous year. Some of the largest sales declines in 2006 were centered in homes priced under $150,000, where buyers were affected more by higher mortgage rates."

"Industry analysts say it's too early to tell whether 2007 will be a better year for the housing market. 'January and February will probably still have some decline – normal cyclicality,' said Jim Gaines, an economist with Texas A&M University. 'By March and April, expect an uptick. If not, Dallas may have a rough 2007.'"

"At the end of December, 41,598 pre-owned single-family homes were on the market in North Texas, 9 percent more than a year earlier."

The Austin Business Journal. "Ken Simonson, chief economist with the Associated General Contractors of America, warns that in Austin, which is still in the throes of a condo project boom, some of the for-sale units being built will eventually end up being offered as rental units. 'I do expect some increase in rental construction and conversion,' he says."

"Nationwide, Simonson says there has been a falloff in investor interest in single-family homes and condo units. 'Those buyers have all but disappeared to a great extent and a lot of projects are hanging out there unsold,' he says."

The Express News. "San Antonio real estate had a jaw-dropping year in 2006, with San Antonio builders starting more homes than there are residents in Alamo Heights, Boerne, Castroville and Lytle combined. Builders started 19,092 new single-family homes, 15 percent more than in 2005, according to Metrostudy."

"It marked the sixth consecutive year of record-breaking building. The exuberant building pace and shocking statistics are unlikely to make repeat appearances this year, however. San Antonio housing has seen a significant shift, and the market for new and existing homes isn't as strong as it was at this time last year, said Jack Inselmann, a new-housing analyst with Metrostudy."

"Home-buyer traffic has slowed in new neighborhoods and builders are having a harder time closing sales, a change many builders started noticing during the summer. 'The housing bubble has burst, right?' Inselmann said. 'All is lost, right? Absolutely not.'"

"Out-of-town investors created an artificial market when they made down payments on homes and then canceled their contracts when they figured out they would be able to flip a property for a double-digit gain. 'It's probably the worst thing that affected our market this year,' Inselmann said. 'I think we've gotten most of those people out of here.'"

"San Antonio real estate has been on an upward trend since 1990, when builders started just 2,000 homes. 'This market is on a 17-year run,' Inselmann said. 'Ladies and gentlemen, it can't go on forever. We came close to making an error in our housing market.'"