The Chicago Tribune reports from Illinois. "Housing analyst David Seiders told Chicago-area builders Thursday that the federal estimate of 3.5 million homes for sale at the end of 2006 is 'grossly understated.' 'There is a big inventory overhang out there, and it's bigger than anybody understands,' he said."

"In an annual forecast on the local industry in Addison, Seiders, chief economist of the National Association of Home Builders, cited the high level of sales contract cancellations in 2006. Many homes marked as sales in government data ended up back on the market too late to be counted as inventory, he said."

"'Cancellation rates more than doubled between the end of 2005 and the end of 2006, meaning that net sales for the year nationally may be down 65 percent,' he said."

"Alan Lev, a Chicago builder and developer, agreed this is a critical juncture. 'January and February and into June, this is supposed to be the time of the year that you're supposed to make your hay,' he said. 'In a normal year, we do 70 percent of our sales between mid-January and mid-June.'"

"Maureen Parotto, director of sales and marketing for Itasca-based William Ryan Homes, also noted a pickup in business. 'Last week we had 39 sales--that's a record for any week we've ever had,' she said. However, the builder was offering buyers up to $60,000 in free features and upgrades."

"Analysts note that such widespread discounting and incentives have kept a bad spell from turning disastrous. 'The common phrase that you hear on buyers' lips is, 'What are you giving away?' said Buz Hoffman, president of Lakewood Homes in Hoffman Estates."

"Patrick Curran, president of West Point Builders & Developers in Hinsdale, said his company is offering flexible closing dates to address buyer concerns that they won't be able to sell their existing homes in a slow re-sale market."

"That fear, that consumers will be stuck with two mortgages, ot only kept browsers out of model homes but also helped to propel those cancellation rates."

"'This year is going to be quite an adventure, trying to piece this thing back together,' Seiders said. However, he said several factors could slow housing's recovery: uncertainty over the size of the inventory of unsold homes, potential tightening of mortgage lending standards and affordability."

"The mortgage industry, responding to criticism of lax lending standards feeding a growing foreclosure rate, has begun tightening its criteria. Congress and federal regulators also are considering reforms, he pointed out."

"On the affordability issue, Seiders said: 'For [the Chicago market] we're talking about flat pricing year over year. But we've got to get affordability restored' for the market to recover."

The Pioneer Press from Minnesota. "A condo clearance sale got results in Burnsville's Heart of the City. Buyers signed purchase agreements for almost half of the 34 condominiums, discounted by up to $100,000 off their original price."

"A mortgage lender slashed prices on the units after the original developer defaulted on the mortgage, resulting in the lender foreclosing on the property in May 2006."

"The Uptown Landing project, which was to have three phases and 111 units, was the first condo project in the Heart of the City. The condos, originally priced from $175,000 for a one-bedroom with 862 square feet to $325,780 for a two-bedroom with 2,021 square feet, now range from $134,900 to $229,900."