The sale prices of existing homes in the Midwest and Northeast are falling as over-all sales across the country are declining, according to the U.S. National Association of Realtors. In the West, home sales are also down but sale prices remain roughly the same.

Recent Commerce Department data shows that the median prices of new home sales was up in August over July this year, but down from August 2005. Crucially, the new home sales prices do not reflect homebuilders� incentives for buyers, i.e., paying their closing costs. In other words, the decline in new home median prices this August from a year ago undercounts the actual fall in prices.

For a closer look at the action on new home construction, we turn to Lennar Inc., which builds new homes across the nation. For its most recent quarter, the firm�s profit was down nearly 40 percent due to the fall-off in new home construction. Lennar has offered buyer incentives in an attempt to counter the slowdown, a strategy to compete with its rivals in the business.

It is worth noting that investors in home building firms behave a little like investors in other industries such as airlines, autos and computers. Investors in these varied sectors of the economy part with their capital in the hope of a profitable return on it at some point down the road. And here is the rub concerning this similarity.

Not one of these investors can predict on the basis of current and past information what the future holds for their investments, at least not with any objective accuracy. Why? Partial information about the future defines a market economy.

A slew of future variables are uncertain when the market organizes people and resources. There are many examples of this uncertainty. They range from the prices of credit and energy to labor services and raw materials in the days, weeks, months and years to come.

What is becoming clear is that there has been excess investment in new home construction across the U.S. Investors in companies that build homes no doubt saw the rising market prices of their commodity and expected the numbers to continue upward. The �proof� was the historic boom in new and existing home prices, the presumed evidence of a rock-solid investment.

Consider investors in new home construction who had to feel quite nifty about the future of the real estate market. It was, after all, rewarding them with healthy profits. The old saw build it and they will come appeared as true as the rising sun in the morning.

When returns on investments are profitable, optimism for the future tends to rule investors� behavior. They become bullish, in the language of the marketplace.

To recognize the future risk of over-investment in a commodity is to be bearish. Usually, such an ursine stance is off the radar screen when a company�s profit and market share are growing.

Inevitably though, when a firm chugs into the zone of slow/no growth, the process of over-investment becomes easier for the eye to see. Typically, this viewpoint emerges after the facts of falling prices and unsold inventory are as plain as day. Market hindsight can be so clear that way.

Some wags have called this trend the paradox of capitalist investment. In time, however, their critical insights tend to fade from public view. Later, the conditions that created investor optimism in the first place go down the memory hole as growth returns -- until the next market downturn.

The dot-com/high-tech stock boom and bust of the second Clinton White House is a case in point. That period of historically high stock prices and over-investment led to a recession, or contraction of growth. Then expansion resumed, and thoughts of this slow/no growth period faded.

Currently, the U.S. real estate market is cooling. Investment in home building is in decline, according to a recent Commerce Dept. report on the U.S. economy�s second-quarter growth. National economic growth has slowed from its rate of expansion in the first quarter.

As companies such as Lennar cut their costs, there is a ripple effect in sectors of the economy linked to the rise and fall of home prices and sales. This tightening trend can spur employers to cut the benefits, hours and jobs of employees in a gendered and racialized labor market.

Now and before, employers and investors make the diverse U.S. working class pay for over-investment with reduced living standards. In this way, a market economy tries to create conditions of new, profitable outlets for investment capital, such as the hiring of younger and cheaper workers without health care and retirement pensions. This is one hell of a brutal way to organize a modern society.