A National Association of Home Builders quarterly index that measures builder and developer confidence in the condo market dropped 11 points in the final quarter of 2007 compared to the same quarter in the previous year.

The Multifamily Condo Market Index, based on a survey of builders, stood at 18.8 in the fourth quarter on a scale of zero to 100. A score below 50 indicates more negative responses than positive responses.

Sounds bad right? It is – if you’re a builder. But if you’re in the market to buy it looks pretty good – because about two-thirds of builders reported that they lowered condo prices to strengthen sales, with an average price reduction of 11 percent.

When asked about other marketing strategies, about 70 percent of respondents reported that they included optional items at no costs, paid closing costs or fees, or absorbed financial points for buyers as incentives.

We’ve touched on this before but we’re interested in your take on this. Why do buyers love to buy when prices are high and the only place to go is down — yet when prices are good they get cold feet? We all know that the way to wealth is to buy low and sell high – so why do so many insist on doing it backwards? Buyers love to buy during the frenzy (and overpay), then a year or two later when the inevitable happens they race like sheep to the slaughter house to sell again only to take a hit. There were some interesting comments from readers after we did the Time Magazine blog below — and it might be interesting to share the psychology of this mindset further. Do we all just feel safer when we’re doing what everyone else is doing?