We've all heard it from industry analysts and experts: Builders are slashing their prices. People are buying new homes for less than they paid a year ago. And builders are continuing to cut prices in 2007, trying to move their unsold inventory before prices fall even further.

There's just one problem with this line of thinking: The data don't show it. According to the U.S. Census Bureau, the median price of a new home has been increasing, from $249,400 in January to $254,000 in March, with the average sales price of a new home having jumped from $311,500 to $330,900 during the same period.

Yet industry experts have heard it from builders themselves that prices are coming down, says Dave Seiders, NAHB chief economist.

“About half the builders have been trimming prices, and that's from our latest survey,” says Seiders, referring to the monthly question-and-answer sessions the NAHB conducts with its members to get the inside scoop on what builders are doing.

So how are prices coming down? For the most part, it isn't via reduced sticker prices, Seiders says.

“There are an awful lot of non-price incentives being offered by builders, and that artificially inflates the sales prices,” he says.

Just some of the non-price incentives builders are employing include paying down a buyer's mortgage, offering $50,000 worth of free design options, and even knocking $50,000 off the price at closing, none of which is being captured by Census or other data collectors, says John Burns, president of John Burns Real Estate Consulting in Irvine, Calif. Other sales gimmicks include paying closing and brokerage fees, offering free cars, and providing countless other product giveaways.

But sticker prices are projected to come down as well, analysts say.

“I expect prices for new homes to decline anywhere from 5 percent to 10 percent,” says Mark Zandi, chief economist for Moody's Economy.com, adding that he anticipates the decreases will show up in the Census Bureau's data during 2007.

Seiders says there is no accurate way to track changes in new-home prices other than through anecdotal evidence from builders. But by monitoring the sales prices of existing homes, one can gauge the direction of new-home prices, Seiders says. He notes that while the data between the two differ, the patterns are similar. And the existing-home data show declining prices.

“We've been seeing systematic price declines since the middle of 2006,” says Seiders, referencing the S&P/Case-Shiller Home Price Index. “With the extra hit on demand from the tighter mortgage lending standards, the inventory overhang is still very heavy and figures now to get heavier. We're looking for downward pressure through 2007 and into 2008.”

One of the most trusted gauges of existing-home sales price trends, the S&P/Case-Shiller Home Price Index tracks repeat sales in 10-city and 20-city composites. The 20-city composite index has been in decline month over month since July 2006. In the most recent version, incorporating February 2007 data, the 20-city composite was down 1 percent from February 2006, and 17 of the 20 metro markets studied experienced price declines from January to February of 2007.

Index co-creator Robert Shiller, a professor of economics at the Cowles Foundation for Research in Economics at Yale University, sees even more declines on the horizon for existing-home sales prices. Shiller bases his expectations on the real estate futures market traded on the Chicago Mercantile Exchange, which is based on the Case-Shiller indexes.

“Over the next year, [expect] roughly a 4 percent to 6 percent decline [in existing-home prices], depending on the city,” Shiller says. “That's a substantial decline.”

The the new-home price pattern runs parallel to its existing-home counterpart, as Seiders suggests, new-home sales prices will come down as well, no matter what the data say.

Learn more about markets featured in this article: Los Angeles, CA, Richmond, VA, Washington, DC.