Mark Twain gets credit for saying, “Buy land, they're not making it anymore.” Still, it's almost unimportant who said it first; the truth of the remark is part of the public domain. Generations of our collective psyche have lived by its simple equation: Land is finite. Because it's limited in supply, logic supported society's conviction that land's value is intrinsic, and always headed on an upward trajectory.

Until now.

Many a built-in belief system has been shaken to its core as more than five years of record home-price appreciation evaporated in a poof. Consequently, land prices have somersaulted downhill—Zelman & Associates research indicates that median prices for finished lots have fallen 50 percent from their peak—kicking up residential loan defaults, foreclosures, and bankruptcies in their wake.

Veterans of real estate know land giveth, and as surely, land suck-eth one dry. Still, more than a few in the residential real estate market cling to it even now. And maybe with good reason.

What every one wants to know is not so much when land will come back in value, but when land will trade for any value at all. Average parcels aren't moving. They may not be making land anymore, but when nobody will pay squat for it, it's like too much of anything, a bane.

BUYER BE WHERE? Banks that suddenly find they've become landowners thanks to a combination of corporate jingle mail and foreclosures hope that the assets that have wound up on their books are worth more than the price tag the free market attaches to them today. And even as examiners and watchdogs at the Federal Deposit Insurance Corp. and other regulatory agencies breathe down their necks, urging them to write down the value of their troubled assets before it gets done for them, the banks resist vehemently.

SALES STALEMATE: Even in once-strong markets such as Homestead, Fla., land simply refuses to move.

They've got their fingers crossed for a miracle. They're waiting to see if Congress will give a thumbs up to allow TARP funds to buy up banks' troubled loans, or whether a big “bad bank” will be created, into which banks can dump their toxic assets. Either way, or no way, as banks hold their collective breath, they may stand to gain a few pennies on the dollar for the value of their distressed assets.

Meanwhile self-selected opportunists—vulture funds, well-capitalized developers, and savvy individual investors—are slobbering on the sidelines at all the land out there for the taking at potentially rock bottom prices. They believe that land, or at least some land, has value, but it's nowhere near the pie-in-the-sky price tags banks seek to fetch for it. The value they see is intrinsic rather than market driven. That is, if they can, they'll buy it at today's street price, sit on it until the housing market returns, and sell it into strengthening demand for homes.

But timing is everything; and right now, timing stinks for just about everybody in the dirt game—by choice, or by, well, default.

Uncertainties of when housing may bottom—as everyone expects it must—has banks and would-be land buyers in a standoff. Neither will budge an inch to bridge the expansive gap between so-called bid and ask prices. The stalemate has cast a nuclear winter over all transactions.

Learn more about markets featured in this article: Los Angeles, CA.