If you'll pardon the reference to a 2002 sleeper comedy hit, “My Big Fat Greek Wedding,” the word “euphoria” comes from the Greek word “euphoros,” meaning “healthy.” In English, somehow, the word took on another sense. Medically speaking, Merriam-Webster defines euphoria as “a feeling of well-being or elation; especially, one that is groundless, disproportionate to its cause, or inappropriate to one's life situation.” So, feeling super when you shouldn't is the essence of euphoria.

Now, many business leaders repeatedly said during the past few years that new-home sales couldn't sustain a trajectory that reached its zenith around this time last year, a record-setting annual rate of 1.3 million single-family homes. Rather than dwell on who was right, better to ask the question, “What's next?” Builders of all sizes face two challenges. One challenge is to try to realistically quantify the euphoria factor. The other is the series of decisions and actions—some of them painful—that must follow doing the math.

Earlier industry economist estimates that new-home sales would “ease” by 6 percent in 2006 serve today as yesterday's wishful thinking. Relativist conversations during the past few months about what would comprise a “soft landing” are now utterly academic, too. Those same economists are now estimating a “downshift” of 13 percent in new-home, single-family sales. That figure probably falls short of sufficiently adjusting for euphoria's absence.

Debate now seems to be replete with Hobson's choice reasoning, along these lines: “Which decision has the least–worst punishment? Being openly realistic and changing strategic course in a way that embraces realism? Or, a kind of self-prevarication, which might enable strategic management to defer the consequences and stage disappointments long enough to latch on to some filament of positive news sometime during the next 12 months?”

For the sake of taking a look at a penciled-in scenario, let's imagine that the euphoria factor includes a greater number of home sales in the past couple of years than a count of investor buyers would cover. What's more, if you believe that there may be an undercount in the number of people who made up the investor segment, you'd probably be right. Add to that number a euphoria factor segment of buyers who bought in the past 24 months because they wanted to cash in at the top of the boom. A cohort demographically and financially identical to that group who moved and bought new move-ups, second homes, and vacation homes in the past 24 months now wears the stricken look of children who didn't get their butts in a chair when the music stopped playing.

What they'll do now is to wait for a better time to sell and a better time to buy. What's that mean for you?

How will you calculate the effect of euphoria on your business over the past 24 months and its absence over the next 24. Will your pro formas look more like those from 2002, when national new-home sales hit 973,000 at an average price of $228,000? Not that we assume a 20-something percent drop in national new-home sales will come to any disproportionate degree out of the hide of big builders. Big builders clamored for years that they'd prepared for a down cycle. Now's their big moment to show what professional management, balance-sheet discipline, and deeper pockets mean. “Bring it on!” an executive at one top-five builder said to me a year ago last February. He's been demoted, by the way.

As you comb through your business metrics to try to pinpoint the euphoria factor, cautionary tales emerge. For a look at what happens when iffy judgment meets bad markets, check out “Playing for Time,” an analysis starting on page 44, which illustrates possibly what not to do when sales really start to weaken in your markets.

The cure-all in “My Big Fat Greek Wedding” is Windex. At least, it could help us look clearly at how the euphoria factor continues to blur many people's view of what's ahead.