BELLEVUE, Wash. -- The bad housing news has hit home. Quadrant says it is laying off 45 people -- a 20-percent reduction in what Quadrant calls its associates.

Quadrant is the state's largest single-family home builder. The company says current conditions forced the cutbacks.

Quadrant is still building, slowly, in Redmond Ridge. What's happening here is typical.

"From a builders' standpoint, we are trying to react to market conditions and trying to draw down on existing inventory," said Dan Klusman of Master Builders Association. "So you'll see fewer home starts than in 2007, 2006."

That means more cleared land, more vacant lots, fewer homes.

Here's what's happening across the country. From July to August, new homes starts dropped 6.2 percent. New building permits were down 8.9 percent.

The West was the only area with a slight July-to-August increase. But year to year, we are down 32 percent. Realtors are philosophical.

"Everything goes in cycles. You just have to hold the faith it will go up again," said realtor Mona Spencer.

But she says it's scary if you watch the news. The stock market is acting like yo-yo and AIG is in trouble.

"Think of it this way. Would you rather have your money in real estate or the market? I'd rather (in) real estate," Spencer said.

Spoken like a true realtor!

"But it's true," she said.

The builders and realtors say the really scary part is what happens with a recovery, say, in 2010 or 2011. They say there won't be enough houses on the market, and prices will shoot up.

Bellevue-based Quadrant is a subsidiary of the Weyerhaeuser Real Estate Co. Quadrant builds new homes throughout Seattle and the greater Puget Sound area.