Missed tonight's Cavuto? Catch "The Deal" right here on FOXBusiness.com

Here's the deal:

Still plenty of housing deals.

Which means still plenty of folks waiting for even better housing deals.

If you really want to know why housing starts dropped 11% last month...or why they are now at their lowest level in 17 years, it's surprisingly simple.

People aren't budging.

Sellers can't believe this drop, so they don't budge on price.

Buyers suspect there's more to this drop, so they don't budge on their price.

Appraisers dare not risk lawsuits over rosy appraisals, so they don't dare be rosy at all.

And banks don't dare repeat the go-go housing euphoria, so they go from no-doc to no-loan, period.

And it's the great Mexican standoff.

Lenders afraid to lend.

Buyers afraid to buy.

And sellers, well, just afraid.

That doesn't mean there isn't money to lend. There is.

That doesn't mean there aren't plenty of qualified buyers out there to whom to lend. There are.

And that doesn't mean there aren't enough sober home sellers and builders realistic enough to know what they thought was worth 20% more a year ago...isn't today.

Today, it's psychological.

It's the fear of being caught paying too much.

Or selling for too little.

Economists talk of supply of homes coming down.

But they have a notorious track record predicting turnarounds, just like they had a lousy one predicting this downturn.

No, real estate changes not when real market fundamentals return but when un-real fears end.

Housing hasn't died. Pricing your home like an Internet stock has.

And financing isn't a problem. The very real fear it is...that's the problem.

We are in a nationwide panic attack that equates 3% of mortgages running late with the 97% that are not late.

We call this a meltdown when most homes aren't melting down.

So when starts stall or stop, we stop. And shutter. And think, why build? Why buy? Why sell? Why live?

This isn't about real estate.

This is about our mental state.

We are overwhelmed...because we fear we are all underwater.

It matters little that most of us aren't underwater.

It has now become the fear.

And it is very much now...the reality.