America’s largest home-building companies are battling for their lives as cutthroat competition forces home prices down.

Hovnanian Enterprises, one of America’s largest home builders, last month launched its “Deal of the Century” campaign. During the three-day national sales blitz, the home builder sold 2,100 homes, more than twice as was expected—welcome news for an industry facing increasing headwinds.

However, the not-so-welcome news, as one company spokesman noted, was that Hovnanian was forced to offer discounts as high as 30 percent to rid inventory.

Hovnanian’s plight is not unique. Builders across the nation are engaged in a frenzy to offload properties before selling conditions deteriorate further. “They are all losing money,” says John Burns, president of John Burns Real Estate Consulting in Irvine, California. “They’ll talk in terms of gross margin and it sounds like they made money, but they actually lost money because they didn’t make their costs.”

This month Ryland Group is promoting its “40th Sales Finale.” The company is slashing prices on its vacant homes in the Fort Myers area also by up to 30 percent in addition to offering $10,000 toward closing costs.

“It’s hand-to-hand combat out in the field,” reports Gordon Milne, Ryland’s cfo. “We look at the competition down the street, what they’re doing, and we’ve got to match it.”

It is now commonplace to see builders offering 5 to 20 percent in incentives and price cuts, depending on the community.

An astounding 50 percent of Ryland’s buyers backed out of their contracts over the past quarter because of tightening lending standards and problems with selling their previously owned homes. KB Home said its cancellation rate jumped to 58 percent.

Pulte Homes, another national builder, claimed its June “The Perfect 10 Event” national sales drive was a big success, although prices and profit margins were not specified. By September, however, sales in at least the Chicago area must have dropped significantly. Pulte ran a newspaper advertisement offering not only to pay buyers’ mortgages for six months, but their taxes too if they bought homes at one of its developments in that city.

In San Deigo, D.R. Horton, America’s first- or second-largest home builder, put up a block of 56 unsold condominiums to auction. According to Steven Moran, an agent with Century 21 Award, “[T]he condos sold for between 68 cents and 74 cents on the dollar, based on the original asking prices.” One unit originally listed for $349,800 was let go for $220,000, and D.R. Horton threw in a washer-dryer and $2,500 toward closing costs to secure the deal.

Home-builder glory days, characterized by impatient, piranha-like home buyers, look officially over. According to USA Today, America is experiencing a sales slump worse than the last housing recession in 1991 and possibly worse than the one in 1980-1982. The International Herald Tribune says the sales slump is the worst since the 1930s.

“It’s desperation time, and some companies may not make it,” said Alex Barron, an analyst at Agency Trading Group.

America’s 15 largest home builders are saddled with billions in debt. In an ominous sign, many of the companies’ bonds trade as if they were junk.

The economy is just beginning to feel the brunt of the slowing housing market.

Former U.S. Federal Reserve Chairman Alan Greenspan said on Wednesday that home prices would almost certainly continue to fall and that the slump will eventually impact spending trends.

Many workers are also feeling the brunt as layoffs within housing-related sectors are now hitting the industry. Both Ryland and Hovnanian cut their staff by 30 percent this year. Phoenix-based Robson Communities dealt out pink slips to a quarter of its staff. Miami-based Lennar laid off 35 percent of its employees.

“We have hundreds of thousands of jobs to lose over the next six to 18 months,” warns Moody’s Economy.com’s chief economist Mark Zandi.

The booming housing industry of the past six years has been a huge support to the economy. Now that the market has turned, instead of housing boosting the economy, depreciating home prices will act as a headwind. Big home-builder fire sales may be just the beginning of many markdowns to come.