Surely this isn't the solution?

Just read this article about Bellway homes and what they're doing to try and overcome the downturn in sales.

Surely though, if they slash their prices by this much it'll have this effect...
- Property prices on average will fall...
- More people will fall in to negative equity...
- More people will have their homes reposessed which will then be put back on to the market and bought by investors for a lower value seeing the money lenders make a loss...
- They'll then try and buy one of these lower value homes but won't be able to buy because those very banks are too scared to lend the money and prices continue to fall...
- Erm? Am I right/wrong?

Surely the answer needs to come from higher powers such as the Chancellor/Priminister so that businesses like Bellway don't need to cut their prices by this much? (Although I do agree that the government have tried and the banks aren't passing on the good will...)
I know it sounds like i'm supporting capitalism but Bellway are just one firm. I know they make ridiculous profits but hey, they are a successful, reputable firm and they are merely providing what people demand, like any successful business. If they weren't, they wouldn't be in business.
But if prices are slashed by this much, the equity that everyone uses to leverage more transactions will slump and we'll end up in a deep recession as the value of all products & services slump drops and no money is changing hands.
Can prices can only go so low before everything becomes worthless?