Surging prices

"Our boss said home prices will still rise in the long run and buying a home when loans are easy to get is still playing a trump card," said the woman, who declined to give her name for fear of reprisals.

New home prices in China last year surged 25 percent from 2008, far exceeding growth of 9.8 percent in per capita disposable income of urban mainland residents, according to the Chinese Academy of Social Sciences. Prices showed no signs of abating in the first quarter.

The government has pulled out bigger guns as prices keep rising, hoping that buyers will pause and adopt the attitude that prices might drop. Indeed, home sales transactions have declined, forcing real estate sellers to increase their sales hype but not drop their prices.

Even if prices have shown some correction, the drop is not as much as expected by the general public.

New home prices jumped to a record in Shanghai in April, with the average square meter cost rising to an average of 22,926 yuan at the top end of the market.

The average new home price in Shanghai fell to below 20,000 yuan per square meter in the week ending May 23, said Shanghai Uwin Real Estate Information Services Co. But prices are still relatively high and beyond the reach of the general public.

Luo has been in the market long enough to realize that the high-flying prices were unsustainable, even before the government imposed its latest curbs.

"The home market always works this way," she told me. "A good year followed by a bad one. It's a cycle."