Annette Haddad at the LA Times has this report on speculators. "Too much speculative activity from investors hoping to turn a quick profit is perhaps the biggest sign that a market, whether real estate or stocks or any other asset, is in an overpriced 'bubble' condition, economists say. Too many speculators drive prices too high, and when they sense that the market is topping, they tend to sell all at once, sending prices into a free fall."

"Justin Lane is seeing the consequences of other speculators' efforts in Arizona. After watching prices double in the 16 months since he moved into the newly built Queen Creek neighborhood east of Phoenix, Lane says he can't afford to sit on the sidelines. So he listed his five-bedroom house for sale in November."

"Six other neighbors had the same idea, including one absentee owner who priced his house about 10% below the rest. That forced Lane to reduce his asking price from $362,000 to $343,000, still well above the $165,000 he paid. 'The investors are pushing down prices,' he complained."

"As Lane has learned, Arizona is one of the biggest magnets for speculators. Close to 40% of the homes in Maricopa, Pinal and Pima counties, which include Phoenix and Tucson, were bought by absentee owners as investments or second homes last year. For the nine months ended in September, investors snapped up 11,000 homes in the Phoenix area."

"'There is no doubt that the investor has been the driving force' behind Phoenix's white-hot housing market, said Jay Butler, at Arizona State University. Speculative buyers helped pump up Phoenix's median home price by a whopping 40% in 2005, the highest growth rate in the nation."

"Of absentee owners who bought in Phoenix last year, nearly one in four was from California."

"Phyllis Rockower is one investor who's done with Southern California for now. Although she had been buying local real estate since 1996, the South Bay resident sensed that prices were peaking last year. So she started to unload her remaining seven properties in April, closing the final sale last month. 'People aren't willing to overpay anymore,' she said."

"Now there are signs in Phoenix that speculators with less staying power are beginning to sell in larger numbers. Rising inventories and weakening demand typically lead to softening or even declining prices. Since August, the supply of homes for sale in Maricopa and Pinal counties has more than doubled to 38,000 as of Sunday. By contrast, in Los Angeles County, with three times the population, inventories have risen from 20,000 to 30,000 homes in the period."

"Arizona State's Butler figures that many Phoenix investors are looking to sell now because they are having trouble finding renters willing to pay enough to cover their mortgages. He expects home appreciation in Phoenix to start declining this year, which could intensify if more owners decide to bail out. 'It will be a question of whether there's more panicking,' he said."