The Arizona Republic reports on the housing bubble in the Phoenix area. "In metropolitan Phoenix, demand for new homes is expected to continue to slow from last year's record pace as builders sell through 'spec' or speculative-home inventories caused by buyers backing out of deals. Builders have been offering incentives to unload spec homes."

"Many of those homes were under contract to be sold but buyers backed out when they couldn't sell existing homes in a resale market suddenly flooded with listings."

"One of the best ways to measure demand for new homes is to track the number of building permits for which home builders ask, and that figure fell sharply in March. The number of new home permits issued in Maricopa and Pinal counties dropped 24 percent in March to 4,716 from 6,203 during the same month last year, according to (analyst) R.L. Brown. Year-to-date permits are down 16 percent from 2005."

"March sales of previously owned homes were off 26 percent from the same month last year. This March there were 9,594 resales compared with 12,911 during the same month last year."

"Brown reported some builders are raising prices, but more are offering deep incentives and discounts. 'The resale market will take longer to sort itself out than will the new home market,' the Brown said. 'Sellers will begin to get realistic on asking prices as time on the market moves from the present 60 days to the range of 90-100 days for overpriced properties.'"

"Builders are pulling fewer permits because they suddenly have more unsold homes in their subdivisions. People with contracts to buy those homes walked away from them when they couldn't sell the ones in which they were living."

"New-home closings fell 6.35 percent in March, another sign that buyers are getting cold feet. 'Why cancel in the middle of construction?' Brown asked. 'if your confidence level isn't high, you step out of the picture.'"