The Arizona Republic asks 'how low will it go?' "Greed drove metropolitan Phoenix's home prices and sales to new records in 2005. Fear is driving the market this year. Home buyers are worried about paying too much and are waiting to purchase. Concerned about dropping home values, some owners are trying to cash out. Builders, struggling to sell even deeply discounted new homes, are scaling back production and warning of lower profits."

"Each day more people, from contractors and mortgage firms to real estate agents, are losing jobs or money in the metropolitan Phoenix's rapidly slowing real estate market."

"Until recently, the market's slowdown had been considered a necessary, short-term hardship to offset last year's wild run-up in prices. But now many analysts and economists say it looks as if the slide will continue for at least the next six months, possibly pulling down home values as much as 10 percent before it's done."

"'There's a psychological umbrella of fear in Phoenix's housing market now,' said Tim Sullivan, a national housing analyst. 'Buyers are uncertain.'"

"New data that includes used and new houses shows Valley home prices are down as much as 20 percent from last year's high. Prices aren't down all over, but some areas are showing steady declines. The median price of a used home in Pinal County fell to $211,500 in this year's first quarter. That's down from the $220,000 the typical existing home was selling for at the end of 2005."

"The median price of an existing Valley home was pushed nearly $60,000 higher last year by investors, according to Jay Butler."

"Owners who used adjustable loans just to afford a house may be unable to pay the higher mortgage. If they can't sell in the slowing market, where the number of homes for sale climbs to a new high each month, they could wind up in foreclosure. Many other homeowners who tapped the equity that last year's run-up brought also will be vulnerable."

"Home builders began offering incentives early this year to try to sell their backlog of new houses in metropolitan Phoenix. The deals keep getting better, signaling the market isn't. Late last year, investors began walking away from deposits on new homes because they couldn't flip houses for quick profits as they did early in 2005. Regular buyers can't sell their houses to clear the way for them to close on new ones."

"Builders are offering incentives worth as much as $100,000 to unload them. Recently, a few started offering to buy existing homes from buyers as a way to free them up to close on their new houses. That hasn't happened since the market crashed in 1990."

"Because buyers aren't biting, builders are downgrading their sales forecasts, laying employees off, backing out of some Valley land deals and seeing their stock prices plummet. A recent study from Hanley Wood Market Intelligence showed metro Phoenix ranked in the top five U.S. markets for new-home cancellation rates. Some Valley builders are reporting cancellations as high as 40 percent. "

"The Valley also has a glut of condominiums, with at least 8,000 units planned and under way. Some apartment complexes that were converted to condos last year are being 'reapartmented,' or turned back into rental units because buyers don't want them."

"Metro Phoenix led the nation for new-home building in 2004 but slipped to No. 4 last year. Housing analyst Barbara Allen, who is based in Scottsdale, said home builders are calling the Valley a 'good long-term market,' which she says means 'they're worried' right now."