The December numbers are out for the Phoenix area in Arizona. "With 4,620 sales recorded in December, the 2006 Greater Phoenix resale home market continued to slow, with 5,040 sales in November 2006, and 6,480 sales for a year ago. This is the lowest level of activity for 2006 and the lowest for December since 4,785 sales were recorded in 2000. For 2006, a total to 67,035 sales were recorded, in contrast to 110,835 sales for 2005 and 102,115 recordings for 2004."

"Sales activity declined 40 percent. While this is another record year, the median price has been steadily declining during the year from $267,000 in June to $255,900 in December, which is the lowest median price since $255,000 was reported in July 2005."

"The rapid growth of sales activity and prices of the last few years has been due largely to the ever-increasing involvement of investors in the market. Thus, the slowdown in the investor market can be a relevant reason for the overall market slowdown and the increase in trouble properties. Many investors have found it increasingly difficult to rent and are trying to sell their homes before they lose them to foreclosure or to sell them to lock in any appreciation."

"Another source of trouble properties are those households, in anticipation of continued appreciation, that bought more home than they could afford and probably used non-traditional financing to acquire it. Thus, confronting financial issues, these households are trying to sell in order to obtain some appreciation and/or to avoid foreclosure."

"'Thus, many of the market issues of 2006 and potentially 2007 can be attributed to individuals, trying to secure their futures, who got emotionally involved through believing in constant success and appreciation,' said Jay Butler, director of Realty Studies at Arizona State University."

The Arizona Republic. "Metropolitan Phoenix's resale housing market finished 2006 with a whimper, capping a tumultuous year in which the region struggled to regain its footing after a buying frenzy driven by speculators. A report shows sales on existing homes in December were the worst for the entire year."

"Experts blame investors, many of whom fled the Valley, leaving a glut of housing behind. Single-family resale inventory stands at more than 42,000, nearly double that of 2005. 'They were the driving force,' said Jay Butler. 'They were the ones who would pay any price for a home.'"

"Ben Sage of Metrostudy said the big theme of last year was the changing expectations. 'It was a major turnaround from the previous year, and the major disconnect now is between buyers and sellers over listing prices and what homes are selling for,' he said."

"'I couldn't wait for 2006 to be over,' said (realtor) Bridgette Gavagan in the West Valley. 'It was a very negative year. Three years ago, buyers bought homes to live in, to love them and to raise families and to be there. They weren't buying it to double their money in six months.'"

"Ken Udenze initially listed his south Chandler home for $910,000 in April and has cut the price to around $830,000. He said he has learned to discount some of the optimism he heard about getting top prices and made realistic decisions to cut."

"'You have to move ahead of the market,' he said. 'It can be hard to do that but it's what you have to do. Why is a house different from a stock when it comes time to sell it, when you know what the market is going to pay for it? You have to detach yourself from it and be a little bit objective.'"

"There's still a lot of excess supply that must be sold before the market can recover. 'The market is clogged by people who are just testing the market to see if they can get top dollar,' said (broker) Margie O'Campo de Castillo in Phoenix. 'The other part of the market is people in dire straits. They got into possibly not the right loans for them.'"

"Prices have been falling in recent months according to the newly renamed Realty Studies center at Arizona State University. Jay Butler expects prices to keep dropping in some areas this year, especially those where a lot of investors bought homes in 2004 and 2005 and where new homes are competing."

"In 2006, sales dropped 57 percent to 1,055 in Ahwatukee Foothills; 41 percent to 4,625 in Chandler; 44 percent to 3,730 in Gilbert; 42 percent to 7,600 in Mesa and 32 percent to 1,785 in Tempe."

"Sales of existing Scottsdale homes dropped 40 percent in 2006 from the previous year while the median price edged up. Scottsdale Realtor Mark Tait said Scottsdale's median price increase is misleading because it is skewed upward by luxury home buyers."

"'The luxury market is as strong as ever,' Tait said, adding that prices dropped in other price spectrums and buyer traffic is off considerably. Tait said he rented out a remodeled home he owns near downtown because it would not sell at $425,000."

The East Valley Tribune. "After flooding the market and driving up prices in recent years, investors now trying to unload properties likely contributed significantly to the market slowdown, Realty Studies director Jay Butler said."

"'People would like to see that hypermarket come back but realize it’s not going to,' Butler said."

"Some areas are seeing declining prices, and foreclosures are expected to rise this year. Many of the homes facing foreclosure will likely belong to investors, Butler said. 'They bought too many. They paid too much,' he said."