A report from the Arizona Republic. "One of the Valley's top housing analysts lowered his projection for the area's new-home market for this year on Tuesday, saying that such stubborn problems as an oversupply of houses and turmoil in the mortgage business will delay the recovery. RL Brown said he expected Phoenix-area builders to pull 34,000 building permits this year, down from his forecast of 41,000 issued in January."

"Brown expects the market to remain at the same level in 2008 before beginning its rebound in 2009."

"Builders pulled more than 60,000 permits in both 2004 and 2005, a pace Brown said was unsustainable. He said the market still is flooded with homes for sale. The market has perhaps 70,000 to 90,000 of them, including the more than 52,000 on the Arizona Regional MLS typically cited as a baseline inventory figure, Brown said."

"He estimated there are as many as 10,000 to 20,000 builder speculative, or 'spec,' homes for sale, along with a similar number of investor-owned homes that are either vacant or being rented until they can be sold. Only some of those spec homes and rentals are on the MLS, too."

"'That's a huge number,' Brown said. 'The point is that there are a lot of homes that are going to have to be sold or occupied before the supply comes into balance with the demand.'"

"Plus, the full effect of foreclosures hasn't yet been felt."

"'We thought we had seen the bottom last year,' said Dave Lorti, (an) agent in Tempe. 'Some buyers were beginning to get back in the market. But now, people are wondering if we have yet to see the bottom.'"

"Phoenix-area builders still face cancellation rates from 20 to 40 percent. Builders also are reluctant to curtail production, even with a glut of unsold homes. 'What do you do? Do you shut down the (production) line?' Brown asked. 'The home-building industry has never done that.'"

"Meanwhile, builders are writing down the value of land they bought during the boom, laying off employees, restructuring their businesses and looking for new ways to make homes affordable again."

"Affordability will become increasingly important as the mortgage industry rethinks the way it did business during the boom. New lending requirements are knocking buyers out of the market, Brown said."

"'Underwriting guidelines have gotten very stringent,' he said. 'You have to have your stuff together to get a loan. What I hear more of is the people in the sales office make the deal but the buyer can't qualify.'"

The Tucson Citizen from Arizona. "Dave Perrin didn't plan to sell his house and buy a new one, but his wife's illness suddenly thrust him into a bloated local real estate market that has buyers dictating terms and prices and sellers scrambling to fulfill them."

"Perrin's wife needed a home that could accommodate a bulky air filtration system, so they started shopping. They quickly found and bought a 2-year-old home in Vail. They paid just under $350,000 for a house that was listed for $357,000."

"Two years ago, the previous owners pulled the home from the market when it didn't sell for $480,000, Dave Perrin said."

"The Perrins aren't the only ones getting sweet deals. A glut of homes on the market, more than twice as many last May as in May 2005, has created a buyer's market. New home prices are down, builders are offering incentives and sellers of existing homes are doing extra sprucing up to get homes sold."

"'It's probably the best time in the past 10 years to buy a house,' said real estate analyst John Strobeck, owner of Bright Future Business Consultants."

"In 2005, investors flooded the Tucson real estate market. At the same time, buyers saw interest rates that had dipped to levels not seen since the 1960s. A 'frenzy' ensued that drove the median price - the price at which half of homes cost more and half less - of existing and new homes up more than 25 percent over 2004, Strobeck said."

"But as more and more people tried to cash in, the market was inundated with homes."

"Lately, prices have leveled off as the excess inventory is slowly being depleted. However, Strobeck said, the median price is buoyed by higher-end home prices that have not had the drops experienced by some mid- to lower-priced homes."

"Prices are dipping because sellers are motivated. 'When people are motivated they will come down, and we're already beginning to see that happen,' Strobeck said."

"The current state of affairs has Realtors scrambling, said Holli McGarry, a Realtor who has been selling in Tucson for five years."

"'Two years ago anybody with a real estate license could just sit there and sell houses, but now we have to work,' she said recently after a 'staging' class."

"The sluggish market has builders cutting prices and bending a little more than they have in recent years. Prices are dictated by the market, said John Bremond, president of KB Home Tucson. 'We can only sell a home for what the buying public is willing to pay,' Bremond said."

"What the public will pay is illustrated by new home median prices. Last June, the median was $263,048. This year it was $241,650, Strobeck said."

"Builders are still trying to sell homes built on speculation in the past year. The market has forced builders to accept less than the list price for such 'spec' homes, McGarry said. 'Builders are taking offers,' she said. 'They never take offers.'"

"McGarry is optimistic. Tucson is still growing, and it didn't see the 50-percent-per-year price run-ups other cities, such as Phoenix, saw."

"'What goes up, must come down, and we didn't go up as far so we don't have as far to fall,' she said. 'People are thinking, 'Well, we can go outside now. The storm has passed.'"

The Explorer News from Arizona. "The rollercoaster real estate market seems to be leveling off, but activity is still high in the Northwest area, according to numbers released last week by the Tucson Association of Realtors."

"The numbers indicate the local market has settled since the volatile real estate boom of 2005, said Judy Lowe, president of the Tucson Association of Realtors. 'We’re not seeing a lot of price declining,' Lowe said."

"Despite median and average home prices being up, this is not a direct indication that the market is taking a turn for the better, said Maile Nadelhoffer, a computer database specialist with the University of Arizona’s Economic and Business Research Center."

"'I don’t think the indications in that latest report were enough to think that the recovery has really started in the housing market yet,' she said."

"Some of the reasons the market is not ready to begin the recovery are the housing supply is still a little high, as are average days on the market and existing home sales. Existing home sales are still on their way down, Nadelhoffer said."

"The small increase in the median and average prices is just part of the natural variability in the prices and doesn’t look like enough to push the entire market toward recovery, Nadelhoffer said."

"'We’ve been thinking one of the reasons for that is a lot of the sub-prime part of the market has dropped out and that’s sort of buoying the median price of housing,' Nadelhoffer said."

"Last Wednesday, Federal Reserve Chairman Ben Bernanke said the lagging housing market would put a drag on the national economy. Nadelhoffer said Bernanke’s comments hold a grain of truth."

"The numbers for construction employment are declining in Tucson, which have a tie to 20 percent of the jobs in the area, she said."

"Real estate agent Joe Evano, who has been in the business since 1994, said people are starting to adapt to the market cooling."

"'Sellers are getting more in tune to the fact that 2005 pricing is not there anymore, although home prices are climbing,' he said. 'They aren’t climbing at the extreme rates that they were in 2005.'"