Analyst Say "Frenzy" Can Not Continue

The Arizona Republic reports that the existing home sale median price rose to $235,000 in May 2005, up 6.3% from April's median price. "Deep down, everybody knows you can't sustain this pace," said Jay Butler, director of the Real Estate Center at ASU. Driving the market is a strong economy, new jobs, low mortgage rates and investors lured by big gains in home prices. Butler says the Phoenix housing market is in a price bubble, and other analysts are reaching similar conclusions. University of Arizona economist Marshall Vest said housing statewide shows "a lot of characteristics" of a bubble. "Demand far outstrips supply, and the demand side appears to be driven by a frenzy of sorts, by greed," he said. "The frenzy is going to evaporate, and the market will begin to return to somewhat normal. It's not that prices will fall. The rate of the increase will moderate." Housing analyst RL Brown said home-price increases will have to begin to moderate or Metro Phoenix "will go the way of Vegas" and prices will climb too high and have to fall back. But for now, Brown said prices aren't too high because people are still buying Valley homes. More...