The National Association of Realtors reported another drop in existing home sales in May, a rate of sale not seen since June 2003.

In fact, some areas of the country, notably the north-east and north-west has seen a small rise in sales. Unfortunately, that means the stats are being pulled down by a disproportionate fall in sales in other areas, for instance, the south-west, and of particular relevance to us, of course, here in the greater Phoenix metropolitan area.

The main reasons for the regional differences are as follows; while housing growth was quite dramatic in the Pacific north-west, for example, it was largely driven by an underlying growth in the local economy. Such was not the case in Arizona. We fell victim to a confluence of circumstances; lots of new construction, lax lending requirements, and a booming national economy that made Phoenix, and its environs, attractive to non-resident speculators. The professionals moved in, and out, quickly but left the impression among amateur speculators that it was easy money. Many of these people are now left holding the bag.

Here in Phoenix we now have inventory at over 60,000 units representing, at current sale rates, an eight to ten month housing supply. Not a positive thing if you need to sell your home. What never ceases to amaze me, and I am sure it does you, is that they are still building thousands of homes throughout the Valley of the Sun. I have said this before but it bears repeating, developers that sold you a home in 2004 for $150,000 that now could sell in the secondary market for $225,000, can still build and sell an identical home for that earlier low price today. They will continue to price their new builds at, or below, what the market will currently bear, until their inventory is reduced.

The good news is that our economy here in Arizona is strong and tens of thousands of people are relocating to our great state each month. Ultimately, the housing market will return to some form of equilibrium, just not in the very near future.

If you need to buy a home you are in a good position; if you want to trade up to a larger home, likewise; if you have to sell (and I mean absolutely have to) set a reasonable price and they will come. If you need to sell three or four or more homes...well you're an investor, you'll think of something.

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