Many hot housing markets in the West have recently peaked and are now seeing sales slide with prices possibly following.

Cities such as San Diego, Las Vegas and Denver have experienced a rapid jump in home values, driven by high demand and limited buildable land.


The median price of an existing home in San Diego is three times higher than in Phoenix, Las Vegas is almost $90,000 more, and Denver is $70,000 higher.

There are signs those markets are cooling down. And that means the same investors and speculators who pushed prices up these other cities may be turning their attention to Phoenix. Home listings in Phoenix dropped in half during the past year, while they climbed in these other cities.

Market watchers here worry that Phoenix could face the same possibility of a market bubble those other cities are confronting.

Many housing experts say the market might slow or flatten out, but the area is unlikely to have a rapid drop in prices because of the amount of buildable land in the Valley helps moderate prices.

And there are some other differences between those cities and the Greater Phoenix area.

Las Vegas

Home prices in the Nevada city trailed Phoenix until 2000, when the area's lack of available land began to catch up with it. During the past year, Las Vegas posted a 52 percent jump in its median used home price, according to the National Association of Realtors. That's the biggest quarterly increase of any city ever.

New-home prices climbed 36 percent during the past year to hit $347,000, according to the Meyers Group.

Realtors Chief Economist David Lereah attributes Las Vegas' recent price jump to a tight supply of homes. The southern Nevada city averaged a less than two-month supply of homes for sale earlier this year, half the national average.

Most land in Las Vegas is federally owned, and the Bureau of Land Management isn't rushing to sell more. Prices have soared as a result.

Las Vegas residential land costs about $300,000 an acre. A large parcel on Phoenix's fringe could sell for $40,000 an acre.

But just last month, analysts and builders grew concerned Las Vegas' housing prices were out of whack.

Home listings climbed. Builders reported few buyers looking at new homes and began offering incentives and reinstating commissions to real estate agents. Some builders opened their doors to investment buyers again after trying to limit rentals in new neighborhoods last year.

Earlier this month, the stocks of several of the nation's big builders fell because of analysts concerns that Las Vegas' housing market was overpriced and costs would need to come down for sales to continue. In September, Michigan-based Pulte Homes cut prices at almost half of its Las Vegas developments.

San Diego

Home prices in San Diego have doubled during the past five years. The Southern California city's median existing home price hit $559,700 at the end of 2004's second quarter, which made it third-priciest housing spot in the country.

With a median household income of about $55,000, that means only one out of every 10 families can afford to buy a home in San Diego. In Phoenix, where the median household income hover around $50,000, about seven out of every 10 can buy a home.

That disparity between housing prices and incomes makes San Diego one of the most overvalued housing markets in the country, according to a Massachusetts-based real estate analyst Ingo Winzer.

His calculations show San Diego housing prices are 40 percent overvalued. Las Vegas didn't make the list, and obviously neither did Phoenix.

Part of San Diego's housing price problem is an even tighter supply than Las Vegas. California home builders have been constructing only one new home for every four new residents during the past few years. The typical formula shows at least one new housing unit is needed for every 2.8 new residents to an area.

High prices because of limited supply, coupled with the area's low wages have worked to start slowing San Diego's housing market, said real estate analyst Stanley Paul Cook of Landiscor Aerial Information.

The California city's home price did dip slightly during August, but is still up 30 percent from a year ago. However, home sales were down almost 4 percent during August, and 18 percent for the previous 12 months, according to the San Diego Association of Realtors.

At the same time the number of homes listed for sale is up.

Denver

Denver has also seen several years of big housing price jumps and is now experiencing a slowing in sales and appreciation increases.

New-home closings in the Colorado city fell 5 percent during the first half of this year, compared with the same period in 2003, reported David Laffoon at Denver-based Home Builders Research.

The median price of a new home in metropolitan Denver was $290,000 in July, compared with $261,400 in July 2003.

Existing home sales in Denver are up about 14 percent for the year, but the area's median used-home price is almost flat from where it was a year ago at $240,000.

Denver is also experiencing a disparity between its residents' incomes and housing prices. Between, 1993 and 2003, the median price of a house in the Denver area doubled to $238,200. In the same time period, per capita income grew at less than half that rate.

Denver's Boulder/Longmont suburb made Winzer's housing market watch list. He called the Colorado area 24 percent overvalued.

All have prompted Denver economist Tucker Hart Adams to call for home prices and building permits in Greater Denver to fall during the next year.

Forecasts for slowing housing market are partly because of the area's slower than expected employment growth. At the beginning of this year, economists called for 14,000 jobs to be added in Denver, but recent projections have dropped to 2,000 jobs.

Greater Phoenix

What's driving the frenzy is Phoenix's housing affordability, something other housing markets in the Western United States can not count on to sustain their growth.



The typical new home selling for $185,000 in Phoenix has 2,600 square feet of space and a two car garage. In San Diego that would barely pay for a studio condominium far from the ocean. In Las Vegas and Denver, new homes under $200,000 are typically small townhouses.

"Phoenix prices are lower compared to most other cities, and you also get a lot more square footage for the money," said Bobby Lieb, a real estate agent with Realty Executives. "The weather is very attractive to families who are sick of shoveling snow all winter and dealing with hurricanes, mud slides and earthquakes."

The Valley's abundant supply of developable farmland helps keep housing costs low. In many other western cities, land is scarcer and thus pricier.

Some areas also have government and seasonal building restrictions.

Phoenix's steady growth and affordable land are now drawing more developers and investors. "The abundant supply of land surrounding us keeps prices relatively low for production home developers," said Don Rodie, a commercial real estate broker with Cushman & Wakefield of Arizona. "That translates to more bang for the home-buyer buck."

Part of the fuel behind the Valley's housing market is its population and job growth.

Almost 90,000 people are expected to move to the area, and more than 40,000 jobs are expected to be created, according to the Arizona Department of Economic Security.

Many people are coming for the jobs, but some are coming for the area's affordable housing.