Still, industry observers are optimistic about 2007.

Home prices are expected to rise 3 percent to 5 percent this year, and sales should pick up in the spring, Scottsdale real estate agent John Wake said.

Wake said he believes buyers also will jump back into the market after sitting on the sidelines for fear of prices falling.

“A lot of people are just waiting to know the bottom has hit,” he said.

The supply of new homes on the market also has peaked and is heading down, Wake said. That means buyers will likely see fewer of the wild home discounts offered by builders in recent months, he said.

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