Even Hot Housing Markets Can Go Cold

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Transactions Dropping In the Pacific Northwest

Home prices jumped more than 10% in second home markets in Utah, Idaho, and Colorado. "They're doing so well because they're getting the runoff from California, Nevada, and Arizona," says Jeannine Cataldi, senior economist for Global Insight. "When prices got so high [in those states], people said, there must be places that are more affordable.'"

But even the nation's hottest markets are slowing. In the Pacific Northwest, where many markets have been bucking the national trend, the pace of sales transactions and price appreciation is dropping off.

In Wenatchee, real estate agents acknowledge the softening. "We've had a little bit of a slowdown but nothing compared to what we're seeing in the rest of the country," says Lisa Day, a Realtor with Lisa Day Group at Century 21 in Wenatchee. "In my market, prices have gone up and they've plateaued. You're seeing a little bit of a plateau now."

Utah Not Crashing

Day says Realtors in Wenatchee are still busy. But Merced real estate professionals are leaving the business or adjusting quickly to disastrous conditions. Jessica Rattanasack, a Realtor with Century 21 M&M Associates in Merced, said she started selling foreclosed properties during the summer and now 90% of her sellers are banks.

Katherine Zupan, who owns My Very Own Room in Merced, used to help residents "stage homes"—that is, decluttering, cleaning, and preparing properties for quicker sales and higher closing prices. But she no longer feels comfortable taking business from Merced sellers who appear to be calling her out of desperation. "It's hard even for a staged home to stand out from the rest of the homes when new home prices are comparable to resale homes," Zupan says.

Shoell, the Utah title company owner, says prices aren't crashing in his state. But it's not "all wonderful here," he adds. "We're always about two steps behind everybody else, but we'll feel it."

Click here to see the best -- and worst -- performing housing markets in the U.S.

Gopal is a real estate reporter for BusinessWeek.com.