When Jana Barrow and her husband put their Scottsdale house on the market last summer, the mortgage market was on the verge of a full blown meltdown and home values were tumbling.

Read Misty Williams' real estate blog, From the Ground Up

So the couple got aggressive and slashed $10,000 off their $350,000 asking price.

It wasn't enough.

Fellow neighbors near McDonald Drive and Pima Road hoping to sell were cutting prices, too.

"We kind of started to play a real game," Barrow said. "We kept reducing and kept reducing."

Like the vast majority of the Valley, Scottsdale has seen home sales and prices slide in the past year. February sales were down 30 percent from the same month in 2007, an Arizona State University study shows.

The median home price last year also fell to $579,000 - the first annual drop since 2000.

Real estate agents say, however, Scottsdale has fared better than many Valley areas, in part, because its resorts, high-end shopping, nightlife and schools have made it a sought-after destination.

"Scottsdale has a reputation, and with that reputation comes some insulation," said Dominic Scappaticci, CEO of Equitable Sotheby's International Realty.

Buyers are coming in with low-ball offers - sometimes 25 percent to 30 percent lower than the asking price - but they're walking away empty handed, Scappaticci said. The average homeowner isn't going to let someone walk away with all the equity, he said.

"People are in this illusion that everything's dire straits out here," he said.

SHIFTING PRICES
At the same time, neighborhoods like the Barrows' have seen significant price drops.

The couple ended up selling their house in December for roughly $50,000 less than what they were hoping. The drop had a major impact on the type of new home they could buy.

"We had to change our whole view of what we were getting," Barrow said.

Still, the family's new home in Cottonwood is double the size of their Scottsdale place.

Prices vary from area to area, said agent Dru Bloomfield with John Hall & Associates.

Last year, Bloomfield examined six neighborhoods along McCormick Parkway, comparing prices in the first and second halves of 2007.

Values fell 16 percent in one community, though homes there sold 30 percent faster than other areas, she said.

Meanwhile, prices rose 13 percent in a nearby neighborhood.

Slipping prices have opened up opportunities for buyers shut out during the boom.

"I've been seeing an increase in first-time buyers - people who have saved their money and ridden through the wave of escalating prices," she said.

In parts of south Scottsdale, some homes are now selling in the low $200,000s, Bloomfield said. The agent added that three-bedroom, one-bath homes in one area were recently starting at $184,000.

BUYERS ON THE HUNT
Across Scottsdale and the East Valley, agents are buzzing about increased buyer interest not only in starter properties but in high-end homes.

Agent Don Matheson with ScottsdaleRealEstate.com said his firm recently put a $6.7 million-home into escrow. He also received two offers on a $2.1 million Paradise Valley home after three days on the market.

"Anything that's priced right is definitely moving," he said.

But homes with multimillion dollar pricetags haven't been immune to the downturn.

Tighter lending standards have made so-called jumbo loans - mortgages over $417,000 - harder to come by, said Jay Butler, who heads up ASU's Realty Studies program. That's made refinancing tough for borrowers trying to escape dicey loans.

"You've got a lot of people who are stretching because they want to be in the right neighborhood or the right school district," Butler said.

Of the roughly 830 Scottsdale properties currently in the foreclosure process, 72 cost more than $1 million, according to data firm Information Market.

Nearly 220 properties have been foreclosed on so far this year, putting the city on track to far surpass the 467 foreclosures recorded in 2007.

Scottsdale's foreclosure troubles are on par with what's happening across the Valley, said Tom Ruff, a partner in the Glendale-based Information Market.

When housing may rebound depends largely on the fate of the nation's struggling economy, Butler said. Even if prices drop further, Scottsdale is a sought-after location and has a good economic base, he added.

"They'll hold their own," Butler said. "Some areas may even improve somewhat."

RENEWED HOPE
For now, more hesitant buyers seem to be abandoning the sidelines to take advantage of low prices and interest rates, and agents are hopeful.

Agent John Wake with HomeSmart said calls from interested buyers have at least doubled in recent weeks.

The question is, Wake said, will that rise in activity translate into more sales in the coming months?

Equitable's Scappaticci said he believes the market is either at or near the bottom and buyers may be realizing it.

It's a gamble to think that prices will fall lower at this point, Scappaticci said.

"If you buy a home for the long term, you're going to do well in Scottsdale," he said. "You always will."