CALENDARS FLIPPING TO MAY TYPICALLY signal the heart of the spring selling season. But heading into housing's busiest time of year, local and national data point to rising inventories and slowing sales, and industry experts acknowledge that this spring will be different from those of recent years.

Several factors are complicating spring sales. Rock-bottom mortgage rates, which bolstered home sales during the past three years, are rising and lessening affordability. At the same time, investors have pulled out and left higher inventories in their wake. The U.S. Census Bureau reported 548,000 new homes for sale at the end of February, the highest level since January 1996.

“The trend is definitely downward,” says Celia Chen, director of housing economics for Moody's She's keeping a close eye on the hottest markets—particularly those on the East and West coasts, which she says were inflated by investor demand and are most at risk of substantial slowing.

Investors leaving the Washington market contributed to an inventory of 2,411 attached units at the end of 2005, compared with just 71 at the end of 2004, according to Hanley Wood Market Intelligence.

“This is a market in transition. Builders are whittling away at inventory left by investors,” says Deborah Rosenstein, vice president of The Christopher Cos., a builder based in Fairfax, Va., just outside Washington. “That's probably characterizing the spring selling season. It's tougher. Salespeople are relearning how to sell.”

Jim Williams, executive vice president of the Northern Virginia Building Industry Association, recently saw this when he organized a sales and marketing seminar. “Last year, we would have had 50 people show up. This year, we had 425,” he says.

Those lessons may be needed beyond July 4, the end of the spring selling season. Rosenstein, who formerly conducted housing market research, expects the shift to a buyer's market to affect the rest of the year. “The underlying demographics are really good, but prices got out of control for mass market demand,” she says. “That has to be brought back in line.”

The National Association of Realtors has forecast a 10.5 percent drop in new-home sales and a 6 percent drop in existing-home sales. But Tom Stevens, the group's president, sees some positives in the changing dynamic. “For some of those people who were gaining 15 percent to 30 percent appreciation, this might not please them,” he says, “but the market we've been heading into is better for everyone. It's more sustainable.”

Learn more about markets featured in this article: Washington, DC.