On July 19, 2000, at 0820 hours mountain standard time, a Schweizer 269C, N577TA, sustained substantial damage when it descended into a rough rock-strewn field while attempting to hover near Cave Creek, Arizona. The helicopter, operated by Scottsdale Helicopters and rented by the pilot under 14 CFR Part 91, struck a rock as the helicopter settled with power from a hover. The private helicopter pilot and passenger were not injured. Visual meteorological conditions existed for the local flight that departed the Scottsdale, Arizona, airport at 0810, and a flight plan was not filed. The pilot stated that he and his passenger were en route to look at a piece of property. Upon arriving at the site, he chose a spot suitable to hover for a closer look at the property. The pilot said he made a shallow approach to the spot and loaded the rotor blades as he slowed; when the helicopter reached a hover, the manifold pressure was at 25 inches. The next thing the pilot realized was that the rotor rpm was near the bottom of the green arc and the helicopter was settling toward the ground. The pilot reduced the collective a small amount and rolled the throttle full on; however, the helicopter began settling faster. The pilot used collective in an attempt to cushion the landing but the skids touched down hard on a large rock, bending the skids and fuselage structure and damaging the tail boom. The pilot reported that after the helicopter came to rest when the collective was lowered all the way, the rotor rpm recovered. The pilot then completed a normal engine cool down and shutdown procedure. The pilot said that when the rpm first decayed and the helicopter began to settle, he initially thought about trying to fly forward out of the descent. Large rocks, high brush, and rising terrain were directly in front, and he feared that the damage and injury potential there was much worse if the helicopter had continued to settle. Based on the outside air temperature and pressure reported in the Scottsdale airport METAR for the time of the accident, the density altitude at the 2,200-foot msl accident site would have been about 5,000 feet. Review of the performance charts in the Rotorcraft Flight Manual for the Schweitzer 269C revealed that the reported temperature and pressure altitude of the accident site for the estimated weight of the helicopter was very near the limit for an out of ground effect hover. The normally aspirated engine's critical altitude is 4,000 feet and the Rotorcraft Flight Manual shows that the maximum available manifold pressure at that altitude is 24.8 inches.