Phoenix Housing Market Hurt by Arizona Mortgage Lending Standards

Tighter lending restrictions that are cutting back subprime loans come at a bad time for the Phoenix housing market.

Real estate agents and lenders are losing deals because buyers can no longer qualify for such bad credit mortgage loans. And builders, already struggling to unload built-but-unsold homes, fear that the fewer number of buyers will stall efforts to get back to higher production.

Doug Fulton of Fulton Homes said his company expects to lose 10 percent of the sales of the 700 homes in its construction and delivery pipeline as buyers lose subprime Arizona mortgage loans.

“Builders are going to get a bunch of inventory back, and I am, too,” he said. “You don’t want to get one (house) back if you don’t have to. You’re kind of scratching for sales as it is.”

The National Association of Home Builders said in April that the subprime crisis pushed builder confidence to its lowest level since December 2006. The trade group said tighter lending standards were rattling consumers and builders.

The subprime fallout is hitting the resale business, too. Arizona real estate agents and lenders say it’s harder to qualify buyers and some deals are collapsing midstream as lenders tighten borrowing rules.

The changes in lending standards have been swift.

David Blank, a West USA agent in northeast Phoenix, closed a house with a bad credit home loan just two months ago in which the buyers had a bankruptcy and a foreclosure but still got 100 percent financing.

Blank said the buyers wound up putting less than $300 into the deal after securing $8,300 in closing-cost money from the seller, some of which was used as a fee to secure an interest rate lower than the market mortgage rates.

“They got in under the wire,” Blank said of the buyers. “They got 100 percent financing. . . . That’s a lot harder to get now. They can afford the payment. By making the payment, it will improve their credit. They’re living the American dream: home ownership.”