A pair of reports provide an update on Arizona's housing bubble. "Last month, Arizona was part of a multistate $325 million predatory-lending settlement with Ameriquest, the nation's largest subprime lender. The agreement, which could result in hundreds of dollars in restitution for more than 14,000 Arizonans, was the second-largest consumer-protection settlement in U.S. history."

"Arizona does not have an anti-predatory-lending statute. About half of all states do, and Arizona Attorney General Terry Goddard has been pushing for similar protection for Arizonans since taking office in 2002."

"Question: What was Ameriquest doing wrong and what did they agree to change in the settlement? Answer: They gave managers extraordinarily rich incentives to meet certain deadlines and benchmarks. Like, you didn't get a bonus if it was a fixed-rate loan, but you did if it was an adjustable-rate. You did if it was a three-year or more prepayment penalty program. Those incentives..drove individuals to cheat. For example, there were appraisers that pretty much did most of the work for the office even though they are supposed to be independent. If the appraisal didn't come in where the manager thought it should be for the loan they wanted, they had them change it. And if they didn't change it, they were told they'd get a new appraiser."

"Right now, there are bad loans out there, which have not gone to foreclosure because the value of the underlying property has gone up so when people have gotten in trouble they could sell it and pay off their loan. When this problem is going to become most acute is if our market levels out or dips..We are going to have people that are in loans that they really shouldn't be in, that they don't have sufficient income to pay, and if property values drop even a little bit, they will find that the loan is bigger than the value of their house."

"That is extremely dangerous, and it will cause amazing dislocation for people who are not going to just lose their house but end up with significant debts.""Q: How common are these practices among other lenders? A: We are in investigations so I can't specifically comment. But I can say this: The fact that these are practices that the two major lenders in the subprime market were engaging in, I think speaks profoundly to how widespread the practices are."

And the Arizona Daily Sun is still oblivious to overbuilding. "Prospective homebuyers who didn't want to pay $330,000 for the average Flagstaff house used to be able to wangle something cheaper to the west in Williams. Now some homes there that don't even include water are coming in at an asking price of more than $350,000."

"Padre Canyon Trails and its 660 homes will be built along the edge of its namesake canyon, 26 miles east of downtown Flagstaff, if the county approves necessary zoning changes. The development would be about the same distance from Flagstaff as Parks is to the west, and the first major subdivision to leap outside Flagstaff's forest land along the eastern Interstate 40 corridor."