A housing report from the Arkansas Times. "Northwest Arkansas has grown faster than anyone could have anticipated. Sleepy pastureland overnight became subdivisions, office parks and strip malls. The lure of easy money proved irresistible to would-be developers."

"'There were a lot of people who jumped on the bandwagon,' said Tom Terminella, a familiar name in Northwest Arkansas real estate for almost two decades. 'Every hairdresser and fireman and a lot of people who were in banking got in.'"

"Ambitious developers joined with start-up bank executives to unveil high-profile projects at glitzy functions. Now, the hangover from the big party has set in. Despite a steady population increase of about 1,100 people a month, there’s a serious oversupply of residential and commercial property."

"One economist estimates 112.9 months of housing inventory, more than nine years’ worth, at the current rates of absorption."

"'Houses were being built at such a pace that even the fantastic growth of Northwest Arkansas couldn’t keep up with it,'said Kathy Deck, at the University of Arkansas in Fayetteville."

"That reality has sobered everyone. Formerly eager developers are scaling back their plans, and their once-trigger-happy bankers are re-evaluating lending practices. 'I got the opportunity to see people jumping in the speculative market, more on the residential side,' Brandon Barber says. 'I jumped out there and built spec homes which sold at the time, just like everything else was.'"

"In early 2006, the residential market began to flatline, especially at the higher price points, as the supply of new housing stock outpaced the demand."

"'We were spread out too much,' Barber acknowledges. 'Now, as opposed to 50 projects, we can focus on seven or eight projects. … We’re definitely not as greedy, for lack of a better word.'"

"As for his existing properties that aren’t selling as well as he hoped, Barber says, 'We have set up some more creative financing and we’re going to wait for the market to come back and let the grass grow.'"

"Tom Terminella is a little more circumspect. 'In the last 24 months it’s been rather entertaining to watch this unfold,' he says. 'I watched a lot of development that didn’t make sense at the time it was happening. Now, with the correction in the market, it makes absolutely no sense.'"

"The problems are worse in Benton County than in Washington County. 'I feel like the multi-family and the single-family residential home sites, pretty much at all price points across Benton County, are oversaturated with inventory,' Terminella said."

"The biggest problem, in retrospect, was the rush to build luxury homes priced at $200,000 and above. Part of that was due to the boom mentality, but developers also became entangled in market pressures that sent land prices up. Once they acquired an expensive lot, it seemed the only way to profit was to try to sell an expensive house there."

"'When we first decided to do it, there was zero availability,' relates Travis Kershner, who started his development company two years ago, as the market took off. 'Land prices went so high so fast, and people were buying lots like crazy. The more they would sell, the more prices went up. The homes needed to be at $250,000 or above to make a profit because of the price of land. People would pay too much for land, in my opinion.'"

"Betty’s Homes, based in Bella Vista, became the most prominent casualty of the recent market slowdown when it filed for bankruptcy on Oct. 20. Then, in late November, First Federal Bank of Arkansas foreclosed on another home builder, Calloway Investments, which defaulted on $4.93 million worth of construction and mortgage loans."

"Nearly everyone involved in the industry believes the banks deserve some of the blame. 'Credit has been easier than it should have been to get,' said Brian Glenn, the chief lending officer at Legacy Bank. 'There was a lack of what we would call solid pre-lending analysis. The market had been so good for so long, decisions were made to continue to make loans because of the assumption that things will continue to keep working.'"

"'No doubt when you go from 10 bank charters to 30 in a two-year period of time, those institutions have to lend money to justify their existence,' Terminella said. 'Just to provide credit to anyone who has a reasonable idea is what got us into trouble.'"

"'It was definitely not hard to get 100 percent financing,' Kershner said. 'Anybody could buy a spec home and get financing from a bank. Then the banks started getting stung and that slowed down.'"

"Glenn makes no apologies, however. 'Really, if you want to play in the game up here, you have to be involved in real estate,' he says. 'We’ve done some speculative residential house loans for builders. ’05 did its thing, and in the first quarter of ’06, we felt the faucet starting to turn off. By summer it was off.'"

"As a result, there is speculation about more bankruptcies among land developers, which could set off a chain reaction that affects contractors, suppliers, and ultimately the banks."

"'It can’t be Mardi Gras every day,' Terminella said."