Inside Tucson Business reports from Arizona. "University of Arizona economist Marshall Vest looked around the room at the Arizona Inn before delivering an economic update last week. 'Does anyone know a good joke? We need to lighten things up a bit.' No one offered, so Vest continued."

"'The economy is losing momentum,' he said. 'Business confidence is plunging, housing is still in a recession – and could be for a while still – and the labor market is deteriorating.'"

"Vest released the latest Business Leaders Confidence Index, showing it fell 8 points. The index, released at the start of each quarter, measures business leaders’ expectations for the next three months. Taken by components, business leaders, both in Tucson and statewide are not optimistic in any one of six categories."

"'Anyone have a joke?' Vest asked a second time."

"He believes a housing recession has been prolonged and no foreseeable end at this time. 'We had just an inventory problem with housing before,' Vest said. 'Now with the credit crunch we have an even bigger problem in housing that will take longer to turn around. The asset bubble has burst.'"

"The biggest problem of a lingering housing recession, he said is that it was the housing boom that really fueled growth for several years in Arizona."

"'Housing accounted for 25 percent of all new jobs in Arizona,' Vest said. 'Tucson is selling 13,000 homes annually and there is an eight month supply of housing on the market.' All those factors in housing are leading to price declines."

The Arizona Republic. "In a new sign of Phoenix's slowing housing market, the city's Development Services Department plans to cut about 10 percent of its staff in coming months for lack of work."

"'We experienced a very significant downturn in July and August,' said David Cavazos, a deputy city manager. 'There's a large inventory of existing homes, and whenever that happens, there's a likelihood that there will be a slowdown in new home construction.'"

"Development Services Director Lionel Lyons said Phoenix officials expected that staff cutbacks would be necessary at some point given the cyclical nature of the housing industry. 'There's no conceivable way that the 2004-05 levels could continue without having a downturn,' he said."

"During the first six months this year, the number of net new housing units declined in Pinal County, according to data from the Central Arizona Association of Governments."

"There were 5,152 new houses added in the year's first two quarters, compared to more than 7,700 in the first two quarters of 2006."

"'The declines in completions for the first two quarters in 2007 weren't as deep as I'd thought they might have been,' said Jack Tomasik, planning director for the governments association."

"Though the Valley's housing market has cooled, it remains one of the nation's top five markets, said R.L. Brown, publisher of the Phoenix Housing Market Letter. Homebuilders are not likely to stop working."

"'Builders are going to bring on new subdivisions,' he said. 'It's going to be a continuing thing.'"

The East Valley Tribune from Arizona. "The Queen Creek region of Pinal County is continuing to burgeon with another new home development under way, even as many area homeowners struggle to sell their properties in a down market."

"National builder Shea Homes recently opened Cabrillo Canyon, a 107-home development. Canada-based builder Mattamy Homes has started work on 250 homes in two subdivisions in the area. Property owner Magellan Partners Queen Creek LLC is planning a subdivision of 61 custom homes. And Shea is working on a more than one-square mile development that will have nearly 2,400 homes."

"Homes in Shea’s Cabrillo Canyon will range in size from 1,501 to 2,470 square feet with prices starting from the $130,000’s. The houses are one- and two-story with three to four bedrooms and two to three bathrooms."

"With the housing market still deteriorating, some stymied house sellers have stopped holding out for a sale and are veering down a different path — becoming a landlord."

"Would-be landlords may get more than they bargained for. 'You can’t just sit back and collect rent,' said author Janet Portman. 'You’re in for a steep learning curve, and you could easily get into huge trouble.'"

"Renting out a home also has financial implications. Homeowners often won’t be able to command a high enough rent to cover the entire monthly mortgage payment, Norton said. A recent client of Norton’s had a roughly $2,400 mortgage payment but could only get $1,450 in rent."

In Business Las Vegas from Nevada. "Last week Gov. Jim Gibbons...called for an Oct. 4 economic summit on housing, and Buckley convened a special subcommittee on mortgage lending. In his speech, Gibbons talked about how foreclosure filings have more than tripled since last year and pointed out that during the first six months of 2007, Las Vegas had one foreclosure filing per 31 households."

"'Foreclosures are putting downward pressure on home prices,' Gibbons said. 'In Southern Nevada, home inventory is at historic levels and 46 percent of those homes are empty. That is negatively impacting home values. For every one percent decline in housing prices, that costs single-family residential property owners $800 million.'"

"There are mixed feelings about how far government should go in helping those who take out loans they can no longer afford."

"'Michael Krein, president of the National REO Brokers Association, handles foreclosures in Las Vegas. Krein said he believes in letting the market readjust on its own without a bailout. Most of the foreclosures he handles involves speculators and the homeowners who got hurt are adults who should have known better."

"'If you bail out the market with cheap financing, prices stay artificially high,' Krein said. 'Just let the market readjust and people will be able to afford a home again.'"

"Who would have thought it? The price of land is so high that some developers in Southern Nevada said they are finding better opportunities right now in California. That was one of the surprising revelations in a recent forum on mixed-use development."

"'There is a lot of land out there, but it is way too expensive,' said Michael Newman, senior VP with the Trammell Crow Co. in Las Vegas. 'Unless, we see some adjustment here, I have grave concerns.'"

"Newman said there are many landowners who have speculated and questions how long they can hold out given their carrying costs. He said he's seen land off the Las Vegas Beltway that is priced at $1.3 million an acre and there is no use that would support that."

"'It is going to be an interesting dynamic to watch,' Newman said."

"Some panelists suggested that some of those land owners and smaller developers are going to lose their properties over the next two years."

"Douglas Crook, managing director of Christopher Commercial, which is developing lofts, said there are going to be challenges in closing sales given what's happening with the housing credit crunch. Lenders are tightening up on jumbo loans of more than $417,000."

The Review Journal from Nevada. "The end is near for so-called stated-income mortgage loans in Nevada because of a consumer protection law enacted earlier this year, some mortgage lenders say. Assembly Bill 440, sponsored by Assemblyman Marcus Conklin, contains a provision that makes stated-income loans a crime, according to some legal interpretations."

"'You have an obligation Mr. Bank or Banker, to verify that the story you're being told (about the buyer's income) is true,' Conklin said."

"Nevada Mortgage Lending Commission Joseph Waltuch has already issued written guidance that his office will not take action against mortgage brokers who collect evidence about a borrower's ability to repay when documents aren't available to verify the all the borrower's income.'

"But critics say that hasn't persuaded lenders on Wall Street and big banks, who still believe that buying stated-income loans may become a felony in Nevada."

"Given the possibility of jail time, 'nobody is going to do that,' said Brock Davis, president of the Southern Nevada Chapter of the Mortgage Bankers Association. 'The risk is too big.'"

"Many people who took out adjustable rate loans during the housing boom are already facing the possibility of not being able to make their monthly payments when the interest rates are reset higher, Brock said."

"The new law could make it even more difficult for many of those homeowners to refinance their mortgages, because they won't be able to offer proof of income, Davis said. To sell, these homeowners often must write a check for the difference between the amount owed and the amount the house is sold for."

"For many of the homeowners that get caught by higher mortgage bills, foreclosure will be the only other option, he said. 'That's the big wave of foreclosures that's about to happen,' Davis said."

"Bill Ochs, owner of Nevada Mortgage, and other mortgage lenders note that Wall Street has stopped buying so-called 'liar loans' and curtailed other lax lending practices."

"Conklin said increasingly conservative lenders and mortgage loan investors -- but not the bill he sponsored -- are making it harder to get mortgage loans in Nevada. 'Some of these loans aren't going to be made anymore. They're just bad investments,' Conklin said."