Delores A. Conway, director of USC's Casden Real Estate Economics Forecast, said she believes the collapse of the subprime mortgage market is more significant than higher gasoline prices in deflating the Inland housing market. Conway said because lenders tightened their rules in response to a rash of subprime loan failures, it has become difficult for many people to qualify as first-time home buyers. Conway said USC housing economists are closely watching the resetting of adjustable mortgages at higher rates to determine whether the inability of people to retain their homes will flood the market with foreclosures. She said mortgage distress could be important in the Inland area where a great number of homes were sold in years when the riskier adjustable products became popular. Also, she said the decline in new home construction is most evident in Riverside and San Bernardino counties because that is the region that previously saw the state's biggest construction boom.
