It’s been my contention for several months now that the number of homes sold in metro Phoenix in 2008 will be a bit better than 2007 but still very low. However, 2009 will be in the range of a normal year as far as number of homes sold. At least that’s my guess.

And as I talk to people it appears that that is becoming the conventional wisdom.

That view is spectacularly summarized in this quote from Kieran Quinn, “Things will be fine in 2009.”

The Center for Real Estate Theory and Practice at the W. P. Carey School of Business at ASU had a conference on February 15 “Risk, Reward and Real Estate.” They recently put some articles about the talks online.

I particularly like the article on the talk from Kieran Quinn, chairman and CEO of Column Financial, Credit Suisse’s Atlanta-based mortgage lending subsidiary for commercial properties and current chairman of the Mortgage Bankers Association.

Prior to 2001, he noted at the conference, the record for single-family originations never exceeded $2 trillion. Then along came the boom years and from 2003 through 2006, “the market averaged well in excess of $3.5 trillion, almost reaching $4 trillion,” reported Quinn. “We think the number of originations this year will be $1.8 trillion, right back where we were in 1999-2000.

On the commercial real estate lending side, it looks like portfolio lenders, for example, insurance companies are facing significantly less competition and are making significantly more profitable loans.

One reason is that since the portfolio lenders are about the only game in town for the financing and refinancing of commercial real estate, they can “cherry pick what they want” and underwrite even more conservatively than they usually do. The portfolio lender generally underwrote loans at 75 loan-to-value. Now, they are doing 65 percent loan-to-value, said Quinn.

Then there is residential.

In residential, homebuilders were on a construction tear to meet buyer demand. The problem was a demand for new homes was not based on actual need.

“Excess,” or “artificial,” demand was created by speculative investors who were not going to be living in the houses they were buying. Unfortunately, even when it became clear that the demand for single-family properties was artificial, homebuilders couldn’t turn off the spigot. They owned land so they continued to go about their business of construction.

“The builders continued to build all through 2007,” said Quinn. “And the builders are still creating supply.”

This phenomenon was explained to me this way. Arizona home builders in 2004 and 2005 built an extra one-half year’s supply of homes. It’s now 2008 and Arizona home builders still haven’t cut out that extra half year’s production of homes to put the market back in balance.

What’s the Mortgage Bankers Associations agenda?

On the buyer end, Quinn reported, there are 9 million adjustable-rate mortgages in the market, 6 million of which are prime and 3 million subprime. “Although subprime ARMs are just 7 percent of all loans, they are 43 percent of all foreclosures,” he said. “We have got to reset those loans.”

To help stabilize the single-family market, which Quinn says will show increasing delinquencies through 2008, the MBA is pushing to modernize the FHA; supporting the Hope Now Alliance, a program that tries to get homeowners in delinquency to work with counselors and servicers; and lobbying for higher loan limits for Fannie Mae and Freddie Mac.