And it's about to become even more difficult. Mortgage insurance companies, which provide coverage to borrowers who must have the insurance if they cannot make a 20 percent down payment, now consider St. George to be a "declining area" in terms of home prices.

Simply put, that label means it will be more difficult for homebuyers in that part of the state to qualify for conventional loans and create more of a hassle to apply for them. In many cases, borrowers will have to put down more money.

There are alternatives to conventional loans, such as loans insured by the Federal Housing Administration, but it doesn't make sense for all borrowers to go that route. It also may take a bit of effort to find a lender that is approved to make FHA loans. And there always is the threat that the FHA could end up requiring the same restrictions now in place with conventional loans.

Although the St. George metro area is the only Utah urban location labeled as "declining," lenders fear communities along the Wasatch Front could end up being targeted in the coming months, as well, affecting an even larger pool of borrowers.

"I was shocked when I first heard about this," said Launa Butler of Habitat for Humanity of Washington County, which aims to help low-income people achieve homeownership. "You just don't want to hear about anything right now that makes it more difficult to get a home loan."

St. George isn't being singled out, of course. More than 9,000 Zip codes nationwide have been labeled as "declining" by the insurance companies.

To understand why St. George made the list, you have to look at the timing of the area's real estate boom and the median selling price in the city, which is about $270,000. That's nearly $50,000 higher than the median for Salt Lake County.

Prices in the St. George area rose only 1.82 percent from the fourth quarter 2001 to the fourth quarter 2002, before logging a 2.85 percent increase from 2002-2003, according to the Office of Federal Housing Enterprise Oversight, a federal agency that tracks home values.

Then the real estate market began to really take off. Prices rose 16.2 percent from 2003-2004 and a whopping 35.3 percent from 2004-2005. Another 12 percent increase kicked in from 2005 to 2006.

But last year the market came to a screeching halt, with a nearly 2 percent decline in prices from the fourth quarter 2006 to the same period in 2007. No one is quite sure whether prices will level off from here, or continue to fall.

One big problem with declining prices is that homes quickly can become worth less than what buyers paid for them - or even less than the amount borrowed - especially if borrowers made little or no down payment.

A 10 percent decline in home prices, for example, essentially wipes out a $25,000 down payment on a $250,000 property. Industry data shows that the less equity a borrower has in a property, the more likely a loan will end in default or even foreclosure. No equity or negative equity - where a homeowner owes more than the property is worth - is the worst-case scenario.

Mortgage insurance companies provide the coverage that protects investors in mortgage-backed securities against the borrower defaulting on a loan. Make a 20 percent down payment on a conventional loan and generally you don't have to have mortgage insurance. Put down less than that and you'll have to buy insurance at for $100 to several hundred dollars per month.

With the "declining" label, "it's going to be much more of hassle" to get a conventional mortgage loan in St. George, said Wayne Briggs, a mortgage broker there.

"Lenders are going to be more careful with appraisals, sometimes ordering a second appraisal," he said.

And many borrowers will have to make more of a down payment than they did before.

Gary Nielson, president of the Utah Mortgage Lenders Association, said many borrowers in the St. George area could simply avoid conventional loans and go with a loan insured by the FHA.

Some borrowers, however, may find getting an FHA loan more costly than taking out a conventional one. Also, finding an FHA lender could be a bit of a hassle in some cases.

St. George Realtor Lori Chapman, president of the Washington County Board of Realtors, said borrowers will need to work harder to qualify, but she's confident that many will be able to find some type of loan program that will work in their situation.

Chapman believes the changes in the lending industry over the past eight months - including the tightening of lending standards nationwide in response to the nation's subprime lending crisis - aren't all bad.

"It's going back to basic, sensible lending practices. You have to put some money down. You have to have decent credit. You have to document your income. "

But some people, such as Emili Dallon, have a hard time taking all those steps. Dallon sells Pampered Chef-brand kitchen accessories and for more than two years has made a good living doing so.

But when she and her husband moved to St. George late last year they were told they could not count Emili's income when applying for a mortgage. The fact her husband had just started a new job caused some hassles, too, although they eventually were ironed out and the couple were able to buy.

It's hard to tell whether the Dallons' lending hassles were caused by the overall tightening of lending standards occurring nationally or whether they were under extra scrutiny because they were buying in St. George.

All Emili Dallon knows is that it was a hassle.

"You hear about this kind of stuff on the news," she said. "But it really hits home when it happens to you."

lesley@sltrib.com