One might compare the turbulent state of the residential real estate market to Coney Island’s Cyclone, and bullish and bearing industry leaders are split on just how the tightening of the credit markets — for both new developments and for consumer residential mortgages — will affect the last four months of 2007.

The senior managing director of Beck Street Capital, Kevin Comer, said he expects a worsening of the residential market. “The impact of the credit crunch will roll in waves through the country in coming months, and has begun to impact many marginal projects throughout the region,” he said. “Over the last two weeks, we’ve been presented with several very high profile condominium projects either from the sponsors or the lenders, both looking to bail out of projects where sales have been slow to nonexistent.”

Mr. Comer said that if a condo project has been on the market without closing on any units, it will likely become a rental. “In most instances, this is a cut in value of at least half,” he said. “It will take time for the sponsors to realize that their equity in these projects has in fact evaporated, and time for lenders to face the harsh reality that neither of the options of taking back a property or writing down loan values is very attractive.

“We hear every day that lenders across the country are at best renegotiating loan terms at the closing table and, at worst, simply walking on firm commitments. If a lender isn’t a portfolio lender, right now they aren’t lending, at least not at terms that make economic sense. Equity is the name of the game,” Mr. Comer said. “This is now the third collapse of the debt industry that I’ve seen in my career and I can’t find any reason to believe that this one will be any different than the others. This time, mortgage REITs, subprime lenders, and the CMBS market stepped up to cause the problems. In the ’80s the credit collapse resulted in the creation of the Resolution Trust Corp., took Chase down to $3 per share, and wiped clean the Savings and Loan industry. It also created the best buying opportunity of a lifetime.”

Federal Housing Administration loans are becoming increasingly popular in these turbulent times of mortgage financing. The FHA was created in 1934 as an effort to bolster homes sales during the Depression. By financially guaranteeing loans the FHS lifts much of the risk of nonpayment and foreclosure from private lenders. It is important to remember that FHA is not a lender; it just guarantees an individual’s mortgage loan.

“Applications are way up for FHA lending, which is booming,” the president of First Alternative Mortgage Corp., Peter Cohen, said. “I have seen a 60% increase in applications and 100% increase in pre-qualification requests. I am getting calls from brokers who have nowhere to send their loan request and they are now inquiring about FHA loans. This type of lending is a full documentation loan with allows a purchase a very high loan to value of 97.75% of the purchase price. An extraordinary amount of the applications are for refinancing where borrowers are faced with large increases in monthly payments from adjustable mortgages and fearing they will fall behind on payments. But the FHA to the rescue is the battle cry for the qualified borrower.”

According to the president and chief executive officer of Manhattan Mortgage, Melissa Cohn, the good news “is that there are still plenty of banks that are lending at competitive rates. We are in a bifurcated lending environment with the portfolio lenders still going strong and lending at competitive rates that have not risen with the secondary market shut down. There are, however, banks, those that rely upon the secondary market, who have made sweeping guideline changes and have raised rates significantly. Now more than ever is the time to shop carefully if you are a qualified buyer.”

Developers and real estate brokers have varied opinions on the state of sales of condominiums this summer, and especially during August.

“I cannot say the recent capital market changes have had any effect on our for-sale housing investments — yet,” the president of the City Investment Fund, Thomas Lydon, said. “In many cases, contracts have been signed 12 months in advance of delivery so that the purchasers have not applied for a mortgage as of yet. These contracts have deposits in the hundreds of thousands of dollars, so the interest rates would have to be substantially higher than today’s rates to cause a purchaser to walk away from a deposit or fail to qualify for a loan. All this being said, if rates on home mortgages stay high for an extended period of time — six months — and the qualification standards tighten further, it has to affect price at all levels of the marketplace.”

Mr. Lydon said the psychology of the marketplace is also a key factor. “Any uncertainty causes indecision,” he said. “Home buying is a very emotional decision for most people. That emotion has been all positive in the past five years, with a few short blips. That would be my biggest concern. Nevertheless, I suggest that you listen to the talk at the cocktail parties after Labor Day to get an indication of sales of residential homes.”

The president of one of the city’s most prominent real estate developers, who asked not to be identified, said he has not seen any slowdown in sales of condominium units at this point in the cycle. “I do believe that if the credit crisis continues and spreads for mortgages remain high, that, coupled with the higher real estate taxes from 421-a change, will cause a corresponding decrease in pricing,” he said.

The managing director for developments at Prudential Douglas Elliman, Andrew Gerringer, said, “No-income verification loans and no-documentation loans are a thing of the past; only credit-worthy purchasers will be financed today. Smaller banks such as Hudson City Savings, Sovereign, and Astoria Federal have financing available at 6.5% to 7% rates for credit-worthy borrowers.”

Mr. Gerringer added: “People tend to come in and have a budget in mind when they visit sales offices and may be realistic or not of the cost of purchasing a unit. Sometimes when a buyer contract goes out to their attorneys and they find out how much the closing cost is, they and in shock are the deals don’t happen. Any increases due to a change in the 421-a abatement expiration or a rise in interest rates will absolutely have an effect on what they can or cannot buy.”

The director of special projects at Prudential Douglas Elliman, Christopher De Weaver, said he “was on the phone today with one of our top agents in our Upper East Side office who just lost a $2 million sale because of the ‘changing rules of the game.’ His buyer is very well qualified but is now going to sit it out on the sidelines until the underwriting becomes less arbitrary for jumbo loans. The buyer felt that they did everything right but they will not come back for a second attempt until the criteria is more clear and consistent.” The president of the Athena Group LLC, Louis Dubin, said sales velocity in August can’t really be gauged “because it is traditionally the slowest month of the year. The fallout in this mortgage mess is how many buyers locked their mortgages before their apartments were ready to close or have been completed. September will be a most interesting month.” The president of Alchemy Partners, Kenneth Horn, said, “During the course of the last 10 days, we have sold more than eight units in our developments in Brooklyn and Manhattan. All prices are selling at the asking prices and we are very encouraged at the pace of sales at this time, especially in the month of August. Whether this will continue is unknown.”

The president of Buttonwood Real Estate, Andrew Heiberger, who is presently selling units in the condominium conversion at 88 Greenwich St., said, “Sales are smooth and steady, with an average price of $1,125 a square foot. To date we have exactly 200 sales and closings have begun, with no cancellations or defaults.”

He added: “I am happy that this correction is finally happening. In the not so long run, it will be much better for the New York City real estate marketplace. I actually think that moderately priced apartments will go up in price, and the luxury markets — units priced at $1,500 to $2,000 per square foot — will suffer because it is these units that have been surviving on buyers from the hedge fund and credit markets and investment bankers.”

The chief operating officer at Citi Habitats, Gary Malin, said, “Clearly, there are issues in the overall market but at this time, it has not truly hit our residential market. Some of the reasons are that cooperative apartments provide an extra layer of scrutiny given the mortgage limits and reserves required, and also in the broader sense given the prices of apartments in the city, our buyer is different to a degree than other markets. Things could always change but that is the pulse now.” The president of Bellmarc, Neil Binder, said prices for mortgages “are not materially higher as a result of the subprime mortgage meltdown. However, what is going to suffer are investors and foreigners who have a high preference for unconventional lending programs and non-income verified loans. These loans are going to be much harder to find. The impact therefore will be primarily in new construction where developers are ready to take any buyer regardless of their financing risk.” A number of planned condominium developments scheduled to begin construction in the fall have been postponed or put on hold. In Midtown, a major residential condominium development planned for Fifth Avenue will likely be postponed until the developer can obtain adequate financing for the project. In Long Island City, a prominent developer who was planning to develop a reasonably priced condominium development convenient to the subway with units selling for $650 to $700 a square foot was advised last week that the lender who had expressed an interest to provide financing decided to cut off any new financing for new condominium developments in the five boroughs.

In the Rockaway section of Queens, a developer who was ready to begin construction of a development of three-family homes and condominium units has postponed construction due to the uncertainty that purchasers can obtain mortgage financing.

Now that I have various opinions from leaders, one big question remains: Where is the market at the end of the year? As one prominent hedge fund executive asked me: “Do you have any read yet on Wall Street bonuses? Until the LBO market had an infarction, this was shaping up to be the best year ever. Now I heard this weekend that a major law firm was rethinking — reducing — its space need. Oy!”

Another major owner of real estate said: “As I explained it to my colleagues, it all depends upon selling of big cigars at the end of the year. If the big cats cannot afford stogies, then they cannot buy a condo.”

Nevertheless, I think Norman Sturner, the principal of Murray Hill Properties, sums up the current state of the real estate market when he says, “The more pessimism that is printed in the media, the more that I am convinced that this is the right time to be in the market.”

Mr. Stoler, a contributing editor to The New York Sun, is a television and radio broadcaster and a senior principal at a real estate investment fund. He can be reached at mstoler@newyorkrealestatetv.com.