For years now, North County residents have been wondering how high home prices could climb. Were we seeing a housing bubble?

It turns out, however, that we weren't asking quite the right question. As the real estate market cools off, it's becoming apparent that our sky-high housing prices are due in part to a credit bubble.

And that bubble has started to pop, as companies offering riskier loans -- typically in the subprime market to borrowers with poor credit -- are experiencing a meltdown. A major subprime lender, Accredited Home Lenders of Rancho Bernardo, has seen its stock price fall by almost 75 percent in less than a year.

Is it any surprise that home prices soared when lenders loosened their credit requirements? Mortgages once termed "exotic" became commonplace in the last three years:

- The no-down payment loan, which let folks buy a home with little risk, borrowing 100 percent of its value.

- The zero-interest loan, which cuts monthly payments by half of that for a traditional mortgage, but which must be refinanced in full after several years.

- The stated-income loan, also known as a "liar loan," which allowed borrowers to exaggerate their incomes so they could qualify.

- The negative-amortization, adjustable-rate loan, known as a "neg-am ARM," whose initial interest rate can rise sharply and whose principal loan amount rises rather than decreases over time.

And now, with higher interest rates and a chilling housing market, is it any surprise that some borrowers are struggling to make their payments? Or that lenders who lowered their standards when they screened borrowers are now tightening them and shutting off the subprime spigot?

The effects of the credit bubble are starting to hit home. Foreclosures in San Diego County nearly tripled in 2006, to 13,246, from 4,541 in 2005, according to Irvine real estate information company RealtyTrac.

In North County, the company reports, hundreds of properties are in default and heading to foreclosure. In Escondido, 385 properties are in default and 63 are set to be sold at auction. In Oceanside, the figures are 490 properties in default, with 72 going to auction.

What's startling about many of these pending foreclosures is how many involve loans taken out within the last two years, during the subprime surge.

Apparently, the sky was the limit when it came to lending standards for loans small and large. Many of the loans in default were in the $400,000-$700,000 range. But one is for $1.7 million and another for $1.2 million. Before it began to tumble, the subprime market was enjoying a penthouse view.

- Contact Business Editor Ann Perry at (760) 740-5444 or aperry@nctimes.com.