Meaghan and Stephen Jones make raviolis and garlic bread for dinner in their Chattanooga apartment on Tuesday. The two realized that a house would require too much of a financial commitment, which conflicts with their plans of becoming missionaries.

Amber Leigh, an apartment-dwelling mother of four, lost her $240,000 home to foreclosure after a car slammed head-on into her husband's vehicle, leaving him disabled.

The family didn't pay the bills, so the bank took back the house.

With the family's credit ruined, Leigh decided to look for a safe place to raise children with the perks of suburban living without the credit requirements. She turned to one of a half-dozen new luxury apartment complexes in Chattanooga that are targeted at a formerly reliable home-buying demographic.

The $1,265 per month she now pays in rent is only slightly less than her $1,500 mortgage payment, but there's no hassle, no commitment and no upkeep.

"It is almost comparable," she said, noting she has a pool and a lawn and is allowed to keep a dog. "We wanted to offer our children the same quality of life."

Leigh is part of the shift that has reversed decades of rising homeownership and cut the share of Americans who own or are buying their home from a nationwide peak of 69.2 percent in 2004 to 66.4 percent in the first quarter of 2011. The American dream of buying a single-family home with a white picket fence is growing more elusive for those unable or unwilling to save up for a down payment or commit to what, for most families, is their biggest single purchase and investment.

The shift from buying to renting has cut the number of single-family homes started in the Chattanooga area by nearly three-fourths from the peak reached in 2005 and spurred the biggest additions to the region's apartment stock in a quarter century.

With most existing apartments already rented, at least seven major apartment complexes containing more than 1,800 units are in various stages of development in the Chattanooga area.

"We've been 100 percent occupied since we opened in June 2010," said Laura Lambert, leasing manager for Hayden Place development on Pineville Road. "I've had many couples renew leases that I thought would be a one-year-and-buy-a-home couple."

Cheaper home prices and the lowest mortgage rates in 40 years are making houses more affordable. But lenders' demand for bigger down payments and better credit scores from homebuyers, combined with recessionary job worries, have kept many potential buyers out of the housing market.

As a result, Chattanooga area home sales in June were at an 11-year low for that month. Only 534 homes were sold in June, down from a high of 864 in the same month four years ago, according to the Greater Chattanooga Association of Realtors.

Local home sales dropped again in July to 524 houses, although the median sales price rose in July by more than 11 percent, the Realtors group reported last week.

Federal initiatives designed to jump-start home buying, such as the 2010 first-time homebuyers tax credit, resulted in nothing more than a blip on the chart -- a momentary pause in housing's current downward slide.

Economic Shifts Hit Home

Many new apartment dwellers come from demographic groups that traditionally skew toward home purchases, officials say.

"Most of what we get are young professionals, married couples and seniors," said Lambert. "I have quite a bit that come in that say we're moving to the area, we're looking to buy a house but that's not going well, so we're looking into renting."

Ben Sport and his wife, Laura, recently ran the mortgage marathon, purchasing their second home, this time on Chattanooga's North Shore.

"It wasn't a complete walk in the park," said Sport, who claims a credit score in the high 700s.

The Sports were poised to sell their house as part of one transaction and buy their new house that same day, but they hit a snag.

"The house was packed, we had made arrangements for the kids, and we were an hour and a half from closing," he said.

Then they got a call. Their buyers had failed a last-minute credit check because of a change in cell phone carriers. The deal was postponed.

"I was shocked," Sport said. "It seemed a little ridiculous."

Luckily, "we had a mattress we hadn't packed and our kids had a folding bed," so the family slept overnight and closed the next day.

Their situation isn't uncommon, said Nickie Schwartzkopf, a broker for Remax Properties.

In one recent example, the deal fell through after months of work when a family decided to pay the movers with their credit card. Unfortunately, by the time they arrived in Chattanooga with all their belongings, ready to buy, the lender had conducted a final credit check. It was a disaster, Schwartzkopf said.

"The day before closing, we found out the buyers weren't qualified," she said. "The cost of the move, they had to charge it, and by the time it showed up on their charge card, it had thrown their credit out of whack."

Where Credit is Due

The drive toward rent payments instead of home loans helps families avoid the gauntlet of tightened mortgage rules, stricter credit checks and job market uncertainty, experts say.

Banks and lenders, which still are working their way through a glut of foreclosures, are fearful of making a loan to buyers who are not fully qualified.

"With the credit criteria for new home mortgages, it's pushing more renters into the market," said Tammy Yeargan, marketing director for property management firm Fogleman Management Group. "Two years ago, you were able to get into a home for little down payment. But that environment's kind of changed a little bit, because now most homes require 20 percent down payment."

In fact, one component of the Dodd-Frank financial reform law adopted by Congress last year could codify into law how much buyers have to put down for conventional home loans. It's proposed at about 20 percent, according to The Associated Press.

Even those qualified to buy a home are sometimes wary of making a multiyear housing commitment at a time when unemployment remains high and the prospect of losing a job could mean eviction.

In July, unemployment averaged 9.8 percent in Tennessee and rose to 10.1 percent in Georgia, according to state employment figures released last week.

Money matters

But even more than labor uncertainty, the erosion of the long-held belief that a home is a stable investment has made some buyers question such a commitment.

Chattanooga's median home values have slid since the bottom fell out of the market in 2007, reaching a decade-low of $124,400 in July before rising to $142,145 last month.

July's median price was less than the inflation-adjusted $132,000 median price in 2000 and more than $20,000 below the market peak in 2006, when the median home price in Chattanooga was $153,000, adjusted for inflation.

Many would-be buyers who are relocating to Chattanooga don't want to sell their homes at today's depressed levels, so many hang on to those houses -- either renting them out or letting them sit empty -- and pursue a temporary housing solution here.

"Instead of taking a loss on their houses, they're renting now," said Jennifer Grayson, president of the Greater Chattanooga Association of Realtors. "That makes them unable to buy here, because they're choosing not to sell their houses at a loss."

Grayson said other homeowners who face foreclosure or short sales are unable to obtain new mortgages for at least two years and are having to rent their homes while they rebuild their credit.

"In Chattanooga, we're seeing some light at the end of the tunnel and the share of homes sold because of foreclosures is going down again while prices are starting to stabilize or go up," she said. "But unfortunately, there are still a lot of people, especially those who are coming here from harder-hit markets, who are upside-down [owing more than their equity] in their homes and can't afford to buy."

Perhaps in recognition of the glut of foreclosed properties and preowned homes for sale, new housing starts have fallen in the Chattanooga area, which includes parts of North Georgia.

Builders began work on 4,484 new homes in 2005 but just 1,225 in 2010, according to building permit data collected by The Market Edge, a market research firm.

Residential building permits for 2011 are on track to sink even lower, so far missing 2010 results by 114 home starts in the first two quarters.

Fort Oglethorpe developer Ken Howell is set to transform what was to be a 102-acre subdivision into a $20 million apartment complex, encompassing 322 units.

"The economy has obviously changed," Howell said in April after he was granted a zoning request to build apartments instead of single-family homes.

"Thirty-five percent of the people who could qualify to buy a house in 2007 don't qualify today, so an apartment complex like what we plan to build can provide people a nice place to live, maybe while they are waiting to buy a home later."

how to buy a home

The sluggish economy may be scaring some buyers and lenders, but the weaker housing market also has cut the costs of homeownership. Falling home prices and mortgage interest rates have made buying a home a whole lot cheaper for those with good credit and dependable jobs.

The monthly payments for principal and interest on a 30-year, fixed mortgage at the prevailing rates for a median-priced home in 2006 was nearly $905. The comparable payments to buy the median price home in Chattanooga today would be under $691 a month after rates on 30-year, fixed-rate mortgages fell last week to a 50-year low of 4.15 percent.

For determined homebuyers, paying bills on time has never been more important, no matter how inconsequential the bill.

The increased scrutiny paid to the slightest ding on even the highest credit scores can cause headaches if not handled properly, said Pam Duffy, a broker for Keller Williams Realty.

"If your credit scores are not good, it's going to affect your ability to get a loan and affect the interest rate you're going to get," she said. "Paying that cell phone bill or credit card bill, all those little things you think about on a daily basis, can affect your credit scores."

But lenders also look beneath the surface when they're considering a loan worth hundreds of thousands of dollars.

Even having too much credit can raise a red flag.

"Say you have a credit card with a $25,000 limit on it; you could go into debt very fast and it would have an impact on your ability to pay the mortgage," she said.

Another overlooked obstacle can be getting an employer to verify that an employee will still have a job within a certain time frame.

"If your employer doesn't sign a two-year verification of employment, they won't make a loan to you," she said.

Looking for the Best Deals

But great deals are still out there for those with clear credit and plenty of time, Schwartzkopf said.

Interest rates are at all-time lows, and the Federal Reserve has signaled a desire to keep rates low for the next couple of years.

"You can still get a 100 percent, zero-down loan," Schwartzkopf said.

The trick is to avoid being wealthy or living in the city, and having a debt-to-income ratio of less than 33 percent.

Low-interest Federal Housing Administration-backed loans still are available for low-income buyers, and the U.S. Department of Agriculture makes loans available for rural homebuyers, she said.

With a glut of homeowners who have defaulted on their mortgages and repossessed property held by banks, more short sales or foreclosure purchases than ever are available for a quick sale.

"We're doing one right now for a woman who's buying up in Dayton, which is considered a rural area, so she's getting a 100 percent loan," Schwartzkopf said.

FHA loans are available with down payments of 3 percent to 5 percent of the total, she added.

But, "If you've made one misstep, if you've made one slow payment to Sears, that knocks you down," she said. "The lenders, they don't want to take the risk."

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