Two years after the 2008 housing collapse rocked the nation, high-end residential developments such as Sunset Ridge on Mercer Island’s S.E. 30th Street remind us that it’s not over yet.

Once a reliable investment, the practice of buying, building on and re-selling Island property is disappearing as banks continue to tighten credit, said the owner of RKK Construction, which is still sitting on a $2 million house and two empty lots at Sunset Ridge five years after buying the property.

“I don’t know of anybody, especially in this price range, doing this kind of thing on a speculative basis,” said Randy Koehler, RKK’s owner and president, about developments like Sunset Ridge. “If you can’t get builder financing, it doesn’t make sense to develop anything.”

Koehler, who has been building on Mercer Island for 32 years, said his company bought the property for Sunset Ridge before the housing market collapsed and went through the process of subdividing it, designing four and five-bedroom houses and getting permits. Now, he said, banks’ underwriting requirements for getting loans big enough to build luxury houses have become much stricter as credit markets around the country tighten up.

“With the new underwriting requirements, they nitpick the poor clients to death,” he said.

At Sunset Ridge, RKK Construction has built three houses and sold two. Koehler said he is hoping to sell the remaining house or pre-sell a house on one of the two empty lots that he has there before he goes on with construction. The available 5,032-square-foot, four-bathroom house at 8210 S.E. 30th St. has been on the market for about six months, he said.

According to the City of Mercer Island’s building and planning office, a building permit for the unsold house was issued in May 2008 and permits for building on the undeveloped lots have been issued as well.

Final approval for subdividing the property, which was once a single lot, was granted in January 2008, according to city documents.

Mainly, said Koehler and Lindy Weathers, the Coldwell Banker broker listing the Sunset Ridge properties, the economic crisis slowed down the process of financing and building houses all around the Seattle area.

“The biggest impact is it drags the project out,” said Weathers. “We can only build one house at a time.”

Weathers said that she has been working with developers for a while, helping select property to buy and then marketing it once construction is complete. She agreed that tight credit was making speculative housing developments virtually impossible.

“There have been a lot of builders who have stopped building and a lot have stopped buying land,” she said. “They can’t afford to just hang onto it.”

According to the 2009 Survey of Credit Underwriting Practices released by the U.S. Office of the Comptroller of the Currency, banks are continuing to tighten underwriting standards for getting loans because of the slow economy and a decreased appetite for risk among lenders. Loans for residential and commercial construction were among the most affected, the report said.

While this has been happening all over the country, Koehler said Mercer Island is unique in that property values here have remained fairly high. In some areas, he said, falling prices made buying property for future development attractive, but on Mercer Island the cost of land combined with the difficulty of building in a tight credit market kept developments from picking up. He said he doubted the market for housing developments would improve anytime soon.

Weathers, though, said she thought Sunset Ridge’s prospects were looking up.

“Definitely, things are better than they were,” she said. “During the last two years, things just stopped.”

What is more, she said, with Sunset Ridge looking more like a neighborhood and less like a construction site as each new building goes up, she thought people would find it a desirable place to live.

Koehler said RKK tried to design the houses at Sunset Ridge to fit the lots and take advantage of lake and city views from there. He said that designing houses over time, he had seen different things become popular, with the concept of great rooms and environmentally friendly building practices catching on lately.

Ideally, he said, Sunset Ridge would already be finished and sold.

“In a perfect world, we’d probably be built out and done there if the market hadn’t changed,” he said.

For now, though, there’s not much to do but wait and hope that before too long, things will start to get better.