C.P. Morgan Homes, known in recent years for its low-cost tract housing and no-money down financing, has become the latest area builder to crumble amid the housing bust.

The company announced Thursday it was halting all operations today, after 26 years in the business, because of problems brought on by the credit crunch.

C.P. Morgan was among several builders that once benefited from an era of easy credit, which led to the collapse of the subprime mortgage market. Another major Indianapolis builder, Davis Homes, closed its doors in July.

Although it had been losing market share in recent years, C.P. Morgan had long been a major player in Central Indiana housing. The company built more than 25,000 homes in 200 neighborhoods in the Indianapolis area and Lafayette, as well as in North Carolina.

The company was considered partially responsible for the building and population boom that swept through Avon, Brownsburg, Plainfield and other parts of Hendricks County in the early 1990s.

Thursday’s news that the company would close its doors came the same day the U.S. Commerce Department reported that new home sales fell 10.2 percent in January from a month earlier, the largest drop on record.

“This definitely is not what I contemplated when I started the company in 1983,” Charles “Chuck” Morgan, the company’s founder and chairman, said in a written statement. “But this is the worst catastrophe I’ve seen in our industry in my lifetime. I could never have imagined this outcome, even as recently as six months ago.”

In a news release, the company said warranties on its homes would be honored by a residential warranty company as outlined in each homeowner’s warranty manual.

The company also said all the homes under its control have been completed. A handful of homes still need grading and landscaping, but money has been set aside to finish that work, according to David Sease, a company spokesman.

Some families are concerned that promises made by the company won’t be kept.

Patricia Conry said she and her family moved to a C.P. Morgan community in Camby two years ago from California. She said a huge part of their decision to settle in Northfield at Heartland Crossing were promises of a pool and a park, which were never built.

Without the promised amenities, the house isn’t nearly the value they thought it was, she said.

“We paid all this money for a house and now we’re not going to get the things (that were promised),” Conry said.

The company, whose slogans included, “More home than you ever dreamed possible,” specialized in starter homes with limited models and floor plans to hold down costs, according to Judy Gelinas, a real estate agent in Shelbyville.

First-time homebuyers, often those with limited finances, were targeted. Houses started at 1,000 square feet and sold for about $80,000 and up.

“Those homes aren’t for everyone, but they did serve a purpose for people who otherwise may not have been able to buy a home,” said Gelinas, an associate broker with Carpenter Realtors. “They’re pretty cookie-cutter homes.”

Many buyers used no-money down financing to purchase C.P. Morgan homes, she said.

“People were getting loans that probably should have waited,” Gelinas said. “The 100 percent financing, C.P. Morgan did a lot of that.”

Some of those homes have ended up in foreclosure, she said, adding that similar problems have happened with existing home sales.

According to the Metropolitan Indianapolis Board of Realtors, home sales in Central Indiana fell by 14 percent in 2008 from the previous year. The average selling price at the end of 2008 was $142,702, down about 6 percent from the previous year.

In 2008, the nine-county Indianapolis metro area had 4,564 new-housing permits, according to the Builders Association of Greater Indianapolis. That total represents a 65 percent drop from 2005.

“There is currently very little demand for new homes and little capital available for companies to obtain to carry them through until things turn around in the housing market, which is not likely to be until late in 2009 at the earliest,” Jeffrey Fisher, director of the Benecki Center for Real Estate Studies at Indiana University’s Kelley School of Business, said in an e-mail.

Steve Lains, chief executive of the Builders Association of Indianapolis, said he had heard that C.P. Morgan in recent days had been in talks about a possible deal with rival builders, including Pulte Homes.

He said C.P. Morgan had about 10 percent of the Indianapolis-area new housing market, but other builders will be able to fill that void.

“We do have a highly competitive marketplace that has kept pricing affordable,” Lains said.