Much of the problems associated with the current recession center around the so called "housing bubble" and that bubble's ensuing "pop". Housing prices have stabilized in many areas across the country. However, more trouble is on the horizon.
The following article discusses the problems that many homeowners are about to experience in their pursuit of the American Dream:
http://www.businessinsider.com/fitch-check-out-the-payment-shock-alt-a-mortgage-holders-are-about-to-feel-2010-1
For definition of prime, sub prime, and A-1 loans:
Prime loans are for those with good credit scores and meet the requirements normally established for a loan. Less than prime are called A-Paper (alternative) or sub prime. The article discusses the A-Paper and subprime loans. Many of the homeowners with A-Paper loans may have in fact had good credit, they just didn't qualify for the loan for some reason, such as insufficient down payment.
Over the next 2 years, many of these less than prime loans are going to reset with high payments after the "teaser" rates are finished. Most homeowners and lenders hoped the "bubble" would continue and people could just refinance when the rates changed. Now many can't refinance as their homes are worth less (underwater) than what is owed on them. With unemployment high, many don't qualify to meet income or job security requirements.
Expect further downward pressure on home values over the next several years in many locations.
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