Duck, these subprime borrowers are a major issue. I’ll explain. First of all, if Countrywide’s most recent release is a good indication – and it should be, as Countrywide is one of the nation’s largest subprime lenders – roughly 20% of subprime borrowers are in trouble. So, assuming that subprime represents about 10% of the market, that’s 2% of the overall market. Which is to say that 2% of ALL mortgages are in trouble due to subprime ALONE right NOW. Well, what percentage of all homes with mortgages are are for sale currently? 10%? 5%? I don’t know the answer but I’d bet it’s somewhere between 5% and 10%, or thereabouts. You see where this is leading? Now you’re looking at that 2% number – which will likely be for sale either by either the owner or the lender in the not-too-distant future – relative to 5%-10%. So when you look at it this (the correct) way, it’s a HUGE issue. Now, I’m not saying this will cause prices to decline by 50%, but you gotta remember: everything important in pricing happens at the margin. You add 10%-20% more homes on the market by sellers that MUST sell and it creates real havok for pricing equilibrium.
