Sub-Prime Loan Demise Might Have Unexpected Side Effect

So the big news regarding the Sub Prime loans is that the borrowers have been defaulting at alarming rates and with a mostly flat real estate market nationally, lenders have been stuck with non performing loans without appreciating housing prices to bail them out. Many of these lenders like New Century Financial are going belly up and the upshot is that even traditional lenders are tightening their underwriting requirements.

The interesting side effect of this lending fallout is its effect on one of the most watched real estate statistics out there, median home price. The vast majority of sub prime loans are written, not surprisingly, on lower priced homes. With these buyers drying up, the current home sales are and thus median home price are skewed upwards towards the higher end of the market, which doesn't always follow the economy.

So over the next few months, watch as the median home prices are reported to see if this potential phenomenon occurs. Just remember not to get caught up if the pundits claim that we've bounced off the housing floor. Keep this information in your back pocket to accurately analyze your particular situation instead of just listening to the talking heads on television. And to quote GI Joe (and who doesn't love to quote a childhood cartoon), "Now I know, and knowing is half the battle."