REAL ESTATE SQUEEZE
After years of lenders handing out easy credit, the mortgage market is spiraling downward and the fallout will likely be wide-ranging. Housing sales are stagnant, and until this year, home prices nationally had not dropped on a year-over-year basis since 1997, says Robert J. Shiller, a professor of economics at Yale University.
Until recently, most of the trouble was centered in subprime mortgages, which are made to people with weaker credit backgrounds and carry higher interest rates. Lenders began raising red flags earlier this year as more and more subprime borrowers were falling behind in their payments or losing their homes to foreclosure. This forced some lenders into bankruptcy and others to overhaul their mortgage offerings.