It’s no secret subprime mortgage borrowers default. But now it’s getting worse. Borrowers of prime mortgages are starting to default, and that spells trouble for a housing market already grasping for air.
Prime mortgages, or mortgages made to borrowers with good credit, are normally seen as safer bets for lenders, at least until now, anyway. Last year at this time, delinquency rates for prime mortgages less than the $417k jumbo loan cutoff was 1.38%. Right now it’s at 2.44%. Not a suprise if we were talking about subprime; but yes, perhaps a little bit of a suprise because we’re talking about prime. I mean, prime? Really? That’s not good.

But then again, it makes sense. The financial markets are in the toilet, and it obviously isn’t a stretch to think borrowers of prime loans have lost a lot of money–not only in real estate investments but in their investment and retirement portfolios, and, at least to an extent, in the number of them who may have lost their jobs over the past couple of years.

Experts agree (and, really, do you need to be an expert at this point to predict this?) that home prices will continue to go down, probably for some years. According to the S&P/Case-Shiller Home Price Index, prices are down 20% from those astronomical 2006 highs–which were now, in hindsight, completely unsustainable and clearly artificial. For homebuyers like myself, this is good. For sellers…um…not so good.

Of course, lenders are tightening up their lending standards, and making it harder for prime borrowers to get a good loan, but maybe that’s what always needed to be the case. In a way, I’m sad to see so many people in trouble, and I understand why the government needs to help them–because, in the end, I’m being helped as well. But in a way, I am glad. Glad I didn’t jump in when everyone else did…and glad I’m now in my position of power, while those people that made the big leap when they shouldn’t have are in theirs. In terms of buying a house, I’m in the best position of my life. Thanks to bad lending and bad borrowing. Though I could have done it without you.