To say the real estate market has cooled would be putting it mildly. Home sales and prices dropped as loan conditions tightened and higher interest rates damped demand. Borrowers with adjustable-rate mortgages felt the pinch of rising rates, while owners who took loans based on the value of their homes have lost equity.
The problem has been felt most acutely by subprime borrowers – those with weak credit histories – who were often loaned more than they could afford at higher rates. Foreclosures continue to climb as borrowers default.