The current mortgage meltdown has the potiential to affect everybody's home prices. The reason for this is that mortgages are getting harder to find. In the recent past, a mortgage was really easy to get. If you had a job, a pulse, and a little bit of money, you could get a mortgage on a home. Because of this, anybody could buy a home. With so many home buyers out there, basic supply and demand rules existed. There was more demand for homes then the supply. As a result, home prices soared. Everybody that owned a home already, decided to move up. It was easy to do because the typical home sold within a few weeks. Sometime within a few days, often for asking price or higher. Almost everybody was on the bandwagon. People in the large luxury homes decided to downsize so the cycle was active and fast paced. People often bought more house then they could afford, and appraisers were writing appraisals for whatever was need to make the "deal" go through. The folks who could not afford the home, did some fancy financing, including obtaining mortgages with an ARM which would start out with a very low interest rate, then in a few years escalate into a higher interest rate. Or they would obtain and intrest only loan which would become interest and principle in a few years. Well a few years have gone by, and now they can not afford the payments. Foreclosures are increasing at a rapid rate. For every foreclosure in a neighborhood, you can expect the home prices to decline by about 10% or more. Back to supply and demand. More supply, lower demand, prices go down. Mortgages are harder to get. Now you need good credit, a good job, and much more for a down payment. This cuts a lot of the potiential home buyers out of the market.
For good reading, see CNN Money, Real estate section.