Are these defaults nationwide, or concentrated in a few hot spots like California, Florida, etc.? Does the long-term tightening of mortgage money look like it will result in some lowering of housing prices, eventually making it actually easier for prospective home buyers, or is it more likely to end up with houses being unsellable, and ending up with rows of vacant houses?
California is definitely seeing higher rates due to many of the Stated income loans and interest only products sold there but it is not limited to just those more cyclical markets as was in the past. This market went through a similar cycle in late 1998 and came out OK so it is not a matter of the sky is falling, but for some to diminish the seriousness of the impact this has on the real estate industry is short sided.