Subprime borrowers are those with credit scores which are inadequate to qualify for a conforming mortgage. A conforming mortgage is one that qualifies in all respects with the Federal agency guidelines and can easily be resold in the $6 trillion mortgage capital markets. Sub-prime mortgages instead are divided in such a way that creates various risk categories and then resold. What has happened recently is that these subprime mortgages have seen higher than expected defaults. That hinders the ability of providers of sub-prime mortgages to gain access to more capital for additional growth. That, in turn, has created a crisis for sub-prime mortgage providers and they have stopped making loans.  The question then becomes what will be the impact on the housing market in general? There are two schools of thought. The first says that these default rates will not rise much from here and the impact on the housing market will be muted. The big mitigating factor in this view will be continuing job growth and wage increases. The second is the doomsday scenario. This school says that construction job losses and reduced consumer spending as confidence in housing collapses will lead to an economic recession which will in turn lead to fewer people looking for new homes and on and on we go.

Here are a couple of relevant articles. From today's Wall Street Journal Economy Can Withstand Foreclosures which says these problems are likely to be manageable.

Another from today's Journal Home Builders' Confidence Slips argues that housing troubles are not over.

What will the impact of all this be on Maui? The impact is likely to be felt more in Kihei than in Wailea. But the major issue remains the mindset that the mainland visitor brings with them when they come to Paradise.

The constant pounding in the press doesn't help.