Writedowns are not over and banks may lose their high credit ratings. This news IS NOT priced into the market! http://www.bloomberg.com/apps/news?pid=20601087&sid=aElaUvS1sxzw&refer=home We have still not seen the top of sub prime resets. The largest amount of loan rates will adjust in the coming couple months. It takes 90+ days for the full foreclosure process to occur after that point. Here is one part of SoCal showing the extreme amount of people in trouble: Red is bank owned, blue is scheduled for auction, and green is in some stage of preforeclosure. Notice how most of the homes are still in some stage of preforeclosure. Supply of homes is guaranteed to increase in the coming months. History shows once unemployment starts to increase it will shoot up several percentage points. Here is a graph of the rates from the St Louis Fed.