If home price appreciation slows -- as many economists believe it will -- subprime credit borrowers could be hurt the most.According to John Silvia, chief economist for Wachovia Corp., $550 billion worth of B&C credit debt (about half the market) is expected to "reset" by the end of next year. "The challenge in housing will come in 2006," he predicted during an economic panel on housing prices Tuesday. "The lower income borrower[s] -- will they be able to reset?" he questioned. (Reset is in reference to adjustable-rate loans that are set to reprice over the next 18 months.) Economists speaking on the panel cautioned that consumers who, over the past few years, barely qualified for mortgage credit will be hurt the most because they have been using their homes like piggy banks. The concern is that if appreciation slows, the marginal borrower will have no equity to tap. Dean Baker, an economist for the Center for Economic Policy and Research, predicted that the housing bubble would only end once conventional rates reach 7%. He said once that happens, home prices on average could fall by 20%.

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