Booyah Breakdown: Subprime Time

Here's where the trouble starts. If the banks do foreclose, they'll quickly want to dump those properties back into the market, because they don't want to hold them. That increases the inventory of homes available for sale, and that, in turn, depresses the selling price of all the homes in the area. Add that to an already ailing housing market, and we've got problems.

"The most significant impact will be caused by the disruption from foreclosures," says Grinis. "As many as one out of every 10 home sales in certain neighborhoods will be sold by a court proceeding or sheriff sale," he says.

Granted, some areas will get hit worse then others. States such as Louisiana and Mississippi have a high number of subprime borrowers, and -- no surprise -- their default rates are rocketing. Whereas more stable areas, such as Connecticut and New Hampshire, will not feel as much subprime pain.

So could this turn catastrophic? Probably not. Interest rates still remain favorable, the economy is still pretty solid, and job growth is still good. But are we near end of subprime issues? No way.

The peripheral affects are hard to estimate, says Grinis. We're starting to see some spread into the prime mortgage market as companies such as Lehman, H&R Block(HRB Quote) and GM (GM Quote)recently reported that the subprime sectors of their businesses hurt their overall earnings numbers.