Hipoteca - There continues to be "Eye Browse Raising" concerns over "Exotic Mortgages". Exotic mortgages are big ticket mortgages or sometimes "Creative Mortgages".

Despite the temporary interest rates brakes being applied by the FED, economists and representatives from the National Association of Realtors raised red flags about "exotic" mortgages and rising interest rates, energy prices and house prices, though they said they do not expect a doomsday scenario for the nation's housing market.

"With rising mortgage rates, home buyers are getting exhausted financially, that explains why sales have tumbled in high-priced regions of the country," said Tom Stevens, president of the National Association of Realtors.

The drop in residential construction spending is expected to slash about $21 billion this year from the U.S. gross domestic product and about $49 billion in 2007.

While one-third of the nation's population lives in markets that are still seeing rising home sales, two-thirds live in areas with declining home sales, he said, and "sales are down significantly in Florida, California, Arizona, Nevada, Virginia and Maryland. These regions experienced the greatest rise in home prices in recent years and affordability has become a major issue."

Housing inventory has tripled and quadrupled in some areas with declining sales, he said, and "these areas are vulnerable to outright price declines, particularly if interest rates were to rise further."

The ratio of home prices to income levels, and mortgage debt-servicing costs to income "have greatly increased in some markets to worrisome levels," he said, with Florida, California, Arizona, Nevada, Virginia and Maryland exhibiting "trends far above the local historical norm."

Markets in those states could experience price adjustments, he said, though "price declines are likely to be short-lived" because of job growth. Higher-than-expected rises in mortgage rates or inflation, or more monetary tightening by the Federal Reserve could cause prices to fall back further, he said.