While the actual pace at which home price appreciation (HPA) dropped in the first quarter can vary depending on the source, nearly all market participants agree that the housing market is cooling off - with first quarter HPA estimates ranging from little more than 3% to 8.1%. And as the potential for continued Federal Reserve tightening threatens to further stifle what has been record growth in the U.S. housing market, many are beginning to wonder when the sluggishness, and uptick in rating agency prudence, might take its toll on the home equity ABS market.

UBS noted last week that year-over-year home price increases might register a zero - or even negative - by this summer, according to quarterly data from the National Association of Realtors. The data, which tracks the average of all sales transactions in a given quarter, indicates progressive slowing; throughout 2004 and 2005, HPA was running at rates of 9% to 10% year-over-year, but since it has consistently slowed - indicating a 3.1% year-over-year HPA rate in April. And, on a quarterly basis, the NAR data has turned negative for the last two quarters, UBS reported.

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