Here's a fascinating paragraph from Bloomberg.

`Trade-Up Purchases'
First-time home buyers are more likely to be subprime borrowers. Every purchase of an existing house by a first-time buyer triggers four other sales in the housing market, said Jeffrey Otteau, president of Otteau Valuation Group in East Brunswick, New Jersey.
``They are largely trade-up purchases,'' Otteau said. ``The buyer of the $300,000 house enables the seller of that home to buy a $450,000 house, and up the line until you get to a luxury home. None of that can happen unless the first-time buyer makes the purchase.''

There are several conclusions we can draw from this. First, this explains how the subprime credit crunch will further weaken the whole housing market. 'Subprime' is not a separate part of the market. Second, we can predict that the housing market won't recover until first-time buyers find homes more affordable. Since most first-time buyers compare prices with renting, we're looking at a long way down. In addition, this also suggests that any recovery will take a long time, as the recovery starts with first-time buyers, and spreads through the market.