a mortgage business model similar to the 60s and 70s(shooter)

Here are a couple of questions:

1. Has credit availability to buyers of residential RE tightened in proportion to the carnage seen in the secondary markets?

2.Is it any coincidence that median prices in CA were still at $580,000in August.....and at the end of October, 2 months later they were at$497,000 at the same time jumbo terms tightened up?

My answer to#1 is no. Credit is still available on historically easy terms. Givenwhat is going on, there is only one place we end up. We end up with amortgage business model similar to the 60s and 70s.....with similarcredit terms. Best credit required....extensive documentation...30%down.....payments not to exceed 1/3 income. In the end....it is thecreditors that set the price of RE.....not the 'buyers' and 'sellers'.

Theimplication of #2 is that when credit availability gets truly tight(see #1) we will see further significant drops. Look at the CAR graphin Nolands article this week. After median CA prices levitated for allof 2007....suddenly the bottom has fallen out. A 15% drop in 2 months!I honestly expect that much of this is due to the $417K conforminglimit. All thouse houses that were selling for $600-$700 are suddenlyselling for $520K because buyers can only get conforming financing.

Whathappens when the GSE troubles force (despite the politicians protests)conforming credit terms to tighten? We will see another viscious legdown.

I expect a return to classic rent/price and income/price ratios.