Almost daily I get updates from our corporate office modifying programs, reducing documentation options, lowering LTV's or DTI's, raising FICO scores or eliminating programs all together.  The pool of available qualified borrowers has shrunk dramatically this year.  It is a real chicken or egg question...have lenders tightened because the RE market is declining or is the RE market declining because lenders have their lending standards? 

I saw this market shift coming about a year ago.  An analyst told me at that time that 80% of the borrowers who purchased homes in California in 06 would not qualify in January of 07.  At this point, home prices were still on the incline and our lending business seemed strong.  But what a revelation!  No market can withstand the loss of 80% of its buyers...it doesn't matter if you are selling homes or widgets; that much loss of demand is going to cause a drop in prices! 

While The California market is unique in a lot of ways, the same problem has bled to many other markets.  Florida, Nevada, Arizona, Texas, Ohio, and Michigan are a few good examples where loss of demand is absolutely destroying the RE market.  I don't expect these markets to recover fully in 08 or even 09!  What I do expect is a major consolidation of Real Estate lenders and Agents leaving a stronger more professional group for consumers to choose in the coming years.  Just as nature purges crops and animal herds with disease and wheather the market place is going to purge our industry of the incompetent and the weak...for better or for worse, America will be left with fewer but better options for financing or finding their next home.