When home prices stopped going up 12-18 months ago, the frustration was palpable but hardly fear inducing. Timelines were stretched for ROI, ‘we’ll use it as a vacation home’ rationales started flooding forth, and travertine backsplashes suddenly went wanting. But things are different now, measurably so. And that difference is not just that the demand for credit to speculate on housing has declined. It’s that supply is now contracting. And when a credit cycle starts seeing supply contract (liquidity declining), all sorts of things start to happen: speculation gets robbed to pay a tax to prudence.

But, really, what has changed? What has really changed?

It’s not as if bankers don’t have money laying around to extend or sweeten the terms of the new loans these home speculators now need. Hell, the Fed and Treasury just need to print it into existence. And certainly Senator Dodd has played his cards: he thinks Congress should help 2.2 million home owners who are getting squeezed from buying a home they couldn’t afford in the first place (and apparently who are not English speakers also because existing federal regulations demand that every possible term and contingency in lending be laid out for borrowers). .

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