Readers suggested a topic on the recent banking problems and home prices. "My topic for discussion would be how fellow HBBers see the decline in housing prices over the next year in light of recent credit market developments?"

"As this saga unfolds maybe we should update our projections including the magnitude of the decline, velocity of price decline and the idea of large downward price steps vs. the historical grinding declines we have seen in the past. As we know this time is different."

One replied, "In the highest-priced markets, how can there NOT be an immediate sharp price drop, if buying anything bigger than a 1br condo requires a jumbo mortgage or a Godzilla-sized downpayment?"

"Northern Virginia (my area) seems on the edge of this. Even with recent price drops, very few SFHs here are selling for less than $500k unless you go out to the far-flung exurbs. Condos and attached housing can be gotten for somewhat less than $400k, outside of the swankiest neighborhoods. But California has to be toast after this…"

To which was posted, "From your lips to gods ears. A 20 to 25% drop in some markets might mean that buyers looking for a plain old home could buy and only get mildly ripped off over 20 years. Some markets need 40% down, but with some inflation and some additional modest drops all those not directly involved with the 2004 to 2006 craze can get on with our lives."

One suggested activism. "All real estate is local (!). So it’s time for local papers, broadcasters, and economists to figure out just how inflated their markets are and let everyone know that. This is especially important for 'non-bubble' areas, where overcorrection is more likely, and for areas not in the NAR/Moody’s 146 metro area data."

One from the Washington area. "The recent rate increase for jumbo loans (among other things) will hit the NoVa area really hard. This fall and winter will be another big price leg down. A recession and/or a pullout of Iraq will be another long-term downward pull on the market, since most of NoVa employment is defense or tech."

One also points to the jumbo loan issue. "I am starting to see cracks in the dike, price drops are getting larger & more frequent. People are switching agents, upping the incentives and still not getting bites. Its the PRICE combined with the inability of buyers to get financing anything above the conforming cap, and then only if they are a PRIME credit risk."

From Reuters. "Withdrawal slips in hand, customers lined up at Countrywide Bank branches on Friday to take back their money, as parent Countrywide Financial Corp. tried to assure investors and depositors that it and its bank were stable."

"'The bottom line is it's your money,' said Yumi Oshima, who had come to move her more than $100,000 out of Countrywide certificates of deposit if the penalty was not too stiff."

"Oshima wondered how much worse the situation would become. She knew that her two CDs were insured by the Federal Deposit Insurance Corporation (FDIC) for $100,000, but said she was still concerned. 'Do I trust them?' she asked, referring to federal banking regulators. 'They're not doing so well for the entire economy.'"

The LA Times. "One concerned depositor at the Beverly Hills office, Woody McBreairty, said he heard about Countrywide's troubles for the first time Friday morning. 'I got out of bed and came right over here,' said McBreairty. 'It was a wave of shock. I thought, 'My God, I've got to go and get my money.'"

"The retiree from West Hollywood said he intended to close his CD account, which holds more than $100,000. 'Who wants to leave their money in a bank where they might lose it?' he said."

The Baltimore Sun from Maryland. "Market observers say the depth of the mortgage problem is impossible to ascertain at this point. Not only is it unclear how many more borrowers will get into trouble, but the problems can be masked by the fact that mortgages are repackaged by Wall Street and sold to investors around the world."

"'The underlying problem, of course, is that people are reneging on their mortgages, but that has set off a house of cards,' said Michael Greenberger, a professor at the University of Maryland and a former securities regulator. 'The big question is whether confidence will return.'"

The Rocky Moutain News from Colorado. "The unprecedented mortgage meltdown is hammering hundreds of thousands of homeowners nationwide who are trying to buy homes or refinance loans, at both the low end and the high end of the housing market."

"'It's a terrible, terrible situation,' said Steven Chotin, president of his namesake asset management group in the Tech Center, which structures mortgage- backed security deals. 'The market right now is in turmoil.'"

"Many market observers, especially in Denver, where foreclosures have been raging for the past six years, had been warning that it was inevitable the lax underwriting standards, easy credit and creative financing deals, such as 100 percent loans, interest-only loans, and option ARMs, would lead to a correction, if not a collapse."

"Even some well-heeled borrowers with good incomes and credit scores are being denied loans, face paying interest rates not seen for decades, or are being told to cough up at least 30 percent at closing."

"Veteran mortgage bankers and brokers, some of whom have been in the business for the past three decades, said they have never seen anything like it. Liana Pomeroy of Cherry Creek Mortgage said she has been scrambling to keep loans afloat, so far with 100 percent success. 'Every single one has been a challenge,' she said."

"Broker Susan Mathews said that many people are sitting on the sidelines, waiting for the markets to calm down. 'There's no sense of urgency,' Mathews said. 'People think that the house they are looking for will probably be here, and if not, there will be a lot of other ones to choose from.'"

The New York Times. "The turmoil in the international mortgage market is starting to make it harder for New Yorkers to get the large loans that are typical in a city where the average apartment in Manhattan costs $1.3 million."

"'It’s the end of an era of highly leveraged lending on residential apartments in Manhattan,' said Keith Kantrowitz, the president of Power Express Mortgage Bankers in Lake Success, N.Y."

"Less than two months ago, Mr. Kantrowitz said that the average mortgage request by Manhattan borrowers had nearly tripled, to $4 million from $1.45 million, in the previous two years. Now, he said, his company will not lend more than 90 percent of the value of apartments worth more than $2 million."

"'Buyers are going to have to liquidate their assets and put more money in,' he said."

"Mr. Kantrowitz said he had a client who was trying to buy a $3.6 million Upper East Side condominium with a $3.3 million mortgage. That would mean the buyer borrowed about 92 percent of the value of the home. The buyer had a strong credit score and had been pre-approved for the loan by a major bank. But last week that bank said it would lend only $3 million, or about 83 percent."

"Jeffrey Appel, director of new development financing for the Preferred Empire Mortgage Company, said most banks still made loans for jumbo mortgages, but under stricter guidelines."

"'I have had people call that, two weeks ago, I could have gotten 95 percent financing,' Mr. Appel said. Now, he added: 'It’s just not available. Things have changed overnight.'"

"Yossi Notik, a broker for the Manhattan Mortgage Company, had a client who was trying to buy a $1 million Upper East Side co-op. His client, who makes nearly $500,000 a year with a credit score in the 600s, wanted to take out a mortgage for about $850,000."

"But four days before the scheduled closing last week, the bank changed its mind and said it would not do the loan at all. Mr. Notik found his client an $800,000 mortgage with another bank. But the change forced her to delay the closing, put down more money and pay the seller’s expenses incurred by the delay."

"'She deliberated walking away from her $100,000 down payment due to the tremendous amount of stress,' Mr. Notik said."

"Robyn Sorid and her husband spent six months searching for a two-bedroom apartment in TriBeCa to buy for about $2 million. But as Ms. Sorid watched her friends have problems with changing mortgage rates, she decided to rent. Last week, she signed a lease for a place in TriBeCa."

"'Tons of friends are seeing their mortgage quotes being re-priced,' she said. 'We will probably sit it out for the next six to eight months, watch what happens and see.'"