The housing market is not done "adjusting." The Case-Shiller index of house prices fell at a record rate in July 2008. Its 20-city index fell 16.3% from the previous year, while the 10-city index declined an even greater 17.5% -- more than it ever has in its 21-year history. Las Vegas had the worst decline at 30%.

The big picture is that the ratio of the median house price to median income has risen from 2.8 to 4 in the last several years. That's because the mortgage-backed security (MBS) industrial complex needed more raw material for its factory. So it lent money to people who could not pay it back -- this is the $1.3 trillion subprime market. Now that it's becoming clear that more and more people will not be paying back those mortgages, the credit wind is coming out of the sails of the housing market.

The decline in housing prices could be good news if it leads to a change in American culture. We need to recognize that the celebrity industrial complex has gone hand-in-hand with the consumer lending business to create a need to live beyond our means and then fill that need with reckless borrowing. Would it be so bad for people to actually be able to afford what they own or rent rather than to feel like they are one missed payment away from losing it all?

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.