It's not that people don't want homes, it's that they can't buy them under the stricter lending standards.

That's how the National Association of Realtors explains the 17.5 percent drop in sales from April 2007, and eight percent drop in housing prices.

But the problem is worse than even the NAR says it is.

Lenders are turning the clock back to 1975, requiring larger downpayments and higher credit scores to qualify for low interest rates. That's only prudent, but what they're also doing is tightening appraisals on properties that are being sold or refinanced.

Dallas Realtor Mary O'Keefe was hit with the new lending realities in a double whammy just this week.

"I had a closing that was delayed because the lender wanted a second appraisal," says Mary O'Keefe, a Dallas broker. "I told my clients absolutely no way would they pay for a second appraisal."

That deal finally closed, but O'Keefe lost another. A client wanted to take out some equity on her townhome, buy another property to live in, and save the townhome for mailbox money. The client had an 800-plus credit score, was approved by a lender, but went to her personal banker for the HELOC. She had an appraisal from the year before for $467,000 giving her about $155,000 in equity.

Because banks want to use appraisals no less than six months old, the personal banker called for a drive-by appraisal, which came in at $400,000, more than $20,000 below the lowest priced home in the community, and $75,000 below a home that sold a year ago three doors down.

Granted, lenders are more cautious about second lien loans, but "declining market" policies are behind the conventional loan belt-tightening at GSEs Fannie Mae and Freddie Mac. By requiring stricter underwriting standards, the GSEs are offsetting the increased risk they've taken on by raising temporary loan limits to include what would have been jumbo-loans a year ago.

The point is that lenders are no longer dazzled by high credit scores. They're scrutinizing home sales trends, days on market, debt ratios, and other criteria.

Says mortgage expert David Reed, "They're really looking closely at condos."

What this mean is that housing sales are about to get a lot worse than a 23-year high in inventory. If solid gold borrowers can't get loans, there's not much hope that housing can improve very quickly.