Stocks went down and pundits came out of the woodwork worrying about the meaning of parting remarks made by Federal Reserve Chairman Alan Greenspan last week at a Federal Reserve symposium held in Jackson Hole.

Greenspan is retiring as Fed chief after 18 years of service in the position.

Like Polonius cautioning his son Laertes, Greenspan had lots of sage advice to pass along to his fellows.

Instead of "Give thy thoughts no tongue ...," Greenspan suggests, "Our forecasts and hence policy are becoming increasingly driven by asset price changes."

Cue real estate.

"The steep rise in the ratio of household net worth to disposable income in the mid-1990s, after a half-century of stability, is a case in point," said Greenspan. "Although the ratio fell with the collapse of equity prices in 2000, it has rebounded noticeably over the past couple of years, reflecting the rise in the prices of equities and houses."

Whether the current wealth-to-income will continue, Greenspan doesn't know, but he suggests that investors are wiling to accept lower compensation for risk.

"The lowered risk premiums -- the apparent consequence of a long period of economic stability -- coupled with greater productivity growth have propelled asset prices higher," says Greenspan. "The rising prices of stocks, bonds and, more recently, of homes, have engendered a large increase in the market value of claims which, when converted to cash, are a source of purchasing power. Financial intermediaries, of course, routinely convert capital gains in stocks, bonds, and homes into cash for businesses and households to facilitate purchase transactions. The conversions have been markedly facilitated by the financial innovation that has greatly reduced the cost of such transactions."

But he warns that an increase in the market value of asset claims is in part the indirect result of investors accepting lower compensation for risk. "Such an increase in market value is too often viewed by market participants as structural and permanent," he intones. "To some extent, those higher values may be reflecting the increased flexibility and resilience of our economy. But what they perceive as newly abundant liquidity can readily disappear. Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher prices."

"This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums," he says.

Translation -- the economy might suddenly smack investors who are highly leveraged in real estate in the hopes of making quick bucks.

When it happens, "it" meaning buyers stop buying, Realtors say "the wind died."

Bubble talk alone might do it, as investors read the news and start to worry. Diminishing affordability might also hurt the housing market, as in California where affordability is quickly approaching all-time lows. A depleting buyer pool might also do it, as buyers who are stretching find rising prices make them unable to qualify for even the most generous loan packages.

"We're scraping the bottom of the barrel for buyers now," says Jim Crawford, an Atlanta area Realtor.