Limited Jumbo Loan Access Perils CA Market

"In San Francisco more than 60% of loans are of the jumbo variety. Lack of access to these loans has in part led to a huge drop off in home purchases in the state; and puts downward pressure on prices as home owners can no longer qualify for huge loan amounts... How will this affect the California market? With middle-class folks who were acquiring these jumbo loans using ‘afforability options’ such as interest only and negative amortization features out of the game most analysts are looking for a correction of 35-40% from the current peak of housing."

Lower prices, more renters. Would that be such a bad thing?