FHA imposes new standards - house prices to plummet?

Today the FHA has proposed new underwriting standards.

For those of you who do not know how an FHA loan works, here is the gist:
If you want a house, but don't have much of a down payment, or you have bad credit, the federal government will guarantee your loan.  A normal bank still issues it.  In return, you pay private mortage insurance (PMI), have a somewhat higher interest rate.  But almost everyone gets approved and the down payment is 3.5%.

The changes being proposed could end a lot of this easy money lending.  First of all, a minimum credit score of 580 will be required for 3.5% down payments, otherwise you'll need 10%.  This won't deter too many, in my opinion, because if you have a score of lower than 580 it is doubtful you are currently in the market for a house.

Here are the changes you need to pay attention to:

1. A .5% increase in PMI.  This means that a $300,000 house will require $1500 more up front, plus an extra $125 per month payment.  This is pretty substantial.
2. Worse yet: a reduction in seller concessions from 6% to 3%.  This is a huge deal.  On a $300,000 house that would mean $9,000!  This covers a lot of the (ridiculous) fees that realtors, mortgage brokers, and settlement companies charge.

I predict that home prices could easily fall 3-5% if all of the US or more in places that have a lot of FHA loans.  But overall this is a good thing, because homes are still mostly overvalued.