The stocks of the public home building companies were off sharply at the close of trading on the New York Stock Exchange Friday as hedge funds continued to short any stock having to do with the housing business and the market fretted over the sudden scarcity of credit.

Wall Street is betting that the market for both new and existing homes will deteriorate in the late summer selling season as mortgage lenders continue to tighten eligibility standards. The apparent collapse of American Home Mortgage Investment Corp. has cast doubt upon the salability of the so-called Alt-A mortgage market, which, when combined with the decimated market for subprime mortgages, has accounted for 40% of the market in recent years. To boot, Wells Fargo & Co. raised the rate on a 30-year prime jumbo mortgage to 8% from 6.75% just last week.

The street took this as evidence that the subprime disease has spread to the entire mortgage market, as well as that for corporate debt, portending a further tightening in standards that will result in less money available in the months to come. The problem for housing: there is no market for securitized mortgage packages that involve any risk at all.

The stocks of most of the big public builders were off between 3% and 15%. Even bellwethers NVR, Avatar and MDC were off more than 3%; Toll Brothers and KB were each off more than 5%; Beazer fell more than 13%; Standard Pacific was down nearly 15%. WCI, after having been down as much as 21% earlier in the day, closed down 6.5%. The public builder stocks are now all well below their 52-week lows.