I'm really trying hard to find good economic stories to post to counterbalance our main themes here, but talk about a needle in a haystack.....

Obviously it is not like this in all states, but considering California - if independent - would be the 7th largest economy in the world - as goes California will go much of the nation. There is a neat interactive map directly on the NYTimes website that shows % of households with negative equity (all the usual suspects plus some surprises) and debt to value ratio by state.

Again, this "underwater effect" is something we talked about ad nauseam a year ago - and it will only get worse in the year ahead as property values continue to fall. A lot of the money we throw at the problem is only going to slow down an eventuality.... in the end people will need to afford homes at normalized income levels - until then it's all just delay and smoke and mirrors. (Dec 6: What Should Median Housing Prices be Today?) We're still not near the historical (house) price to income ratio of 2.6-3.0, but one more year of such severe drops as we experienced in 2008 should help us get there fast.

This story also highlights the consumer retrenchment we talk about constantly... and the multiplier effect - it is all derived from housing but each service job lost multiples pain across many other people. Unfortunately the best economic decision for most of these people is simply to mail the keys in, take the credit hit and lower their cost of living by a material amount by just renting anew at much more realistic rates than when these people bought....

• MOUNTAIN HOUSE, Calif. — This town, 59 feet above sea level, is the most underwater community in America. Because of plunging home values, almost 90 percent of homeowners here owe more on their mortgages than their houses are worth, according to figures released Monday. That is the highest percentage in the country. The average homeowner in Mountain House is “underwater,” as it is known, by $122,000. The first homes in Mountain House were sold in 2003, just as the real estate boom began to go into overdrive.