One nice thing about a roaring stock market is I can post economic stories without feeling guilty of "piling on". As we wrote Wednesday (Apr 8: Recession Causes Relatives to Move in Together & Sharp Drop Off in Divorces. Housing Bubble 2.0? (Not))

In places where home prices have dropped to reasonable levels - we are finally starting to see a pick up in units sold. (Mar 28, 2009: Some Real Estate Markets Warming Up) Unfortunately, a great many people in the country still live in concentrated urban areas where housing is still too expensive for average Joe. (Sep 26, 2008 : 15% of Americans Spend 50%+ of Income for House Payments)

And as I've been writing in multiple pieces for the past year+, this housing bust is unlike any before because it is coming in two parts - the first part has been the "ridiculous mortgage" phase which is atypical - it has been LEADING us into the recession. Completely out of whack with history. Now we will enter the second phase which is the more typical housing bust in that is a LAGGING phase in a recession.

For newer readers, we've been stating that the typical recession is not caused by housing - usually it's caused by excess inventories, slackening demand, cyclical peak, too high interest rates - all the normal stuff. In those type of recessions, housing falters "late" in the cycle. But by forestalling "normal" recessions for 25 years through easy money printing as a solution (sound familiar?) we built up a massive excess of cyclical forces; and to top it off we blew a housing bubble as the cherry on top. Of course as should be apparent to you - the solution to causing home prices to go where they should never go through easy money and low mortgage rates is... well.... a return to easy money and low mortgage rates. This is now the only solution we know - and this time around it's institutionalized behavior by government. (I suppose one could argue it was before as well but now its explicit v implicit) And just as we did in middle part of the decade we are celebrating the solution.... because the fall out is to be worried about "another year". For now we buy stocks and talk about white knights of government "fixing it". It will be very interesting to watch what happens to the housing market when we cease from a false 4.75% mortgage rate and go back to "normal" 6%s. But that's a story for another day....

For today, we want to talk about those markets that thus far have held up. As we enter the next stage we should see the normal drops that come once the recession begins to bare it's teeth. The ones that come from job losses - the more typical foreclosures. If I could short one thing, New York City real estate would probably be a great one - it has mostly held up 'til now. I believe that changes and they join the crowd over the next 24 months. NYC will be an especially special sort of bust due to the fact that prices were subsidized by all the free money handed out by the credit boom.