The story it is telling right now is kinda bleak. If you look at the year over year change back to the late 1980's, the last year and a half are a precipice:
And if look at individual performance of the 20 individual markets over the same 20 year period you get this thing:
Click it into its own page if you want to read it, but that's not really necessary. The trend is the trick. A dozen of these cities (note especially LA, Miami, San Diego and DC at the top of the bubble) have peaked so completely out of line with their historic curves that there's no hope of getting them moving back upward any time soon. Since many of these markets are still at more than 200% of their January 2000 index value they'll probably fall for another year at least - without even considering energy or currency crisis possibilities.
If the lines settle back down somewhere near the 2000-2001 baseline and make nice, neat bellcurves of themselves, well, oops. There's something like 5 trillion dollars of value under that curve. With that gone (and the equity markets flat or falling, which seems sort of inevitable) it doesn't look like we'll be feeling so flush over the coming years.
I think it's safe to say that this sort of residential value inflation, while natural and common as a local phenomenon, is a very bad sign when it happens across the entire national economy. And perhaps we should rethink the policy of making credit so readily accessible for residential real estate speculation (like for the millions of houses that were bought not to be owner-occupied but purely to make money riding the wave up). Because it is one thing to watch your stock portfolio crash - it's a very different thing to lose your home.
