Today's Wall Street Journal offers some expert opinion on the markets most likely to experience sharp declines in housing prices. (The article is free online, and appears on page D1 in the print version.)  Here's the bottom line:

Bubble-Metrics

Rankings of metropolitan areas in terms of the risks of future declines in house prices.

Rank PMI Mortgage Insurance (1) National City (2) Credit Suisse First Boston (3)
1 Boston Santa Barbara, Calif. Fresno, Calif.
2 Nassau-Suffolk, N.Y. Salinas, Calif. Las Vegas
3 San Diego Naples, Fla. Los Angeles
4 San Jose Riverside-San Bernardino, Calif. Riverside-San Bernardino, Calif.
5 Santa Ana-Anaheim-Irvine, Calif. Merced, Calif. Phoenix
6 Oakland, Calif. Stockton, Calif. Bakersfield, Calif.
7 Cambridge, Mass. Port St. Lucie, Fla. Sarasota, Fla.
8 San Francisco Madera, Calif. Sacramento
9 Providence, R.I. Napa, Calif. Jacksonville, Fla.
10 Riverside-San Bernardino, Calif. Medford, Ore. Naples, Fla.
11 Los Angeles Sacramento --
12 Sacramento Modesto, Calif.  --
13 Edison, N.J. San Diego --
14 New York Santa Rosa, Calif.  --
15 Detroit Chico, Calif.  --
16 Newark, N.J.-Union, Pa. Barnstable Town, Mass.  --
17 Minneapolis-St. Paul, Minn. San Luis Obispo, Calif.  --
18 Fort Lauderdale, Fla. Oxnard, Calif.  --
19 Washington-Northern Virginia Fresno, Calif.  --
20 Denver-Aurora, Colo. Los Angeles --
21 Warren-Farmington Hills-Troy, Mich. Miami --
22 Miami West Palm Beach, Fla.  --
23 Tampa-St. Petersburg, Fla. Vallejo, Calif. --
24 Las Vegas Ocean City, N.J. --
25 Baltimore Bend, Ore. --

(1) Reflects labor market data, median incomes and mortgage costs
(2) Reflects incomes, mortgages data and space constraints
(3) Based on interest-only loans, price trend, investor activity, job growth and supply constraints

Source: PMI, National City, CSFB


I haven't been posting much on this topic lately, in large part because I'm still not entirely sure how much of an an aggregate risk this really represents.  If you look at that list above, you see what we have known for a long time: The serious exposures appear concentrated in Florida, California, and a few Northeast markets. 

In addition, it is not entirely clear what the appropriate policy response might be in any event.  These remarks, from Robert Reich on Sunday's edition of Face the Nation, seem sensible to me:

Well, I don't think it's the Fed's responsibility to prick any bubbles. The Fed's responsibility is to tame inflation and, to the extent that they can possibly do it, also maintain relatively full employment. It's speculative. You know, you don't want to cave in to speculators. And the Fed--to the extent that we have a housing bubble, the Fed I think doesn't want to simply raise interest rates to try to prevent it.

On the same show, Glenn Hubbard had this to say:

[Host John] ROBERTS: Glenn Hubbard, what's the danger of this housing bubble bursting? In 53 cities across the nation now, houses--single-family homes are said to be extremely overvalued.

Mr. HUBBARD: ...I think the Fed always has to worry about inflation. That's it's job. And I think that's why inflationary expectations are under control. I think we do have a great deal of froth in housing markets. There's no doubt about it. I don't think we're likely to see a large nominal price collapse, that is largely falling house prices, but I think we'll see much slower rates of growth in house prices after 2005. For the rest of this year, it looks like the housing market is actually quite strong with starts in construction.

There is a final reason my commentary on this topic has been sparse -- others have been doing a very fine job.  I'd start with Calculated Risk.  (Four posts yesterday alone!)  If that is not enough, check out Housing Bubble.

UPDATE: Reader Hal correctly notes (in a comment below) that I should have linked to The Housing Bubble 2, instead of the Housing Bubble (which is currently an inactive site).