Intresting article in MSN

Where a housing bust will hurt most

Hardest hit will be areas where construction is providing the most new jobs, not necessarily the places that have seen the greatest appreciation.

By BusinessWeek

The decade-long housing boom may not be over yet, but it's showing the first signs of slackening. Prices are off their peaks in a few markets, such as Manhattan; the rate of price increases has slowed in hotbeds such as California and Florida; and houses are staying on the market longer.

Meanwhile, Americans' finances are so stretched that they're actually spending more than they earn -- the savings rate has turned negative. Housing affordability is already at a 14-year low. And the Federal Reserve, fearing an outbreak of inflation, keeps jacking up short-term interest rates, gradually hiking borrowing costs for both builders and buyers.

The spillover effect
That's raising a crucial question: If the housing market turns south, where is the economic damage likely to be the greatest? Places where prices fall a lot will feel the hit, of course. But the greatest economic impact may not come where prices slide the most. Instead, the regions that see the most pain probably will be those where homebuilding has been a major source of new jobs. A decline in housing could accelerate job losses in the entire local economy, as happened in Los Angeles in the early 1990s, when aerospace layoffs and an ensuing housing slowdown led to a 10% decline in overall employment.

Housing matters so much because it has powerful spillover effects. A pair of just-completed studies by the National Association of Home Builders estimate that building 100 single-family homes generates about 350 jobs for a year, 280 of which are local.