海角大神

Put your ear to the ground and you can almost hear the bulls stampeding. The Dow closed above 12,000 Tuesday for the first time since June 2008. The Dow is up 4 percent this year after increasing 11 percent in 2010. The Standard & Poor 500 is also up 4 percent this year, and the Nasdaq index, up 3.7 percent.

鈥淭丑别 U.S. economy is back!鈥� says a prominent Wall Streeter. Not quite.

Corporate earnings remain strong (better-than-expected reports from UPS and Pfizer fueled Tuesday鈥檚 rally). The Fed鈥檚 continuing slush pump of money into the financial system is also lifting the animal spirits of Wall Street. Traders like nothing more than speculating with almost-free money. And tumult in the Middle East is pushing more foreign money into the relatively safe and reliable American equities market.

It鈥檚 simply wonderful, especially if you鈥檙e among the richest 1 percent of Americans who own more than half of all the shares of stock traded on Wall Street. Hey, you might feel chipper even if you鈥檙e among the next richest 9 percent, who own 40 percent.

But most Americans own a tiny sliver of the stock market, even including stocks in their 401(k) plans.

What do most Americans own? To the extent they have any significant assets at all, it鈥檚 their homes.

And the really big story 鈥� in terms of the lives of most Americans, and the effects on the US economy 鈥� isn鈥檛 Wall Street鈥檚 bull market. It鈥檚 Main Street鈥檚 bear housing market.

According to the Wall Street Journal鈥檚 latest quarterly survey of housing-market conditions, home prices continue to drop. They鈥檝e dropped in all of the 28 major metropolitan areas, compared to a year earlier. And remember how awful things were in the housing market a year ago! In fact, the size of the year-to-year price declines is larger than the previous quarter鈥檚 in all but three of the markets surveyed.

Home prices have dropped most in cities already hard hit by the housing bust 鈥� Miami, Orlando, Atlanta, Chicago. But declines increased in other markets that had before escaped most of the downdraft, such as Seattle and Portland.

Things could easily get worse on the housing front because millions of owners are in various stages of foreclosure or seriously delinquent on their mortgages. Millions more owe more than their homes are worth, and, given the downward direction of the housing market, are going to be sorely tempted to just walk away. This means even more foreclosure sales, pushing housing prices down even further.

So don鈥檛 be fooled. The financial economy isn鈥檛 the real economy. The American economy isn鈥檛 back. While Wall Street鈥檚 bull market is making America鈥檚 rich even richer, most Americans continue to be mired in a housing crisis that鈥檚 worsening 鈥� and in which the Wall Street banks seem blissfully disinterested, and the Administration incapable of stemming.

------------------------------

海角大神 has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.