On Tuesday, The Daily Beast ran my new Housing-Mortgage Stress Index. While the U.S. housing market saw a sharp drop in July and millions of homeowners remain underwater, housing market troubles vary significantly by metro region.

The Housing-Mortgage Stress Index shows the U.S. metros whose housing markets — and homeowners — face the highest levels of stress and danger of foreclosure and falling prices. The index, developed with my collaborator Charlotta Mellander, is based on three variables:

• Negative equity — percent of mortgages where owners owe more than their homes are worth.
• Loan-to-value ratio — total Mortgage Debt Outstanding divided by Total Property Value — both from Core Logic.
• Monthly mortgage cost-to-income ratio from the U.S. Census American Community Survey.

The index weights all three variables equally and covers 142 U.S. metros.

The first map above, prepared by Zara Matheson of the Martin Prosperity Institute based on data from Core Logic, shows the percentages of mortgages that are underwater across U.S. metros. Las Vegas tops the list with nearly three-quarters of all mortgages underwater. More than half of all mortgages are underwater in Stockton, Modesto, Vallejo-Fairfield, Bakersfield, and Riverside, California; Port St. Lucie, Orlando, Cape Coral, and Fort Lauderdale, Florida; Phoenix, and Reno. In Miami, Tampa, and Detroit, more than 45 percent of all mortgages are underwater.

The second map shows the performance of U.S. metros on the overall Housing-Mortgage Stress Index. The most troubled metros are located primarily in California, Florida, and Nevada. Nine of the top 20 troubled metros – including all five of the top five – are located in California (Stockton, Modesto, Vallejo-Fairfield, Riverside-San Bernardino-Ontario, Bakersfield-Delano, along with Fresno, Visalia-Porterville, Sacramento, and Salinas). The six Florida metros on the list are Miami, Orlando, Port St. Lucie, Deltona-Daytona Beach-Ormond Beach, Lakeland-Winter Haven, and Palm Bay-Melbourne. Rounding out the top 20 metros are Las Vegas and Reno, Nevada; Phoenix; Provo, Utah; and Greely, Colorado.

Among large metros — those with more than 1 million people — Tampa, Detroit, Atlanta, San Diego, Jacksonville, Washington, D.C., Virginia Beach, Chicago, and L.A. show high levels of housing-mortgage stress, along with the five noted above — Riverside, Las Vegas, Orlando, Phoenix, Sacramento, and Miami.

There is still a great deal of localized stress in the U.S. housing market, and recovery is likely to take a lot longer than most people anticipate.

Arnold Kling is all over it:

Old consensus: we need Freddie and Fannie in order to make housing “affordable.”

New consensus: we need them in order to “prevent further house price declines,” in other words, to make housing less affordable …

Government interference in housing markets, which helped produce the disorder known as the financial crisis, is still producing disorder…

The effort to prop up home prices does the following:

1. Diverts capital from other uses.

2. Uses up taxpayer money that could be spent on other things.

3. Increases the wealth of people who find suckers to buy their houses at too-high prices.

4. Decreases the wealth of the suckers who buy now.

5. Decreases the liquidity and mobility of people who cannot find rational buyers for their houses because rational buyers do not buy into a rigged market.

6. Decreases the investment opportunities for rational buyers, who are unable to buy homes in an un-rigged market.

The old government-backed system had a rationale of sorts in the old industrial order, providing a “geographic Keynesianism” which spurred consumption of durable goods coming off of U.S. assembly lines – everything from cars to refrigerators, washer-dryers, air-conditioners, and TVs. But little of that is produced in the U.S. anymore – it’s now a subsidy to offshore manufacturers. And the economy is far less manufacturing-intensive and far more knowledge-driven. These newer economic structures come along with much greater labor market flexibility and mobility, and conventional housing policy is thus at odds with Kling’s point #5. It’s time to put this bad policy to bed. But, we’re faced with an Olsonian political bind where there is not enough political clout to counter the housing and related lobby. And as Olson long ago pointed out, it’s just these kinds of political constraints that put nations and regions on the road to economic decline. Are counter-forces sufficient to overcome them? That seems to be the real question.

More and more economic experts are saying the U.S. economy is headed for a “double-dip” recession. But actually it’s much more – and much more serious than that. Earlier this week, Paul Krugman speculated that the U.S. is headed for a Third Great Depression, noting that while recessions are relatively common and depressions quite rare, he fears our current economic circumstance is coming to look more like the Great Depression of the 1930s or the Long Depression of the late 19th century.

The first chart below from David Leonhardt of The New York Times shows the recent downturn in private-sector unemployment.

The second chart from Leonhardt’s Times colleague Catherine Rampell (one of the most statistically savvy reporters around) compares the current economic downturn to previous ones. Krugman’s point taken: This doesn’t look like any run-of-the-mill downturn.

While some do not want to face the looming reality, it is becoming clearer every single day that what we face is not any typical recession but a full-blown economic reset. My own look at the previous two similar crises shows that Great Resets like what we are now going through are generation-spanning events which require deep changes in economic, institutional, and spatial structures.

Are our economic policy-makers ready for the enormity of the challenges we face - the deep and fundamental changes in our economic system, from what we produce to what we consume – required to restore economic prosperity?

Megan is skeptical that cities can outlast the crisis. Crime will get worse, she fears, tax revenues will shrink, and middle class families will once again head for the ‘burbs. Ta-Nehisi (and many of his commenters) say economics favors big cities, especially Gotham. Case in point: how expensive it (still) is to live in Manhattan. I side with Ta-Nehisi, especially on the question of New York City, for reasons I outlined here.

As an American living in Toronto, I’ve come to learn this is peculiarly American condition and conversation. Toronto is loaded with families: middle-class, working class, upper-class, immigrant, and Canadian-born; gay and straight; married and so on. Crime, violent crime at least, is relatively low; the public schools stellar by American standards. I live downtown in a largely residential neighborhood loaded with middle-class families, of roughly the same demographic that would live in, say, Bethesda or somewhere like it. Toronto provides a workable model of an “urban family land” – which stands in sharp relief to the barbell demography of American cities which divide into the young (singles and “strollerville” couples) on the one hand and empty-nesters on the other.

This missing middle is less a problem for America’s biggest and best cities. Places like New  York and San Francisco have shown they can function without a large contingent of families. But it poses a looming problem for American competitiveness. It means America’s leading metro centers remain, by definition, considerably more stretched out. In an era where density and talent clustering are key drivers of innovation and economic prosperity, this may ultimately prove a significant competitive disadvantage for the nation as a whole, even as its biggest cities continue to fare relatively well.

New York and London are consolidating and strengthening their positions atop the global financial system, according to the FT’s John Pender.

The latest edition of the Global Financial Centres Index (GFCI) shows these two leading centers to be considerably more “resilient” than others, ranking as the world’s only “truly global financial centres.”

The GFCI, which is based on surveys of financial experts and professionals, rates financial centers on a point basis. London was on top with a rating of 781, followed by NY with 768. The ratings for these top financial centers fell only 10 and six points respectively since the onset of the crisis.

The next three centers – Singapore, Hong Kong, and Zurich – saw their ratings nosedive by 14, 16, and 17 points respectively. Tokyo has fallen out of the top 10, slipping to 15th place. Chicago is seventh, Boston ninth, San Francisco 17th, and D.C. 21st. Toronto is 11th.

Pender suggests that the only “plausible thesis” is that heightened competition to London and NY can eventually come from Asia. He points specifically to Shanghai, noting that China is running huge surpluses, its banks are well-capitalized, and its government is working hard to turn Shanghai into a global financial center by 2020.

But Shanghai currently ranks 35th on the GFCI, around the same as the British Virgin Islands and the Bahamas. Never mind it plummeting a whopping 30 ratings points over the course of the crisis. And there is considerable competition within Asia for the top financial spot – pitting Shanghai against Tokyo as well as Hong Kong and Singapore.

Perhaps a combined Shang-Kong center can emerge over time. Shanghai has the industrial muscle and economic size and scale, while Hong Kong brings openness and attractiveness to global talent.

But major banking centers are extremely resilient.  Even though New York overtook London during the last economic crisis of the Great Depression, London has come roaring back and once again eclipsed the Big Apple.

The real action will be further down the chain, as the economic crisis continues to wreak havoc on second- and third-tier financial centers.

This spring’s 2.3 million newly minted college grads are understandably worried about their economic future. Unemployment among their peers is on the rise, according to this analysis by Chicago-area employment services firm Challenger Gray & Christmas, which found the unemployment rate for 20- to 24-year-olds jumping to 13.2 percent this spring, up from 9.2 percent a year ago.

Saturday’s Wall Street Journal reports that many of the past decade’s “youth magnet” locations are losing their appeal as economic opportunities whither in cities like Phoenix, Seattle, Atlanta, Charlotte, Dallas, Las Vegas, and others which led the nation in attracting young college grads from 2005 to 2007.

So where are this year’s college grads heading?

This recent survey lists the best places for college grads to launch their careers. New York City topped the list – despite the financial crisis – with eight in 10 survey respondents listing it as one of their top destinations. Second-place Washington, D.C. was named by 63 percent. Los Angeles, Boston, San Francisco, Chicago, Denver, Seattle, and San Diego round out the top 10. And, remember, this is a list of the places that are best to find a job, not to have fun, go to great restaurants or clubs, make friends, or get lots of dates.

The list is heavy on big cities. It differs considerably from the Wall Street Journal’s youth magnet list, but it’s quite similar to a list my research team and I developed of the best places for recent college graduates which put big cities like San Francisco, Washington, D.C., Boston, Los Angeles, and New York on top. (D.C. jumped to the top of the list when we factored affordability and cost into the mix).

The appeal of big cities stems from a simple economic fact – they offer thicker labor markets with more robust job opportunities across a wide number of fields.

Getting ahead in your career today means more than picking the right first job. Corporate commitment has dwindled, job tenure has grown far shorter, and people switch jobs with much greater frequency. The average American changes their job once every three years; the average American under the age of 30 changes their job once a year.

In today’s highly mobile and economically tumultuous times, career success also turns on picking a thick labor market which offers diverse and abundant job opportunities. For new grads, picking the most vibrant location is an important hedge against economic uncertainty and the risk of layoff.

So for you newly minted college graduates ready to jump at the first job you’re offered, now more than ever it’s important to gauge the vibrancy of the job market and economy you’re signing onto. Moving is an expensive and time-consuming proposition; mistakes are hard to undo. Maybe this place finder tool will help.

And, here again, the economic crisis appears to be reinforcing the position of America’s leading talent magnets while further eroding the status of both older manufacturing centers and sprawling Sunbelt centers, for a simple reason: the location decisions of young college graduates are critical to shaping the future of cities and city-regions. The likelihood that a person will move peaks at around age 25 and then declines steeply with age: a 25-year-old is three times more likely to move than a 45- or 50-year-old. The combination of declining housing prices and concentrating economic opportunity in large U.S. city centers is only likely to compound this trend.

With GDP falling at a “hefty” 6.1 percent annual clip, Harvard’s Jeff Frankel parses the data:

The previous record-holders were the recessions of 1973-75 and 1981-82, each of them four quarters in length according to the official NBER chronology. In the current downturn, the NBER’s Business Cycle Data Committee determined that the economy peaked in the 4th quarter of 2007…  The NBER also keeps a more precise monthly chronology. The postwar record is 16 months, again shared by the 1973-75 and 1981-82 recessions. To match this monthly benchmark, the current downturn would have to have continued into April. Our best single indicator as to whether it did so will be the employment number to be released by the Bureau of Labor Statistics next Friday, May 8. It almost certainly will show that there were further job losses in April. If so, it will further confirm the dismal conclusion: one would have to go back 80 years, to the disaster of 1929-1933, to find a longer recession.

David Leonhardt interviews President Barack Obama for the New York Times Sunday Magazine on the crisis and what the the financial system, economy, society, and life might look like on the other side.

I actually think that there was always an unsustainable feel about what had happened on Wall Street over the last 10, 15 years, and it’s not that different from the unsustainable nature of what was happening during the dot-com boom, where people in Silicon Valley could make enormous sums of money, even though what they were peddling never really had any signs it would ever make a profit.

That doesn’t mean, though, that Silicon Valley is still not a huge, critical, important part of our economy, and Wall Street will remain a big, important part of our economy, just as it was in the ’70s and the ’80s. It just won’t be half of our economy. And that means that more talent, more resources will be going to other sectors of the economy. And I actually think that’s healthy. We don’t want every single college grad with mathematical aptitude to become a derivatives trader. We want some of them to go into engineering, and we want some of them to be going into computer design.

And so I think what you’ll see is some shift, but I don’t think that we will lose the enormous advantages that come from transparency, openness, the reliability of our markets. If anything, a more vigorous regulatory regime, I think, will help restore confidence, and you’re still going to see a lot of global capital wanting to park itself in the United States.

The whole thing is here. The interview shows how focused Obama is on the economy and his grasp of core economic issues. But it’s a little heavy on the current moment and on immediate tactics. I wish – I really wish – Leonhardt would have pushed harder on the issue of broad economic transformation – and that we’d have gotten to hear more of what the President thinks the economy and society will look like after the Great Reset.

Over the past few weeks, I have been taking a longer view of things, more like 100 years, to the end of the 21st century. However, 10 years of it is already almost gone! So when I read a recent issue of New Scientist on how to survive the rest of the century, I was rather surprised. In an article on “Surviving in a Warmer World,” under very simple conditions, a 4 degree C rise in global temperatures, results in the abandonment of most cities, the desertification of most of the world, the death of five billion people and the end of life as we know it. Although we do survive.

This is of course a simulation model, but I am not sure how many of us have focused on just the recent financial collapse and the global depression with the hopes that if we get out of this in the near term our troubles are over. Not only are our troubles not over, but getting out of the depression and surviving the present century are intertwined. For what a depression tells us is that the current consumption and investment trends are unsustainable financially. As Richard points out, the current investment in housing is not sustainable.

The current crisis comes from an over-investment in housing and all that goes with it and now under-consumption because of consumer debt. Society needs to put these two crises into perspective, and the way to move forward in this crisis is not just to reflate the economy at all costs (read: money expansion) but to stop consumption-led growth and start to focus on investment for the future – energy, environment, clean cars, etc.

This message is starting to sink in. Joseph Stiglitz, in a recent issue of the FT, pointed out that we can have several shots at the financial crisis until we get it right, but we only have one shot to get the environmental story right. I would argue that we do not have too many shots to get the economy and the environment right. The huge investments needed for the future cannot be put into the wrong place. If they are we might all be dead in the long run.

If one is going to invoke the creative class, and they are not going to destroy the financial sector, perhaps we can ask if the incentive structure is right to get them to focus on saving the environment from total collapse.