I read a very nice, concise article on what we're likely to see happen to the US economy, over the coming months and years.

From today's Times:

The Federal Reserve sent the stock market soaring yesterday. So can it stop the decline in home prices, too?

... Mark Zandi, chief economist of Moody’s Economy.com, ran an analysis for me this week in which he looked at home values, mortgage rates, tax rates and incomes going back to 1968. Taking all these into account, he found prices were about 20 percent too high.

Of course, I must point out (as does the reporter), that the decline in average home prices is on a national basis. While some areas might see drops of up to 40% (er, did I mention Detroit?), others might see little or no drop (although whether or not this should include the rate of inflation, I don't know).

My belief, based on current supply and demand, is that Boston proper real estate prices will stay about where they are, today.

(I pretty much agree with anything Mark Zandi says. He's cool. So is Bill Gross, at PIMCO. Oh, and where is Edward Glaeser these days??? Why is he so quiet?)

(I also should add, I think most economists and analysts opinions on the direction of the market assume one thing: the cost of money will stay constant. However, as we all know, the cost of money is NOT constant, in the US. The Federal Reserve can change it, twelve times a year.

One story I read today said that in order for the housing market to get back in line, interest rates need to drop to approximately 3.75% (how you can measure something like that in such specific numbers is beyond me and probably impossible, but that's economists for you ...).

Don't rule that out. The Fed has done stranger things.

If they do drop the rate, the economy could jump into overdrive, money would be spread far and wide, and the results would be worse than the cause.)

More: Will the Fed Reverse the Housing Slump? - By David Leonhardt, The New York Times