Make no mistake, it is still all about housing — more than three years after the onset of the collapse. As Karl Case told the New York Times (the Case as in Case- Shiller): “If prices sink 15% from here, which is a possibility, and the 2008 and 2009 loans go bad, then we’re back where we were before – in a nightmare”.
Indeed, while the C-S home price index has managed to rise for five months in a row, the rate of growth has slowed markedly and prices in nine of the 20 metropolitan cities were either flat or down sequentially in October.
...Mr. Case added that “the probability is very high of serious double-dip like 1982”. That would certainly leave the stock market vulnerable to a retest or possibly even a breach of the March lows. That is really the unknown — was this a 1930-style bounce in the market (+100%) which was doomed to fail (followed by a 30% correction) or the 1933 rally that history tells us marked the end of the fundamental bear market.
Bill - It's not "all about housing", it's all about employment. However, employment and housing, for now, are completely linked. As said above, housing may well decline some more, but with 10% employment as far as the eye can see, housing demand will be weaker than in anyone's experience, and so housing prices ain't going up any time soon.