The big news today is that sales of existing houses fell 27 percent last month to their lowest level in 15 years. I don't know how many ways I can tell you this but: The. Old. Housing. Boom. Is. Not. Coming. Back.

That boom was a highly distorted economic bubble set in a moment in history that can't be repeated for years to come, if ever. When the stock market tanked in the dot.com bust of 2001, money flowed into real estate speculation. This was abetted by cheap credit from the Federal Reserve and government policies meant to encourage house-ownership. It was made toxic when the banksters began bundling mortgages into securities, selling and reselling them as ever more exotic derivatives (read: swindles). These were so profitable for Wall Street that the pressure was on to grant mortgages to virtually anybody. A poster child for this orgy of bad practices was, of course, Washington Mutual, which went from a sober and venerable institution to become nation's biggest bank failure.

The meme was, "housing prices have never fallen." Not really true, but it justified all the bad financial models cooked up by the Best and Brightest MBAs. The stagnant and falling wages of average Americans were cloaked in the '00s by this temporary explosion of house values. As with Rockefeller's premonition of the 1929 crash when he got stock tips from newsboys, I knew we were in trouble when my low-paid barber was boasting of the mortgages she received to buy three rental properties in Phoenix. In a nation that was rapidly losing its manufacturing base, housing and everything connected with it became the major productive activity. Cities such as Phoenix, Las Vegas and Orlando were the biggest factory towns in America.

So now we continue a reckoning. A huge inventory of houses remains out there, including among all those "toxic assets" hidden on the Fed's books. The overhang of debt from the housing boom has many years to be worked out. Mortgages will keep resetting, driving ongoing foreclosures. Widespread unemployment, abetted by companies that are profitable but still not hiring, is one thing holding back a housing "recovery." But the business model of endless sprawl, flip-this-house, the mortgage Ponzi scheme and easy borrowing is gone. Gone.

Somewhere in the 2000s, much of America became like Phoenix, where real estate was the economy, rather than the consequence of a real, productive economy. No wonder smaller cities that didn't overbuild escaped the worst of the Great Recession. This is among the greatest of the great resets that are happening whether we want it or not. The last to admit it, as with the run-up to the crash, will be most of the leading economists and seers out there.

Today's Econ Haiku:

The Teamsters and Coke
Rumble over health-care costs
This is the real thing