A few thoughts on how the market plunge may effect cities:

As defaults add up in the subprime mortgage market, and foreign investors pull capital out, the impact on the housing market will be less pronounced in older cities, where pricing is kept at least somewhat rational by limited supply, than in the Southwest, Southeast, Vegas, and other areas with room to expand. Homeowners in the Southwest are three times more likely to have subprime loans that those on the coasts.

It'll be interesting to see how this plays out locally in New York, where new Governor Eliot Spitzer's proposed first budget already spends more than the state can afford, matching the state's prevailing spend-every-dollar-that–comes-in budgeting plan, and where an off year on Wall Street may bring down the whole house of cards.