The Wall Street Journal’s latest quarterly survey of housing-market conditions found that prices declined in all of the 28 major metropolitan areas tracked during the fourth quarter when compared to a year earlier.

As of Nov. 2010, housing prices declined in all major cities except for Los Angeles, San Diego, and Washington DC. See the chart below (courtesy of CalculatedRisk).

(click to enlarge)

It seemed that the earlier government’s home buying credit stalled the normal housing market correction. Now the law of physics kicks in again.

As a side phenomenon, the housing woe fuels a surge apartment rental market.   The slow recovery in labor market and the direction of housing price are the major culprits.  People rationally substitute rental for owning a house – which tends to create a negative feedback loop and dent the housing price further.

WSJ reports, with millions of families switching from being homeowners to renters, apartment-building values have soared. Investor demand is so intense, prices of some properties are approaching values last seen in mid-2007…Values of apartment buildings rose 16% in 2010, according to brokerage firm Marcus & Millichap, after falling 27% between 2006 and 2009.

When I moved out of Boston in the summer of 2009, the apartment rental market was quite dismal.  I spent a few month trying to sublet my apartment and eventually I took a hit of at least 20% .   But now the fortune reversed.

In a longer term perspective – after a big bubble, it’s no longer profitable to use housing as an investment.  Or you have to be very very patient.  Buying a house will just be buying a house; don’t expect to make money by flipping it. No more.

Here below is a long-term housing price chart, from Bob Shiller. It’s quite telling: you can see the recent housing bubble was really an anomaly by historical standards.

Finally,  I included an interview by Bob Shiller at Davos, Swiss. He gives you an update on his view on the housing market trend.