Using the home price indexes of the Federal Housing Finance Agency, I calculated the change for house prices for each state during the two years ended in June. Nationally, that is the approximate period since home prices peaked.
Sure enough, the red states that have suffered more than other red states are also more likely to turn blue.
President Bush carried 31 states in 2004. The realclearpolitics Web site gives Mr. Obama some chance to win 14 of those states. (That is, the states are not listed as solid Republican. They are either seen as leaning Republican, toss-ups, or more likely to vote for Mr. Obama.)
Of the 10 red states where home prices did the worst since the peak, 9 are seen as having some chance of being lost by Mr. McCain. (They are Arizona, which is leaning Republican, Nevada, Florida, Indiana and Missouri, all toss-ups; Colorado, Ohio and Virginia, all leaning Democrat; and Iowa, which is rated solidly Democrat.)
Of the 10 red states that had housing prices do the best, only 3 are seen as possible defectors to the Democrats. (They are New Mexico, which is leaning Democrat, and Montana and North Carolina, both toss-ups.)
<http://norris.blogs.nytimes.com/2008/10/28/housing-prices-and-mccain/>