Which Markets are recovering - and why?

Recently, I was talking with a friend from New York about why real estate prices are falling nationwide. The conversation turned to a discussion about why some cities felt the pain more so than others.

He advanced the theory that it was all due to sub-prime mortgages - the higher the percentage of all mortgages in a given metro area, the higher the foreclosure/short sale rate and the greater the price decline.

I agreed that this factor impacts the number of properties entering the market, but the price is also largely impacted by the number of buyers. And buyer confidence, I think, can be well measured by the unemployment rate.

After I hung up, I thought more about it and did a bit of internet sleuthing the results of which are below. Which of these factors do you think is more important?