“If wishes were houses,” observed sociologist John Dean in 1945, at the outset of the great postwar housing boom, “a clear majority of Americans would be home owners.” Sure enough, between 1940 and 1960 the portion of the country that owned a home would jump from 44 to 62 percent, by far the most rapid increase in the ownership rate in any period of American history. Returning soldiers and families of modest means drove the surge in purchases, thanks largely to government-backed loans that made affordable mortgages widely available for the first time. The affluent society was taking shape. As Americans flocked to burgeoning suburbs, homeownership fast became the most coveted item in the inventory of the new consumer economy.
But Dean was a skeptic, an unlikely bear in a bull market. Most Americans might wish for a home to call their own–but that didn’t mean it was feasible for them all to purchase one. Homes were still the biggest of big-ticket expenses, involving large initial outlays, long-term indebtedness, hidden future costs and unpredictable price fluctuations that might plunge a family into default if the housing market collapsed (as it had a decade earlier). Furthermore, Dean warned, “the whole complex problem [of] whether a specific family should buy and what is or is not a wise buy for it is an area of acute illiteracy” among the public. The decision to buy involved far too many risks to be taken so lightly by a political culture prone “to assume that for all families home ownership is desirable financially, morally, psychologically, and from a housing angle.” Dean’s book Home Ownership: Is It Sound? was one of very few at the time to challenge the pro-ownership consensus. “For some families some houses represent wise buys,” Dean wrote, “but a culture and real estate industry that give blanket endorsement to ownership fail to indicate which families and which houses.”
Robert Shiller is also something of a skeptic. An economist at Yale, Shiller is a prominent figure in the modish field of behavioral economics, which draws on the study of human psychology and social behavior to understand how people make economic decisions. His bestselling book Irrational Exuberance (2000) foretold the dot-com bust while tech stocks were at their peak and investors remained convinced that stock prices would continue to rise indefinitely. For an updated second edition published in 2005, he added a chapter on the dangerously inflated bubble in house prices, a year before that market began to unravel, too. As prices skyrocketed by more than 50 percent between 1997 and 2004, far outpacing homebuyer incomes, Shiller cautioned that “irrational exuberance really is still with us.” By 2008 prices had tumbled 18 percent nationally and plunged even more in the worst local markets, in south Florida and the Sun Belt. Around 12 million homeowners owed more on their homes than they were worth, and mortgage defaults had tripled, driving the American economy into recession and crippling financial markets around the world.