The Genesis of the housing crisis

Rick Moran
In a very long but very informative article in the Spring issue of National Affairs (successor to the vital periodical The Public Interest), history professor and author Vincent J. Cannato expertly dissects where government housing policies failed spectacularly and caused the meltdown of September, 2008.

Cannato delves into the psychological reasons for home ownership in America and thoroughly examines how well meaning but very wrong headed policies led directly to the crisis.

From his conclusion:

No matter what the federal government does, the desire to own a home will continue to burn in most Americans' hearts. That desire is an inseparable piece of the larger American Dream, and it generally makes good practical, social, and economic sense. Nor is it reasonable to expect government to abandon completely its role in the housing-credit markets, which are essential to the nation's economic health.

But it is time to start reminding ourselves that the dream must be tethered to reality. If we are honest, we will acknowledge that home ownership is not for everyone, and that renting is a perfectly reasonable - in fact, preferable - option for people in some circumstances. It is simply not rational to expect that the line on the home-ownership chart can or should keep rising until it reaches 100%.

As John Dean wrote 65 years ago, "For some families some houses represent wise buys, but a culture and real estate industry that give blanket endorsement to ownership fail to indicate which familes and which houses." In 1945, Dean was bucking the tide. But in the wake of the Great Recession, his wise words offer a message that our policymakers need to hear once again.

Hat Tip: Ed Lasky
In a very long but very informative article in the Spring issue of National Affairs (successor to the vital periodical The Public Interest), history professor and author Vincent J. Cannato expertly dissects where government housing policies failed spectacularly and caused the meltdown of September, 2008.

Cannato delves into the psychological reasons for home ownership in America and thoroughly examines how well meaning but very wrong headed policies led directly to the crisis.

From his conclusion:

No matter what the federal government does, the desire to own a home will continue to burn in most Americans' hearts. That desire is an inseparable piece of the larger American Dream, and it generally makes good practical, social, and economic sense. Nor is it reasonable to expect government to abandon completely its role in the housing-credit markets, which are essential to the nation's economic health.

But it is time to start reminding ourselves that the dream must be tethered to reality. If we are honest, we will acknowledge that home ownership is not for everyone, and that renting is a perfectly reasonable - in fact, preferable - option for people in some circumstances. It is simply not rational to expect that the line on the home-ownership chart can or should keep rising until it reaches 100%.

As John Dean wrote 65 years ago, "For some families some houses represent wise buys, but a culture and real estate industry that give blanket endorsement to ownership fail to indicate which familes and which houses." In 1945, Dean was bucking the tide. But in the wake of the Great Recession, his wise words offer a message that our policymakers need to hear once again.

Hat Tip: Ed Lasky