It's been unnerving to read about the recent troubles in the housing market, because it seems to conform in some respects to other bubbles we've seen and yet it is unlikely--just as with those other bubbles--that our society will derive any longterm lessons from these troubles. The housing market is beset by twin problems: less demand resulting in depreciating property values and inability on the part of homeowners, especially homeowners with bad credit histories and/or unsavory home loans, to pay down their mortgages. As with so many overheated markets of the past, the housing market, which I recall analysts declaring a solid investment a few years ago, has overextended itself. For this, Wall Street deserves a good amount of blame, as investment banks encouraged a market of loans for people with bad or "subprime" credit. These loans were often complex and ill-fitting for their holders. The problems of the subprime market seems to be gettng a good deal of attention in the business press but less attention in the general press, that is less attention as it relates to the average consumer.
This is a severe oversight, because many people are defaulting on their mortgages and facing foreclosures on their homes. Reporting on the economy tends to focus too much on the performance of stock indexes and too little on the economic well-being of most people. It also tends to only fleetingly acknowledge how the market impacts most people. In the case of a housing market, it looks like another new fad on Wall Street has proven dysfunctional and illusory as a steady investment. At a time when caution and some aversity to risk are undervalued--as seen in the (perhaps soon to end) overabundance of credit--it is a needed (though probably unlikely) change for bankers and analysts to think cautiously and realistically rather than impetuously and riskily about the nature of a good investment.