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The Mess Behind The Housing Crisis

You have heard it countless times, American’s were using their house as a piggy bank and as their primary means of savings. We all to one degree or another saw the house as an investment vehicle to one degree or another.

Housing Appreciation is the American Way!

But this New York Times editorial by Tyler Cowen put’s it into perspective how over reliant we have become on housing as an investment.

The fundamental problem in the American economy is that, for years, people treated rising asset prices as a substitute for personal savings. The thinking went something like this: As long as your home’s value rose every year, you didn’t have to set aside so much from your paycheck. If your stocks went up, too, so much the better; don’t forget that the Dow Jones industrial average stood in the 800 range in 1982 and seemed to rise almost nonstop for many years.
Of course, asset prices haven’t been rising much lately, so many people will need more savings for their retirement or for possible emergencies. via  NYTimes.com.

Read the whole editorial, it is well worth your time and energy.

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