"the possibility of falling home prices over the next ten years is extremely remote. In fact, mortgages are expected to rise a whopping 5 percent on average!".Oh, how they were wrong! For most people, during the boom years, rising home prices offered a way to prosperity. The logic was, buy a house, wait for a year or so for home prices to rise and sell it at that higher price and pocket the difference. Lot of sophisticated investors as well as novices to real estate were drawn in by the easy money and the associated prosperity. But this drive for more money and prosperity that brought everything tumbling down like never before in history.
In his book The Great Inflation and Its Aftermath: The Past and Future of American Affluence, Robert Samuelson writes that the drive to prosperity is a paradox. He writes:
Modern, advanced democracies strive to deliver as much prosperity as possible to as many people as possible for as long as possible. They are in the business of creating perpetual booms. The cruel contradiction is that this promise itself may become a source of instability because the more it is attained, the more people begin acting in ways that ultimately invite its destruction. Booms often have unintended and nasty side effects; even anticipated side effects that are ultimately unsustainable—stock-market bubbles, excessively tight labor markets—can be hard to police because they're initially popular and pleasurable.
The quest for ever-more and ever-better prosperity subverts itself. It might be better to tolerate more frequent, milder recessions and financial setbacks than to strive for a sustained prosperity that, though superficially more appealing, is unattainable and ends in a devastating bust. That's a central implication of the crisis, but it poses hard political and economic questions that haven't yet been asked, let alone answered.
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