Future house beautiful

The real estate bubble that kicked off the 21st century taught us some things that a home isn’t. It isn’t a way to get rich quick. It isn’t a cash machine. It isn’t a speculative investment that’s guaranteed never to lose value.

This is not to make light of the pain of people who have suffered from the real-estate-fueled financial meltdown. It wasn’t the buyers who made those claims about residential real estate—it was the people who were making the loans. Say what you may about undeserving people getting loans they shouldn’t have gotten, but remember one thing: not one of the borrowers ever approved a loan. That was done by the people who made money writing the loans.

Few of the people who bought during the bubble have gotten any help from banks or the government. Lenders and speculators, on the other hand, got billions in bailouts. CoreLogic, which provides analytical data on real estate and financing, estimates that, in the fourth quarter of 2011, the difference between the current value and the amount owed for underwater loans was $717 billion. That is hardly more than the $700 billion handed over instantly to banks and corporations in the early days of the financial meltdown—and a fraction of the trillions in loan guarantees and other assistance the big players got. We could have reduced the principal on every underwater loan to current market value for less money than we’ve pumped into the banks and corporations that caused the problem in the first place.

But the residential real estate market remains a mess, with 2.7 million foreclosures during 2011 alone, and many more to come. This has been an “unprecedented cycle,” says Walter Molony, spokesman for the National Association of Realtors. “We’ve never had this kind of mortgage market before, and it’s going to be at least another year or two before foreclosures stabilize.”

And the crash has expanded well beyond the much-maligned subprime market. High unemployment following the financial meltdown has left previously rock-solid homeowners losing their homes to foreclosure in record numbers.