Sub-prime lending (government forcing lenders to lend to people who were not actually credit-worthy of a home loan) artificially increased demand (more people seeking to buy a home) which increased home prices. But it artficially increased demand another way too, or in an exacerbated manner by putting people into much pricier homes by not only selling them a home they shouldn’t have had, but putting them in a much more expensive one at that.

IE, the family (or individual) could have “afforded” a $125,000 home, based on their present income. But, due to their credit risk (gaps in employment history, changing jobs frequently, living with relatives instead of renting on their own) would not have qualified for that $125,000 home.

Along comes Uncle Sam, forcing a lender to lend to such applicants, and what do the lenders do? Put them in a $250,000 to $300,000 home. Double whammy.

If the first American Dream was owning your own farm and the second was owning your own house, personal business ownership would be a logical successor. It would dovetail nicely with the needs of a knowledge/service economy that emphasizes flexibility and customization. We’ll only know the Third American Dream has arrived when small factory franchises arrive, however.

But, even if the Third American Dream happens, I don’t expect the second American Dream to go away. Home ownership has a powerful pull; dropping house prices weakens the pull but, by reducing the cost of home ownership, makes less pull necessary.

Dreams die hard. In my America, even the First American Dream still kicks a little. Hobby farms and survivalist dreams of self-suficiency in the country are more widespread than they would be if they were just one leisure time option among many.