Some time ago, Americans shifted toward seeing homeownership as a means to having and building wealth. The next step might be to suggest that this wealth based in homes is holding up the economy:

Those high prices are real, but are also a bit of an illusion, investor Bob Elliott argues in a post this week…

That perception is making a lot of homeowners feel relatively well-off — and helping drive consumer spending, which powers the economy.

“Without the perception of high prices there is a significant threat that the key linchpin of the whole economy might start to unravel,” Elliott wrote…

For now, the housing market recession isn’t really dragging down the overall economy. If anything, people are still spending money because their homes make them feel rich. It’s just sort of a weird situation.

This is the argument: American homeowners have a lot of wealth in their homes so they spend more on other things because they feel like they can rely on that wealth to back their purchases or debt.

This sounds different than what we saw in the late 2000s. When home values plummeted then, it triggered larger numbers of missed mortgage payments and foreclosures. This led to problems for banks and financial institutions. A bailout ensued.

The piece above suggests that if home values stagnate or fall, this would affect consumer spending, which then affects the whole economy. Either way the whole economy was affected; all the financial losses in the 2000s affected all sorts of areas even if the biggest hit was to banks and financial firms. Here, lower home values would change what people might spend on new smartphones or on food or on entertainment or clothes. A downturn in spending in an economy that relies on consumer spending would be bad news.

Put it another way: what would Americans not buy or spend on if home values had not risen as much as they have in the last decade or so?