Homes are a common currency of status. As McGinn notes, many jobs in an advanced economy are highly technical and specialized. "I could tell you more about (my job)," a woman informed him at a dinner party, "but you won't understand it, and it's not that interesting." By contrast, a home announces that, whatever the obscurities of your work, you've succeeded. There's a frantic competition to match or exceed friends, co-workers and (yes) parents.

Some house lust is fairly harmless. Several Web sites (Zillow.com and Realtor.com) provide estimated prices for homes. People can indulge their nosiness about their neighbors', friends', co-workers' or relatives' finances. They can also fantasize about their next real estate adventure by watching a cable channel (HGTV) devoted to houses, home buying and renovation.

Other effects are less innocuous. Although house prices recently exploded, they have increased only slightly faster than inflation since the 1890s, concluded a study by Yale economist Robert Shiller. The recent sharp run-up may imply years of price declines or meager increases. "Buying a bigger house isn't an investment," warned Wall Street Journal columnist Jonathan Clements. It's "a lifestyle choice—and it comes with a brutally large price tag." Not only are mortgage payments higher; so are costs for utilities, furniture and repairs.

Worse, government subsidizes these supersize homes along with suburban sprawl and, just incidentally, global warming. In 2008, the tax deduction for mortgage interest payments will cost the federal government $89 billion. The savings go heavily to the upper-middle class and the wealthy—the least needy people—and encourage ever-larger homes. Even with energy-saving appliances, those homes are likely to generate more greenhouse gases than their smaller predecessors. As individuals and a society, we've overinvested in housing; we'd be better off if more of our savings went into productive investments elsewhere.

Sociologically, the "housing bubble" resembles the preceding "tech bubble." When people paid astronomical prices for profitless dotcom stocks, they doubtlessly reassured themselves that they were investing in the very essence of America—the pioneering spirit, the ability to harness new technologies. Exorbitant home prices inspired a similar logic. How could anyone go wrong buying into the American dream? It was easy.

© 2008