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Is the American dream a nightmare?

Opinion: The hidden menace of homeownership.

A foreclosed home in Stockton, Calif., May 13, 2008. (Robert Galbraith/Reuters)

It was a startling and controversial conclusion. But now it is beginning to make more sense. It turns out that a high rate of homeownership just might be bad for the economy.

Homeownership has been a long nurtured desire of many Americans. Public officials relaxed mortgage requirements 10 years ago because they wanted everyone to live the dream. It seemed to be great for the economy, until the crash last year.

Americans weren’t the only ones who caught the fever. Some Europeans bought even more property and are suffering even greater consequences.

Melanie Bowler, an economist at, has found that the hardest hit property markets in Europe were the ones with highest rates of homeownership.

Estonia, Latvia and Lithuania had a combined homeownership rate of 90 percent, and house prices in the region have fallen an average of 30 percent in the past year. In Britain, where the homeownership rate is nearly 75 percent, prices are down 17.7 percent since last year.

One of the problems with such a high propensity for property is that these economies became more reliant on the housing industry for jobs. In Spain, where homeownership reached a bloated 85 percent and then lost steam, the rate of unemployment among construction workers has doubled in the past year.

British economist Andrew Oswald first connected the increase in unemployment in Europe and the U.S. to the rise of homeownership way back in 1996. At that time his ideas were hard to accept because they bumped up against dearly held values. But his analysis is beginning to look prescient.