The Great Recession and the ensuing housing collapse in 2008 damaged the so-called "American Dream." In many ways, the American Dream is a self-fulfilling prophecy, in that it creates optimism that the future will be brighter than today; that people -- regardless of their upbringing -- can attain their own successes whether it be starting a business, purchasing a home or anything in between.
Optimism, the American Dream, and Homeownership
Homeownership played an integral role in the American Dream. The years 2003 to 2006 were a period of easy credit in the housing market via subprime lending when anyone could get access to a mortgage. After recovering from the dotcom bubble, investor optimism was high, and homeownership was on the rise. Despite rising interest rates, homeowners had the backstop of capital gains. If they could not make mortgage payments, they could sell their house for a profit. For most, it was too good to be true. And if it's too good to be true, it probably is. (See also: Who Is To Blame For The Subprime Crisis?)
The collapse of the housing market during the Great Recession displaced close to 10 million Americans as rising unemployment led to mass foreclosures. In 2008 alone, 3.1 million Americans filed for foreclosure, which at the time was one in every 54 homes, according to RealtyTrac. The demise not only ruined the American Dream but increased skepticism among the younger generation that had yet to enter the housing market.
As the housing market stabled and prices began to climb, skepticism remained. By the second-quarter of 2016, the All-Transactions House Price index has surpassed the pre-crisis high. However, homeownership in the U.S. continued to fall. A combination of growing inequality and the lingering mistrust in the financial system kept many on the sidelines. By 2016, homeownership in the U.S. had dipped below 63% - a 50 year low.
Is The American Dream Over?
Anecdotally, the American Dream pertains to home ownership among the working class of America. Proof that no matter your income, your upbringing or where you live, you can own your own home. However, even with the 2008 housing collapse a thing of the past and the U.S. economy back to full employment, the American Dream no longer exists. Working class families are not buying homes. They are swamped with debt and the wealth gap is increasing.
What the Great Recession showed was the so-called American Dream is no longer attainable. The pre crisis optimism has been replaced by skepticism.