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It is astonishing how much Americans expect in a house. This is largely a reflection of our wealth, but is sadly also a reflection of the tax incentives for home ownership (or home buyership, since the primary incentive is the tax deduction for mortgage interest).

This incentive drives house prices higher for two reasons. One is the obvious: lower interest rates mean that people can afford to pay more for a given house or buy a better (i.e., larger) house than the otherwise would. The second is that it makes housing more attractive as an investment. If you can borrow money at half the market rate, but only to buy a house (or two), and housing prices are generally going up, then a house will be a more attractive investment to you than anything else with similar fundamentals.

What this means is that a lot more money is put into housing in this country than if the housing market were a free market. This means further that people have a lot more money tied up in housing than they "should" have, but worse, people have more than they "should" of their future cash flow precommitted to heating, air conditioning, furnishing, decorating, and maintaining their larger house.

This is part of the reason that American couples both "have to" work 60-hour weeks, while their European counterparts are standing around in pubs or sitting around in cafes enjoying life. Compounding this is that many American homes really are built shoddily, basically just well enough to survive the 30-year mortgage. This creates the phenomen of the "disposable" neighborhood, where a suburb is born, grows and thrives for a time, and then falls into disrepair, waiting for urban renewal.

In Europe, homes are built to last for generations, so that a free reserve of capital -- rather than a generator of waste -- is passed down through the ages.