Shrink Rap: Shrinking the Housing Bubble

"Life itself is a bubble and a skepticism, and a sleep within sleep."
-- Ralph Waldo Emerson

Dear Shrink Rap: There's been a lot of talk lately on this site and elsewhere about a housing bubble. Everyone has an opinion but no one looks at the psychological meaning of bubbles. What do you think is going on here?
-- B.R.

Shrink Rap: I'm curious about how we came to discuss the fear of collapsing value in the housing market using the same imagery we used for the stock market's collapse.

The term "bubble" has a long history of meaning a hollow, speculative scheme that promises a lot but then has a sudden and ruinous collapse. It's appropriate to apply the term to what happened with tech stocks and Internet stocks in particular. But it doesn't seem to me to be an apt metaphor to the housing market.

I'm not an economist, but I don't see any sudden change in the housing market that could possibly approximate what we saw when the stock market began its accelerated downward spiral. Only an increase in interest rates (perhaps stimulated by war) -- which would occur slowly and methodically -- could turn the tide in the housing market. But is this market going to "burst"? I don't think so.

Neither am I taken by the argument that homeowners are indulging in equity loans to support lifestyles beyond their means. Only financial fools and self-destructive masochists, who weren't mauled painfully enough by the claws of the bear, would allow themselves to get overextended in this manner. The majority, it's safe to say, are content to refinance their mortgages as they are able, while some are borrowing from their equity to upgrade their homes.

Furthermore, it's not exactly perplexing that when one market tanks, a shift of wealth and value occurs from one asset class to another, in this case, from stocks to real estate. But I don't really want to get bogged down with this issue.

I would prefer to look at why we have chosen this bubble metaphor. One answer may be that journalists are fearful of missing the bubble boat, as they did with the stock market. The media might now be hypervigilant, calling out "bubble" before they have any real justification and without regard to whether the image is even fitting. At least then they can't be accused of making the call too late.

But I think there is something deeper here.

The nature of bubbles is that they burst. I've exercised restraint over the last year in keeping unconscious symbolic interpretation to a minimum in my columns. But this bubble metaphor is just bursting for an unconscious interpretation.

The Unconscious Bubbles Up

Unconsciously, we can't get away from the image of an explosion. It's part of the psychic residue from the terrorist attacks. It's part of our continued conscious and unconscious fear and apprehension and why terrorism is so insidiously effective.

The news bombards us with suicide bombers blowing themselves up and obliterating others along with them. Explosions are never very far away, always just beneath the conscious surface.

We don't really need to use the image of a bubble to describe the housing market. We could find another, more fitting one that has more semblance to the nature of expanding and contracting prices. Why do we continue to apply the bubble metaphor where it doesn't fit what we are trying to describe? I suggest it is because we have explosion on the brain.

Images of explosions are both fascinating and terrifying, and may be both creative and destructive. Of course, even the beginning of the universe is thought to have been the result of the mother of all explosions. Here on Earth, we will be pounded even harder by explosive images as replays of the attacks abound during this week's buildup to the memorial events of Sept. 11.

As the Bush administration finally goes after Saddam Hussein (and I think it could be soon to take advantage of the Sept. 11 sentiment), the image of explosions will once again fill the TV screen. Rockets red glare, bombs bursting in air, bubbles bursting -- all the same, at least in the symbolic representation of the unconscious mind. Not logical, but psychological.

A Housing Bubble Is Not a Home

The second point I want to make has to do with the meaning of the home as the bastion of security. It's been more important than ever over the last year to have a sanctuary, a place to feel secure after our personal insulated world as we knew it was blown to bits by the attacks.

Yet, while we treasure the safety and security that a home represents, at the same time we think the "bubble could burst" and our oasis could evaporate. The anxiety that accompanies this fear is just another way the unconscious mind reminds us that we no longer fully trust even in the security of the home.

Watch your reactions carefully during this next week. Pay attention to your emotions relative to the upcoming memorial events. Notice what touches you and what doesn't. We can't be detached in these moments but we can restrain ourselves from seeing explosions or bubbles where none exist.